>> the fed views the labor markets as the conduit to achieve their inflation of justice. >> the average -- we are in the recession, but we are not seeing the whites of the eyes of the recession. >> this is bloomberg surveillance, with john mccain, jonathan ferro. >> good to see you back.

tom: it is good. the judge looked at me jonathan: and said, i know you. jonathan:he said, see you. good morning. we have got to talk about credit suisse as well. credit suisse down hard. tom: we are talking about this for the bloomberg world and wall street, this is painful and somewhat clear, as lisa was mentioning, and little opaque. i am focused on the stock down 16%. a further dilution. it is dilution.

jonathan: the rights issues that a lot of investors wanted to avoid it. there are two other issues at play. yet the terrible earnings and the real. tom: yeah, they want to be james gorman. jonathan: that is going to be the spinoff for the investment bank. they are considering a ipl for that particular unit. lisa: they're looking far outside funding to go out and buildout. how much can they really. that using private capital without necessarily some of the consumer composites. i am curious about what kind of

equity stakes some of the senior managers have. facebook is at 20% in the free market. tom: after meta, after what we saw with facebook google, after we saw there, amazon and apple are ever more important. i take issue with people who compare, even google with the cash flow streams of amazon and apple. jonathan: that side of equities, unchanged. look at the bond market. just up to 4% on the 10 year. the fx market, euro slightly weaker. 10041.

tom: combined with the equity market, you mention in our two hour meeting, the idea that spx has actually done better than the tech -- over the last couple of days. you see it as with euro goes with parity, vix. jonathan: it was positive yesterday. it did not bleed major wide. tom: tuna percent of s -- 20% of spx market cap this afternoon. >> if he stripped out some of the big tech names he saw positive returns on the s&p. the reason why, the step down. do we get the step down in the

ecb today? not necessarily at the rate decision where they are expected to go 75 basis points and raise all of their benchmark rates. as in terms of december, they go to 250, do they go to 25 basis points? how much did she signal they are concerned about the pain. does the euro weaker further if they step down or does it gain economic growth. maybe we get a positive read after two consecutive quarters. do we get a more optimistic look there? why are we not seeing them really tick up? they are still in historic lows even as the fed goes after raising unemployment rates. we see these big tech names talk about cutting back some of their

staffs. apple and amazon earnings. apple and amazon front and center. apple, how much can they remain the cash cow? how much can they remain the story, you can all dealt me and think that we are not going to perform, -- doubt me and think we are not going to perform. jonathan: we have been talking about at the last couple of weeks. maybe iphone demand is faltering. as we often say, they knock it out of the park. tom: they knock it out of the park. it is a subset. the answer is, you are right. there are these worries. without would point out to

american listeners and viewers, -- what i would point out, to american listeners and viewers, there's a phone carrier. i am not sure how that falls in. jonathan: let's start with the ecb story this morning. can we begin with the ecb. we're looking for 75 later. what are you looking for? >> i think we are looking for 75. it would be a surprise if they do 50. you see the bank of australia do 50, the canadians followed and failed quickly. the ecb does have the flexibility to do a 50 points basis points. we seen something in the pmi data. take a look at the euro numbers, they are weaker than what we were expecting. we are expecting 75, the

surprise will be 50. it tom: is there a theory to that? are they just making it up as they go? katrina: everyone here is making it up because we have not been in this position for so many decades. the caution with the ecb, first of all if you go back, they tighten too quickly and acted too quickly in the past. there is more hesitancy in the ecb that there are in other markets. we really do not understand in the united states, europe has faced a triple whammy, they have have the war crisis, energy crisis and they are facing tightening. the combination of those 3% little more on the cautious edge -- the culmination of those three, puts them a little more

on the cautious edge the combin, puts them in a little more on the cautious edge. >> global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. people have doing end up seeing more expectations in growth in the euro region or do we see the long and spiked for the weakness of the euro? katrina: the markets are going to react positively. the ecb is accommodating the fact that the pmi is slowing, by slowing down the pace at which they increase interest rates, they are giving support to the overall economy. the risk here and the risk we are focused on in the united

states, in europe as well, the rising rates chokes off a economic recovery. they're likely to see the economic recovery has some level of support. it is a much smaller level than support. in terms of canada, i want to point out one small thing, a transmission rate for the reduction. instead of doing a 75, when the 50 is much quicker and cleaner. you do not have as much of that debt and mortgage debt. the transmission mechanism isn't as fast as it is in those other commonwealth markets. jonathan: what i thursday we have got coming up. the depot record dump later from 75 to 50. tom: we have jon ferro with

years of experience. the two of you together on this. exactly. the body language of the press conference is going to be interesting. we will bring you those headlines on radio and television throughout the morning. jonathan: i think it is simple to understand because we see a play out in the united states increasingly. you're going to see political pushback in a bigger way. look at the data in europe. pmi is play the 40's. tom: i have been screaming about this for months. there's a point where you walk towards neutrality. then every step from there becomes excruciatingly if occult, we are there now. -- difficult, we are there now. jonathan: i think politically, it is going to be the most

painful hundred basis points, not just for the fed, but the ecb as well. lisa: if they do not continue to hike, what is the respond on the long and. do you start to see borrowing cost surge regardless of what they do? jonathan: the ecb decision coming out a little later. economic data coming up 8:30 eastern time. this is bloomberg. >> with the first world, the european central bank is set to lift interest rates to their highest level in more than a decade. almost all economist predict a second straight 75 basis point hike today. the president in china is willing to work with the u.s. to find ways to get along. the comments came before a possible meeting with president

biden at a group, it signals a effort on his part to maintain efforts despite disputes. russia has carried out lee terry exercises stimulating a nuclear -- carried out nuclear exercises stimulating a nuclear strike. the u.s. has warned russia, any use of nuclear weapons in the war of ukraine will have grave consequences. credit suisse is planning a overhaul. in includes capital raise in thousands of job cuts. it is the most urgent attempt to repair credit suisse after huge management chaos. the firm will create a capital markets business that will revive the planning. the world's richest man told twitter employees he does not plan to cut 75% of staff. elon musk denied the numbers in

-- and addressed workers. the billionaire is expected to cut staff when he takes over the company, causing anxiety among workers. a $44 billion bill set to close friday. i am lisa mateo, this is bloomberg.

>> we're going to go through the

transformation the next three years. it will become definitely from a 2024 onwards. jonathan: that was the credit suisse ceo. the stock is down in swiss trading by almost 12%. what i day we have coming for you. we have earnings for apple in amazon after the close, we also have a ecb rate decision. yields are higher by six basis points on a 10 year. the euro is weaker. going into that ecb called a little later. tom: for global wall street, the informative conversation on the disaster known as credit suisse is trading on a book value basis. one point four something for

j.p. morgan. a little bit better for morgan stanley. credit suisse, 0.24. that is all you need to know. you and i go to dilution, except you and i know the calculation of equity dilution is complex and is usually something failed on a cfa exam. how bad it with the equity dilution be for shareholders of credit suisse? marcus: dray tate ubs model. just a guess or a level by encryption by the stock market. as we are looking at credit suisse now and seeing all sorts of things going on.

some sense in prothro parts in the bank -- profitable parts in the bank. the book value doubling. that will be deemed a success. tom: what is the timeline to find the formal dilution of the set of transactions? it is a three year timeline, even though they are talking get up in a cup of coffee. is it -- talking it up in a cup of coffee. marcus: i think it is going to be extensive results before that. it may take one or two years beyond that. they need partners on the investment bank, they need partners in the structure, product group.

they need real results. it is something clearly happen ing. the rest of it is important, but it is not vital. that is what we are showing here. that is where the money still is the european side, not so much. lisa: credit suisse has its own story but it is within the european banking system, which faces eight regime change today if the ecb doubles the deposit rate, if they double the. benchmark rate. they have been using the highest levels in the decade. how does that change the scenario in a positive scenario for banks, that have been looking for higher rates for a long time? marcus: it causes recession, which is quite likely in my mind. we were probably already going

to recession in europe. i think it is the other bit. the complex managing planning vent, which is this access reserve. a lot of things are up to -1% and frequently locked in. the deposit rates down, they can send the money back to the ecb. that is too generous. if they overdo it, they are going to cause a liquidity withdrawal, a potential financial nightmare. they may lose control of their money market rates. they may get sued, with all sorts of things that may go wrong. it is quite a new world. they have not worked out what it is like above ground. lisa: in terms of whether they

ratchet back some of their plans to raise rates, do you think that is what the market is asking for and that financial stability will be a pressing concern if they say now in ongoing aggressiveness? marcus: not for the ecb, but the federal reserve. what the fed do is key to everything. it gives the ecb what they need to pass to 50 in december. that will talk a bigger book, they have to to keep the euro above parity. they want to keep talking, but they really want the fed to resolve. jonathan: by the time we get to december, there a forecast that spells out recession, is that affordable? marcus: the u.k. and europe is

already in recession and it can only get worse. a world of pain is coming. jonathan: that is the problematic view of things, the fact that base case does not include a recession in the euro sign. the next forecast comes in december. when they sit down, you have to imagine some form of downturn and the outlook and the hike at 75 basis points. tom: as of the bloomberg financial index, england and america are very close. they have improved over the last number of days. ecb is different. this is a different press conference than what we are going to see from chairman powell. jonathan: one piece of good news . at least it is so much better than it could have been. it has been more than what

people ought it would be. lisa: at what point is this a positive developments? everyone keeps saying just wait until winter comes. i was reading a story that daylight savings time being a nightmare because people turn on their lights earlier and that uses up more energy. there are all certain things people are looking for. jonathan: they have been looking forward to get rid of that for a long time. lisa: it creates a little bit more. tom: we follow back --fall back and spring forward. ♪

jonathan: here is the price action for you, starting with the equity market on the s&p 500. futures positive on the s&p, let's call it unchanged. meta-is down and down hard. we are down about 19% on meta.

yesterday we were down hard in the likes of microsoft. think there might be a surprise for some people. tom: there has got to be a separation here. this is about mr. zuckerberg here. it is like the elon musk thing with twitter. jonathan: facebook is kind of a mess right now. metaverse, rebrand. lisa: how much is this the push pull of the negativity. facebook has its own challenges my but we are seeing the same things across the they tech names. the step now, the potential for the fed to not rate hikes as much as people have expected, providing optimism to the other

sectors. it is a push and pull. jonathan: why do you need a journalist in the wall street journal to write this down for you and summarize what people have said and in the guidance? lisa: i could not have agreed with him more. tom: john and i talked before air. you mentioned it. everything in the s&p looks good to, versus detect challenges that are out there -- the tech challenges that are out there. let's do this. this time the ecb, i'm going to ask a couple of questions. christian, i mentioned early,

the fancy map of the bloomberg conditions for europe is extremely challenging. how much will christians press conference be treated today, touched today by the grim financial conditions of europe? christian: that will play a role. i do not think it will have much up an impact on the rate pack of what her teams going to decide today. it will play a role in how they think about reducing the balance sheet. that is clearly the next thing that is going to come up and be in focus. i think also in the press conference today. that is where they need to be careful to not make things even worse on the financial condition signed. there -- side. there are many other issues on the financial system that need to be dealt with. tom: it is like a movie.

jonathan: on the italian question if you want to deal with that, is the italians asking the questions, not the europeans. you have the new prime minister not subtly going after the ecb. how do you think the ecb will grapple with the different kinds of politicalization? christian: they have created a tool, tpi, transmission protection instrument in order to deal with spread widening where it is not fundamentally warranted, not caused by the policy that the government needs to fix. but as a warning to the italian government not to play by the -- that is a warning to the italian government not to play by the rules. it is a guarantee if they do, ecb will be on their side. will it be enough if the trouble really starts proverbial? we have been skeptical to speak

on paper. the mechanisms of actually activating it and people agreeing on it is difficult. it is a difficult situation. they have to play with the rules. if they have to play by the rules. kt will inevitably have to be discussed and decided and have to happen the minute that the ecb moves beyond neutral. . on a policy rate you cannot have the policy rate being restrictive and stepping on the brakes and at the same time, having a balance sheet setting, which is supportive to the economy. at that point, the ecb will have to start qt. we do not think it will reach restrictive territory. come april next year, they will be reducing the balance sheet. come december, they will probably decide about this and

today they might hint one they may do this. lisa: they will plan to start that in april. right now according to their plan, there will not be a recession in europe, even though every wall street bank seems that there will be. christian: they clearly signal that things have played out worst than they have expected in the last set of forecast, it would signal that the recession will be a part of the base case. we all said they get very far in the rate hikes because of this. inflation is a double digit territory. we will see it in the next few days where it will go next. it is broadening. demand seems to be too fast. there is a case for the ecb to hike into recession. i do not think they will let a recession of the variety stop them.

lisa: do you wonder how some of the american tourist being a part of the demand story, given the fact that everyone later mother seems to be going to tour in italy. tom: i think paris is 30% of french gdp a come also some 5% come also 27 with the tourist . boom. lisa: i wonder with some of the gains that you have seen, does this make the ecb's job harder, if they are not aggressive enough, you end up with inflation that is more persistent. christian: there is a strong consensus, at least part of the observers that the ecb is behind the curb, that it failed to realize that all of the stimulus that the government has objected

that was coming to the pandemic was going to have some impact on demand when supply cannot recover quickly enough. that supports inflation. the raising interest rates earlier would have made the whole process a little sooner. i think we would all agree, we -- mostly have nothing to do with the european economy, it comes from external, they were in ukraine. these are the things the ecb cannot do nothing about. there is a rise in expectations in inflation. if the ecb does not react to that, it is lowering interest rates, that will support demand, which really cannot be the ecb's intention at the moment. jonathan: thank you. will go back to the earnings. this is a number. machine, energy, transportation revenue, $14.28 billion

year-over-year, that is plus 22%. you have seen in the organic revenue as well. tom: a busy day with 20% of the market cap. added them altogether, they make up 11% on apple's market cap. jonathan: something has changed with facebook. if you think about where the access -- exccess investment has been for the last 10 it is goins like that. the has not been there in the same way for the energy names in the last decade. they have all made the same point. tom: you wonder with the durability, i am hearing most of the sell side. energy is something that is

underinvested, even with the 120 earlier. christian: stephen the face of recession risk. jonathan: even in the face of recession risk. lisa: your point though, tech was the leader, tech where the names that people invest. now we are seeing that punctured. matta, that machiavelli has collapsed by five -- meta-, their market value has collapsed and and they are not below the level of the 20 largest u.s. companies, trading at a 50% discount of the nasdaq 100. tom: the drop has almost doubled the value of honeywell. lisa: i wonder can these things happen in isolation or is it a broader vacation that we may not have felt yet?

the investment was done during a time of much cheaper financing and greater ambition for some of the tech names that are finding themselves. jonathan: think about it. food delivery. this is the revenge of the economy, over invested. this is the revenge right on the screen. tom: those organic revenue, organic revenue is a ge thing, now we are seeing it everywhere. and nominal gdp popped we seen with inflation gives you organic revenue. what happens? pricing power is in place, at least for now. jonathan: tom: do not tell that to the

housing market. jonathan: pictures right now unchanged on the s&p -- futures right now unchanged on the s&p. this is bloomberg. >> to be up-to-date with the first word, i am lisa mateo. the european central bank said to look past fears of recession. it is expected to raise interest rates by 75 basis points for the second time in the row. ecb is trying to quell inflation that is running at 10%. the biden administration has been forced to scale back a plan to impose a cap on russian oil prices, that follow skepticism by investors in growing risks and financial markets. the u.s. and eu are likely to settle for a more loosely policy kept at a higher price than what

is envisioned. mark zuckerberg asking investors for patients. the parent of facebook is spending billions to pay for its version of virtual reality at a challenging time for digital advertising companies. meta shares fell more than 20%. nash has been expected to take over the post after his father died in 2020, but the move was delayed by corruption investigations. among other things, samsung is the biggest chipmaker. going into the midterm election, the middle class is using the biggest hit to its wealth, still it has almost richer than it has ever been muted that is a conclusion of a news examination that paired new wealth data with a pole of 100 million adults. here more of that story in

bloomberg's the big take podcast. 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.

>> on 2020 three, we think it is going to take longer. you know how we are thinking. i think the bear market is over, although we do think the rally is going to be big enough to trade it. jonathan: awesome to catch up morgan stanley yesterday. good morning. here is the price action on the s&p. the future is unchanged. some names getting absolutely hammered. this market is still holding up,

particularly in a weaker way. despite the fact that the likes of apple and amazon have got absolutely hammered. you want to look at meta-now more than 20%. eight brutal morning born -- eight brutal morning. tom: people are not techie and vr. if i looked up at home depot and wanted to go and buy a sink and walked into bloomberg surveillance, it will cost me $271 and $.13. why is elon musk carrying a sink into twitter?

>> he is ready to close the deal and probably he will be a part of how this thing shapes out. no one knows what sort of changes he is going to make. he has highlighted things of cost structure and where they can go with the product. it was a simple and trying to suggest he is moving. mandeep: facebook was self-inflicted. if you look at the print last night, that was ok with consensus, the earnings was not bad. it was just a guide around. cap x. with any new technology or product, you have a initial launch, you get some feedback around product and commercial success.

where are the areas you want to double down on. in this case, he is just doubling the cap x. now he is talking about 39 million. to me it is just baffling. your business is challenging because of competition for tiktok -- from tiktok. it is responsible. lisa: this is the key where grandparents post pictures of their grandchildren's for their friends, it is not known as the tiktok of the new generation or the instagram, which has been fueling them, even that is losing some of the clout that it used to have two competitors. mark zuckerberg knows that and his burning money to try to regard what is next. mandeep: i will give them credit that they are trying to leverage a lot of ai to catch up to tiktok. a lot of that is going to go

towards data centers. they are trying to narrow that cap that tiktok has capx investments. that is ok. the younger demographic have already moved off the platform, to your point about facebook and instagram losing audience. with any social network and consumer internet company, once you use your goat users, the demographics are, the others will follow and it is very hard to stop. that is why he is doubling down. the fact that he kept highlighting metaverse and ar and adding more product use around vr is just surprising. lisa: just from personal experience, it seems like it is tiktok and snap. how much money was thrown in

certain tech companies that might become obsolete or out of style at a time when they still carry massive clout in the index. is this the tip of the iceberg in terms of investors withdrawing? mandeep: i do not think so. investments in ai built off eventually. these are secular droves kind of company. yes some you will have an aberration phase -- diversion phase. this is huge. it will be the infrastructure for the foreseeable future, turning five years until something else comes up. ai investment is not going to go away. the problem is, where do you focus when it comes to those ai investments. in this case, if it was something more proven or further ahead in terms of commercializing, it is like -- and saying we will double down.

it just does not make sense. you have to do it in one step. that is the part i think meta is getting it wrong. in time top executive leaves a cfo or somebody like sheryl sandberg, suggesting to you --. i would agree with that. tom: facebook down 43% since june 1. jonathan: you are calling it sandberg day. just brutal. tom: david kirkpatrick absolutely nailed the success of facebook. i was wrong.

kirkpatrick, the facebook affect author nailed it. i wonder what he would say now. jonathan: you seen how many people are getting their news from tiktok? that is slightly concerning. tom: we have a internal bloomberg surveillance, welcome you to a bloomberg meeting, should we be on tiktok? i have people suggesting me that i should be on tiktok. no. i just do not get it. for us to be on tiktok ,hi, the yen is up. lisa: it's about the ownership of a company steepening strengths between the u.s. and china. where the data is coming from and being hosted, there is this real insecurity about that about one of the main and quickly growing. i would say another one, like

snap. that is the my kids use. i feel like that guy, the guy coming in. tom: my kids are not on snap or tiktok. lisa: congratulations. you are having a great parenting situation. younger ferro is not on snap. snap is not reporting the earnings either. tom: i have people telling me i should be on tiktok. jonathan: do is telling you that? -- who is telling you that? your agent?

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>> the fed diffuse the labor markets as the conduit to achieve inflation objectives. >> inflation fears overdone and it is leaking into data. >> you will not see the turnaround in u.s. inflation that will get the fed to cut rates rather than pause hikes. >> the odds of the recession are high, but we have not seen the whites of the eyes yet. >> this is bloomberg

surveillance with tom keene, jonathan ferro and lisa abramowicz. jonathan: big earnings after the close, good morning. this is bloomberg surveillance on tv and radio, alongside lisa abramowicz and tom keene i am jonathan ferro. tom: a big day, a big day for earnings as well. the ecb, we are going to the statement. i am not an expert, this is not just about folks. for more than the fed, this is about a balance sheet analysis. jonathan: the potential to wind back the balance sheets. things get harder as the year progresses. 75 basis points potentially, then talking about balance sheet unwind, all of this gets to recession. i've said repeatedly all week, they are said to do this on a week we have pmi in the 40's on

the euro side. tom: energy is down as well. you have stability within the united kingdom, 11561 on sterling. it is a changed landscape from two weeks ago. jonathan: without a doubt, the dollar is weaker. that is giving people more faith in the equity market. going back to the ecb, 75 basis points into a recession potentially, with double-digit cpi. not pretty. lisa: i wonder if the weakness, if it comes quickly, is going to be a benefit to be able to hike, have a recession, then perhaps a clean slate with respect inflationary pressures, rather than stop and let inflation run hot and let the bonds come in and penalize them on the long end. this is not the same market was when the ecb had the luxury of being at negative rates. jonathan: outside the trading flaws of frankfurt, the city of london, wall street, what do you

think this sounds like when we start talking about central banks causing recessions? what do you think that sounds like? central banks trying to get unemployment higher so they can get inflation lower? lisa: it sounds like a political liability and a conversation that is feasible, maybe on a satiric discussions, until there is greater weakness. we are seeing earnings role in. if you see the strength, that resilience, it is more feasible to say we still have the hopes of a soft landing, maybe we can get to something where a lot of people do not lose their jobs. jonathan: i think central banks have to do a much better job. if you just tuned in, we were talking about bad news being good news. that kind of thing drove you nuts. this thing drives a lot of people nuts, too. this fed in a news conference next week, unemployment is climbing, if it is climbing, needs to explain why that is a

price worth paying to get inflation lower. i think a lot of people will struggle with that concept. that is why politically, this is a real problem. tom: it is about labor. there's been a number of essays out on this, the theories are not there. lisa: i am going to be controversial and defend central banks. i know. have picked up the slack of fiscal policy makers for many years. now nobody has the ability, because we have inflation. now, everyone is throwing it at the fed. tom: blackrock was he did, this is the supply-side analysis. -- heated. speaking of demand, we were in london for the queen's funeral. i was trying to be responsible, so i popped up liverpool station. the mcdonald's there. not as bad as ceric. -- zurich.

i want to be responsible for a number two value meal. mcdonald's is as anti-tech as you can get. they have a branded organic revenue in america, up 6%. i think they have blended international up nearly 9% of sales. they are getting pricing power. jonathan: are the kids doing that? you were doing that? lisa: good luck. jonathan: the ugly american order. tom: that would be true. they charge a small stocking fee. jonathan: i am sure they did. futures unchanged on the s&p, going to the ecb later this morning. so will run you through that. that is the equity market on the s&p 500, need to talk about the bond market. yields are higher by seven basis points, close to 4.1%. the dollar has been weaker.

tom: finally. jonathan: a one handle on the euro-dollar, that is something. tom: e.m. has pulled back a little bit from crisis levels. not turkey, that is its own story. 7.24 per dollar, it is a little better. these are small movements within the continuum of grim. jonathan: the dollar is biting back this morning, it is stronger. negative half of 1%, going to the ecb a little later. lisa: let us see what happens when we get the decision. it: 40 5 a.m. is the press conference with the president of the ecb. -- 8:45 a.m. is the press conference with the president of the ecb. will we see strength come back to the market after two can ticket of quarters of declines? after the bell, apple, amazon and until reporting earnings. a massive day of reporting

results. how much do we see confirmation of what we saw from meta and other tech names? jonathan: the european equity strategist at goldman sachs. we are looking for 75 basis points, this is a big conversation about maybe a recession taking place. is that an equity market you want to own? sharon: probably not come actually. i think in the near term, they are balanced a little bit. as per earlier comments from tom, we have seen some of the tale of risks related to u.k. volatility and rate volatility come down. that is great. but i think medium-term, it is not -- i've looked into a recessionary moment, we think there will be a recession next year, along with the timing rates. tom: how does that lead into year guests -- guesstimates on

broad european organic revenue growth? can companies do better a year, two years out? sharon: i think revenue will be ok, because inflation will stay sticky and high. companies will pass some of that through, some of the cost. that is what inflation is, companies passing costs through. not only have you got higher costs coming through, you have higher interest rates, higher taxation. revenue is probably ok, but margins is where the squeeze will be. lisa: how much are you getting bullish on european banks? this is the pain trade, because ranks -- rates are going up. that's what they've been asking for a long time. sharon: i think banks -- so, banks -- if i am talking about a european recession, and we are talking about europe see contraction in gdp next year, the banks are domestic. they are leveled companies.

they would obviously be badly hit if there is a rise. but i think this time around, banks could do better. interest rates are rising, as you point out. the last few cycles, interest rates have been low to negative in europe. that is not the case now. also, banks themselves have capital now. also, i think unemployment would cover a tiny bit in europe. but the labor market is strong. even if you take a downturn of contraction in gdp growth because of industrial output supply starts to come down, etc., i think the climate has been rosier. for banks, people generally continue to pay loans and mortgages as long as they have jobs. they will see a squeeze in income that will hit them, but for the banks, what matters is whether people are paying debt. on the flipside, people will not

take out new loans at higher costs. it is not all rosy for the banks. but compared to previous cycles, i agree higher rates is helpful. jonathan: you said they could be more defensive in the downturn. you and i talked about that last time. have you seen clients become more receptive to the message, seen stocks behave that way? sharon: they have outperformed again come out performing sector year-to-date's, even though we see gdp slide. pmi in the mid-40's now. you would never expect banks to be the out performing sector in that type of environment. i think that shows you can see banks behave differently this time around. clients, they are naturally skeptical about banks. it tends to be more of a trade and something you want to hold long-term. but i think the fact they are paying dividends and the fact they benefit from higher interest rates results will be reasonably ok for the banks, and

that will provide research. jonathan: that is true for the whole of europe, not just the banks. wonderful to hear from you. takei, i keep saying it because i am surprised by it. we are talking another 75 from the ecb. i get it, but the data is weak in europe right now. tom: i just do not get it. i do not get it on a technology overlay. do they come out and say we are going to do 75 basis points, and that is it? jonathan: they are worried about second round effects, you know that. i get it, too. it becomes more entrenched because of the supply-side dynamic in the energy story. lisa: not just that, but also potential supply chain disruptions, with respect to china and what is going on there. this is a nightmare for central banks, that is what they are all facing off with.

jonathan: a toxic route. quagmire of stagflation. it is becoming more constructive. tom: a whisper of optimism. [laughter] jonathan: from new york, this is bloomberg. ♪ >> keeping you up-to-date with news from around the world. the european central bank is set to raise its rate some the most in a decade. it is trying to live record high inflation. they predict a second straight 75 basis point hike today. president xi says china is willing to work with the u.s. to find ways to get along. comments came before a possible meeting with president biden next month. it signals an effort on his part to maintain ties, despite

disputes over everything from taiwan to the invasion of ukraine. meanwhile, the u.s. secretary of state is accusing china of undermining the status quo that has kept both nations from going to war over taiwan. he spoke to bloomberg in washington and said beijing was trying to speed up its seizure of the island. china and taiwan downplayed the likelihood of an invasion anytime soon. planning a sweeping overhaul. it includes a $4.1 billion capital raise, and thousands of job cuts. it is the most urgent attempt yet to repair credit sweeps after huge losses and management chaos in breaking up the investment bank. the firm will create a separate market business that will revive the first boston branding. the world's richest mantle twitter employees he does not plan to cut 75% of staff. bloomberg learned elon musk denied the numbers in and

addressed to workers at the company's san francisco office. still, the billionaire is expected to cut staff when he takes over the company, causing anxiety among workers. the $44 billion deal set to close friday. i am lisa mateo, this is bloomberg. ♪

>> what has changed is this. it decision by the government in beijing that that status quo was

no longer acceptable, that they wanted to speed up the process by which they would pursue. jonathan: that was secretary antony blinken sitting down in d.c. very cool. just yesterday. an audience, did you like that? tom: it is important, he is taking the international view. right now in washington, based on this morning, two weeks until an election, it is like the united kingdom, maybe. we are becoming as focused as the united kingdom becomes focused. the mind is concentrating. jonathan: we start the presidential race at the start of the year. tom: you guys do it better. jonathan: i know he finds it ridiculous. lisa: he could push back and say you chose to live in this, so here you go. jonathan: i love it here, you know i do.

i am thankful to be a guest in this great country. lisa: how is the rent search going? jonathan: rent in manhattan, nuts. actually insane. tom: explain the difference between rent here in the. jonathan: the fee model is ridiculous. the idea you have to pay a one month rent on a 12 month police as a fee is insane. i see a lot more no fee rentals coming, you see more of that. but the fact there is a model in new york, i think is unreal. foreign to me. foreign. i am foreign. tom: personal-finance today on bloomberg, she is familiar with the reds across the nation. annmarie hordern joins us. i know the territory along the erie canal of what was industrialized america coming out of the river valley, there is a company called kodak.

they are gone. the president will visit that shell of industrial america, he will try to paint stark relief within the panic. how panicked is the white house, how panicked is the president? annmarie: just quickly, i think rent in london is actually cheaper. the president's point, it is pretty astonishing. less than two weeks to go until the mature -- midterm elections. he is going to be joined with governor kathy hochul, who had a very contentious debate this week with her republican challenger. crime is becoming a focus in new york. the washington post has a great piece this morning about the fact over the last 40 hours, it has become very difficult for the democrats. they called it a defensive crouch. what did you have yesterday? the first lady in rhode island, they are starting to send out the surrogates in places or normally they would have the support already shored up.

also, advertising campaign and congressional districts in new york and new jersey. that says to me that they are a little bit nervous. not about flipping some seats, but holding or potentially flipping some of the seats that were held by moderate republicans they thought a month ago they would have easily had in the bag. tom: dr. biden is in rhode island, suri cruise, whatever. why are they in the states that are ole up -- lay up? annmarie: they are nervous. some other states that are close, and get back, nevada where it looks like adam has a good chance of winning that seat from the democrat incumbent, they do not want the president there. because many still view the midterm elections, the president would say it is not, but they are a referendum on the current administration. they want to keep a very large, wide distance from the president and some of his surrogates out of the white house.

lisa: what is the message that janet yellen is among those campaigning for this administration, given she is currently in ohio talking about electric vehicles and economic development? annmarie: with the administration will try to do is point to the legislative wins they have had a that started last summer with the infrastructure package. the president was talking about it without the prior administration, it was almost a running joke in washington, d.c. that every week was infrastructure week. he was able to across party lines and get it done. this summer, they passed what they called the inflation reduction act really, that has a lot to do with health care and climate. ev credit and things like that. she is going to tout that and try to make the case that when you have these kinds of bills, where the u.s. government could go on behalf of the american people and negotiate with pharmaceutical companies and get

drug pricing down, it will help ease inflation. it will be interesting. in a place like ohio, inflation, the economy, these are the number one issues people claim to vote on. jonathan: did you watch the president drive cars fast with jay leno last night? annmarie: i watched about 20 minutes, the cars were cool. jonathan: jay leno is cool. lisa: what are you trying to say? [laughter] jonathan: are you turn to get me in trouble? i said jay leno was cool. you are asking me if the president is cool? annmarie, thank you. [laughter] what do you want me to say to that? lisa: that was called a pivot. it is true. jonathan: an old ford suv that had been converted or something like that. tom: can we get back to the election with her team coverage? the president is not cool for

democrats. i am looking at a map, they are in new york, rhode island, not on the map. that is not where the tension is for his party. it is california, new mexico. jonathan: what is the race you are focused on? tom: the broader senate race. i do not have narrow ones. i like everybody else. the nation is drowning in pendantry. jonathan: they are in the u.k., too. how many elections have we had over the last few years? not general, conservative party leadership contest, to be specific. lisa: i think the federman -- fe tterman and oz debate outcome will be interesting. fetterman is the incumbent, it is sad. he is recovering from a stroke. jonathan: it is so sad to see

him like that. lisa: how does this represent democrats trying to go up against someone they are painting is extremist with a candidate dealing with their own personal issues that are pretty obvious to people in the audience? jonathan: really sad, no doubt it will be a focal point. in the next couple minutes, we will catch up. looking at the equity market on the s&p, futures lift up. six basis points. of course. lisa: sword fighting, i love this. jonathan: best of friends. lisa: it is equal. jonathan: how many people are invested in that? tom: tons. [laughter] ♪

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jonathan: equity futures on the s&p, positive .1%. could you guess facebook is down by 22%? that is a feature of the story. single names, big tech, alphabet, microsoft get hammered.

it is not showing up in the index in a major way. that has been the story the past couple of days. tom: it comes down to buoyant revenue growth and ability to raise prices. for the meantime, these are good, organic revenue growth numbers across a broad section of non-tech companies. i do not compare these companies to apple and amazon. we will see this. jonathan: the bear market continues. resilience elsewhere the last couple of days. we will see if that continues. bond market, 44451 on a two year yield. everybody talking about a step down in rate hikes. city talking about a step down. i think most people on board with this idea you get 75, come down to 50, maybe 25 after that. holland horst at citi said, if

anything we see hawkish risk of officials would avoid a loosening of financial conditions. that is the interesting point from the team at citi. tom: you go to bloomberg financial conditions index which shows you holland horst like number. negative one point 06, make that one standard deviation and that is what more accommodative than 10 days ago. jonathan: euro-dollar going to the ecb, looking for a 75 basis point hike. 8:15 eastern time is when we get that decision. tom: for us, it is when? jonathan: 30 minutes after that. italian german spreads, 10 year trading 222 basis points over during any -- over germany. we have come in. i think it is a uncomfortable level for a lot of people in europe, to 20 -- 220ish. tom: i have stepped down.

i do not like it. jonathan: step down. tom: where did that come from? who are we playing? jonathan: i can't were number where i got it. i think jim said it on twitter. city saying it, would you like to rebrand it? there is a rate of the change of -- rate of change. fantastic. lisa, what do you make of that? new tone -- newtonian move? lisa: slow is not the pivot. -- slow is not the pivot. when we were talking about the tech names, i one to dig into the scope of moves we have seen. based on google or alphabet and microsoft, those shares suffer the biggest selloff going back to march of 2020 yesterday.

still down today, didn't free up valuations from people who do not want to catch a falling knife. meta-platforms, there was a smart comment on twitter saying today's meta-is tomorrow's myspace. how much of that is the feeling in markets with shares lower after falling dramatically more than 60% into lowest levels since 2018? jonathan: like a old museum no one visits anymore. that is what myspace is. lisa: i never had a myspace. jonathan: i do not know if it is still there. it is a old museum i have not visited. lisa: we will have to dig up the archaeological evidence. after the bell, with amazon and apple and intel -- i put intel in there because that is a microcosm of the bigger story behind the chip sector. how much is apple going to be the true bellwether if they are able to be resilient, does that highlight specific stories and

not necessarily a broad-based entrenchment from the tech world in general? tom: on amazon, you are going to have mystery on how prime days did for amazon in the last mile of the cardboard box. the business seems to be a challenge. global head of fixed income at columbia, thread needle with a smart note encompassing the econo babel. i will bring the numbers we want to see today. what does the fed do with buoyant u.s. gdp? session this, recession that. i am looking at a 2.4% statistic in one hour this morning. >> i think it is difficult to call u.s. gdp buoyant when and as -- when it has been negative the first half of the year. we can blame it on different factors not related to the consumer, but i think this is a requirement if the fed has any chance of a small -- soft landing to get positive gdp for the third quarter. jonathan: we get so much

pushback from this step down turn. slow the pace off, interest rate hikes. is that decision ultimately going to be at the mercy of the next cpi print going into the december meeting? gene: we are getting closer to that point where the fed can decelerate its pace of hikes. but, we are not there yet. we have seen the fed has a pattern of looking at that most recent cpi print. that last one was sufficiently hot. the 75 basis points still needs to be the base case or next week's meeting. as we go later in the year, there can be ample justification for them to slowdown that pace. i think that is a meaningful signal. that reduces interest rate volatility and interest rate volatility has been at the center of financial market weakness this year. i think that is going to be a critical step, even if it is not

the end of this tightening cycle. lisa: how concerned are you about the bond vigilantes coming back into the united states, particularly for tenure and and thirty-year denominations if there is a slow down in the pace of rate hikes and the face of cpi still coming in hot? gene: i am not worried about at. do not think it is a market that has the same vulnerabilities as we saw in the u.k. market. very thin the quiddity and leveraged players at the long end of the curve can drive those prices on yields to significantly higher levels in a short period of time. i think those dynamics are different. the risk case for the long end of the u.s. curve, we start to see aggressive selling in a scenario where japan ends their yield curve control. i think that is an outside case. for the u.s., the idea of the bond vigilantes coming back israel, but i have only seen it this year already.

lisa: do you think there is evidence in the slowdown of pace in inflation, confirming this view of used car prices coming down and feeling there is limited pricing power for an increasing number of u.s. companies? is it bleeding into this feeling people have gotten carried away with inflation projections, that naturally, it will come down more? gene: i think that is the most important question in markets today. i think there is ample evidence there is lower inflation in the pipeline. it is not in the headline figures that, i do not think the fed is compared -- prepared to blink when they are barely over there neutral policy rate estimate. inflation at a headline level is still high. it is coming. i feel there is a broadening amount of data that support that, whether in used car prices, ism prices paid, measures from the national federation of independent businesses and other things. it will take more time. jonathan: final question.

10 year last week, was at war 33. right now, 10 year at 4.06%. just want to get a feel from conversations you have been having, do you believe that might have been high on friday, or do you think we are threatening to break beyond and above those levels? gene: we will continue to press so long as the 75 basis point increments. we are likely to have three central banks hiking within that magnitude within the next week. i do not think we are far away from that peak. i do not know if we just saw it last week or if we are going to see it in the next few weeks. if we plan for clients over 12 months or beyond, i think these are -- i think this is a better environment to be adding duration to portfolios. jonathan: thank you, good to catch up. that seems to be the take from a

lot of people. after the 75 next week's meeting from the federal reserve, we send a boat of the hiking cycle. you can think of that leaning into duration. tom: i am hearing it to. when is the inflation report? jonathan: november 10. tom: that is what matters. november 10. peter bookmark over at bleakley advisor, i talked about this yesterday to someone i ran into on the street and we are not talking about the redo in floating-rate paper and in commercial real estate. everything is on 30 year mortgage. that is what sells on tv. i get that. he brilliantly walks through that transaction of two years ago, it is a three year piece of paper multifamily housing. what happens a year from now, the math doesn't work. jonathan: you know who was talking about it, she is sitting next to me. lisa: you know. doesn't matter. going forward, i think there is this bigger question of how much

inflation already is coming down. you ask about what you would look for. it is not going to show up in the cpi reports because it is going to cramp some housing demand. it is not going to show up for another year. how much do you start to feel this subtle feeling that inflation is going to cool up faster? that is what i am hearing, that is what we just heard there. tom: do you think we are going to see a substantial disinflation in rents or homeownership costs? jonathan: how are you measuring it? in the official cpi print? tom: no. it is a distortion. we are infected by new york. i went below 59th street. jonathan: is this where you had the conversation? tom: there was a bridge down there. it was gorgeous. jonathan: what about 58? how did you get into the building? tom: i had to figure it out. i knew there was a mcdonald's. jonathan: i thought that was on 57th.

tom: that is on third. nationwide, rents are going to diss and play are you kidding me? lisa: they are not going to does inflate --disinflate. jonathan: you are already rude, i am polite. you shout out, get a life. [laughter] true story. lisa: i know. jonathan: get a life. i am just sitting there. thanks so much for watching. from new york, this is bloomberg. >> tom keene. the european central banks sent to look past growing fears of a recession today. expected to raise interest rates by 75 basis points for the second time in a row. the ecb is trying to quell inflation running at almost 10%. five times the ecb's median target. the biden administration enforced a scale back a plan to impose a cap on russian oil

prices. that follows skepticism by investors and growing risk in financial markets. instead of strangling the kremlin's oil revenues by imposing a strict lid on prices, the u.s. and eu are likely to settle for more loosely cap at a higher price than one envisioned. credit suisse most are medic steps yet to repair the bank. it plans a 4.1 billion capital raise. investment banking thousands of job cuts. we spoke with credit suisse ceo. >> we want to go through the transformation after next three years with every strong capital base. and leave the transformation also with strong capital base. it will become profitable definitely from 2024 onwards. lisa: credit suisse is trying to restore credibility after a succession of big losses and management chaos. global news 24 hours a day, on air and on "bloomberg quicktake." powered by more than 2,700 journalists and analysts in more than 120 countries. i am lisa mateo.

this is bloomberg. ♪

>> we have to be responsibly managing we increased -- with china. we have to maintain military and vantage but it -- we are making it clear, we are looking for competition, there is going to be stiff competition. there does not need to be conflict. jonathan: the president of the united states on the relationship with china. counting you down to a ecb rate decision. no drama on the s&p. drama elsewhere. meta-down by 22%. 22.6% in and around session

lows. credit suisse down by 2.5%. drama at the single name level this morning. later this afternoon, you hear from apple and amazon. tom: i do not want to waste a lot of time. i'm going to point out my theme for next year, the great zombie rollup. maybe that starts with credit suisse today doing its own interior rollout. jonathan: which is the zombie piece? tom: to their credit, they said they would do the bad -- bad bank accounting, part of it would go to pimco, blah, blah. jonathan: can you talk about the heritage of first boston? tom: fossils, 12 left on boston -- 12 left on wall street. it is a magical nightmare. it is, you've got to go back to the 1950's and 1960's. they are going to market it, brand it. what i would suggest people want to see is results. jonathan: could you say we all

know brilliant people at credit suisse? this morning is tough when your company goes through this. tom: one of the first people to get behind me was neil's sauce, head of economics at credit suisse. greg joins us this morning. i said to them, can somebody who were memories driving by the ge factory in schenectady, new york past utica, there is only one guy we know who knows jack welch is schenectady new york. maybe it is the utica of america. they will go to syracuse today. biden went to syracuse -- can they garner votes in the utica, syracuse? >> democrats entrenched in new england are in trouble. no, i think we are seeing a total reversal. we are seeing hispanic voters leave the democratic party and

go to republicans. we are seeing a lot of changes from the old roads. tom: lisa, what i think is so important here is simple idea of the panic two weeks into the election. what we are seeing day today is going to be extraordinary. lisa: when you look at the betting odds, democrats are dramatically losing seats. there is the question of how bad of a whopping they are going to take in the house and senate. with respect to which races you are watching, which is going to be most compelling to you in terms of not just whether, democrats lose power, but by how much? greg: 17 in the house, on the low side. i may have to revise my final forecast and put it in the 20's. so many interesting dynamics in the selection. polls show crime has surged is a big issue, polls show abortion is not as big an issue we thought it might be. polls show hispanic voters are moving to the republicans. really interesting stuff. i think there is going to be a

wicked, wicked postmortem among the democrats trying to figure out what happened. lisa: not to be a conspiracy theorist, i have to go to this. there have been rumblings around the edges. how concerned about election security are you, when there is a number of international actors and domestic ones that want to raise doubts about the institution of the united states? greg: it is a legitimate fear. there was a break-in yesterday, we do not know the details. i have a hunch it is probably not the only incident that will happen in the next two weeks like that. charges, ballot box step, all that stuff. tom: let's focus on the gop. how grand old party is the gop two weeks out? lisa: they've got an internal debate to resolve, how much money do we give ukraine? greg: kevin mccarthy has had to walk back what he has said. most republicans won continue the funding. tom: go ahead. greg: i think at this point, i

think one of the sleeper issues that involves china, it involves ukraine, iran is a dramatic increase in defense spending. i think we go to 800 billion dollars in this new fiscal year. tom: are democrats and republicans on board with that jointly as we see them both jointly with the view on china? greg: one of the rare issues where you could see a compromise. i think there is unified, and 230 in washington toward china for all of the things they have done with whether it is covid or treatment of dissidents. lisa: let's say the republicans win the house and senate. what are they going to do with the fed when they are hiking rates? how much are they going to start pushing back against aggressive tightening in some of the monetary policy, simply because it is going to create problems for this economy? greg: i think we are going to start to see the fed come under intense criticism. we saw yesterday, sharon brown, the democrat from ohio with a

harsh letter. we see people in the markets, whether it is jeremy siegel or jim polson. there are highly regarded people who feel the fed has overdone it. i think that criticism is going to increase. jonathan: great to catch up. no doubt we will touch base again before the midterms. within two weeks, to that vote. to the results of those votes. tom: we are going to have a lot of coverage of this and do it in a bloomberg surveillance way, twofold in the polling. fold it into the economics. the one thing i will say, there is a huge certitude gridlock or even republican ascendancy tax increases. jonathan: he mentioned china reflate. something we haven't talked about, it is a busy day. the chancellor of germany, schulz. the german government has agreed on an agreement for costco to

buy a stake in one of hamburg's port terminals. tom: americans are clueless on this. there is a huge relationship. what is it called, belt and suspenders? jonathan: belt and road. not sure it is called belt and suspenders. where have you got that from? [laughter] tom: i have no idea. jonathan: some concern over this. tom: lisa and i have a foreigner with us. i think we are going to bring this up as nobody in the media is. lisa: i mean. tom: i'm going to bring this up. this is delicate. afterthought is in school, a religion class studying hindu. this is momentous in your united kingdom. this new prime minister, there is people in america where it is lost in translation. the difference of the history of the united kingdom and religion versus america in that. explain what it means for most of the united kingdom.

explain what it means. jonathan: it is fantastic. i think we talked about the diversity of the conservative party in terms of the makeup of who leads the party in the makeup of the chancellor. whether you think that was a historic decision by liz truss. i think the controversy is not around that stuff. i am happy to say. the controversy is going to be about a very rich, wealthy individual, a billionaire through marriage going through with austerity in the united kingdom at a cost of living crisis. tom: the cost to get here, is that part of it as well? jonathan: sure. this is bloomberg. ♪

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>> investors are skittish as the fed pulls the punch bowl of easy money. >> i think the risk is they end

up doing more than they signaled in the dot supply. >> other central banks are hiking, but they are also beginning to slowdown. >> i think we have set a chain reaction in motion that is going to lead us to real problems this winter. >> this is "bloomberg surveillance." tom: good morning. an eventful thursday, much going on including in for minutes, christine lagarde and the ecb will report. under the press conference, what will you listen for? jonathan: the tone around the economy, the conversation around the balance sheet. they are willing to 75 basis points potentially into a recession, are they willing to unwind that balance sheet? tom: in the intro, they talk about the punch bowl. i do not believe there is a punch bowl in frankfurt. it is so messed up. what is the difference in lagarde's balance sheet versus powell's balance sheet?

jonathan: powell doesn't have italy on its balance sheet. that is the biggest inference. that is the problem with europe and the bond buying program. you've got some the countries, bond markets, sitting there. very different situations. tom: what was the thing that was seven months ago out of an ecb meeting, they were going to do a plan. they were going to do an individual bond plan where they summed it up. jonathan: tpi? the transmissions protection? that hasn't been activated. tpi is meant to work like omt. tom: i remember omt. one of my favorites. jonathan: draghi came up with omt. that was the great, whatever it takes moment in 2012. omt was never activated. tom: the one that was better than any of them was eie i/o. lisa: omg. [laughter]

tom: it is alphabet soup. people making it up as they go. lisa: trying to offset some financial stability concerns and social concerns in a place like the european union will also -- while also combating inflation. is it an impossible task, and how much is inflation going to cooperate? i think that it's the under punning -- underpinning of the bulls and the bears. the bears say, this is a structurally higher inflationary regime and you will see the bond vigilantes come out. tom: correction of the month was ahead of the dutch central bank leaning over into the middle of the interview and saying, stupid inflation. the netherlands is not 11%, it is 17%. is the 17% old news? jonathan: double-digit cpi. can we say we have seen the peak in eurozone inflation? i think people -- a lot of

people are not comfortable with that call yet. this is the dilemma. the classic em dilemma for the central banks, a dilemma they haven't faced for a long time. upside risk to inflation, downside risk to growth. they have got to attack inflation, that is the mandate of this ecb. tom: what do the bonds say? what do bonds say in europe, how do you roll that over? lisa: bonds are trading light bitcoin. not quite like that in europe, but you have seen bond yields get tempered a bit. i wonder how much the bank of canada decision yesterday, where they came in with a smaller rate hike, how much that will end up setting the tone for central banks around the world. that they can step down. tom: let's get to the data. the more industrial, bigger names like dow jones industrial average. versus the nasdaq, flat on its back. jonathan: because alphabet and

microsoft are down. meta-, you want to know where facebook is? facebook is down almost 23%. tom: which is worse than two hours ago. jonathan: euro-dollar is negative .4%. ecb decision 11 minutes away. yields higher on a 10 year in america, up seven basis points. tom: stay with us on credit suites this morning. a reorganization at the swiss bank. jeremy joins us to get you 12 minutes to the ecb decision. what will you watch for in 10 minutes? jeremy: i have been listening to your comments. it is about the decision itself in terms of that assumption of 75 basis points baked in. the doves have acquiesced that view. it seems most likely. very much that language regarding the forward-looking

bias towards the growth trajectory, adjustments in terms of the balance sheet. also in terms of the decision in terms of arbitrage between the high deposit rate. whether that is going to see a gradual degree of liquidity reduction in the euro zone, which could be instructive on a euro evaluations going forward. jonathan: rate hike, balance sheet and -- throws. they are willing to hike into recession risk. do you think they are willing to do qt into financial instability that we have experienced in the last month or so? jeremy: i think they are starting to discuss qt. i think we are some way away from getting towards any degree of passive qt as far as the ecb is concerned. if we are and when we see this starting underway, it will most likely be that passive, no longer reinvesting proceeds. i think that is the story in 2023. i think the ecb and bank will be

happier during the least, some degree of neutrality before they start to consider the balance sheet adjustment. neutrality in terms of the ecb is probably somewhere in the region of 2%. we have some way to go. i think qt is probably a story for 2023. lisa: we have been looking at bond yields in the german region throughout the euro region. they had been coming down a bit before today. they are paring some of the gains on price, rise in yield. how much have we baked in the idea of a slowdown in the pace of rates material after 75 basis point hike in 10 minutes time? jeremy: i think that is what the market is predicating. if we see 75 basis points today following the previous move of that magnitude, the market is anticipating movement. the ecb will be quite aggressive in terms of policy perspective going forward.

we would expect 50 basis point move in december. ultimately, probably 25 basis points move most likely into the beginning of 2023. if -- at that time, i think we are getting into a scenario where we are rolling over and inflation will prove to be more durable and we will see headwinds in terms of the macro drop -- macro backed up playing up. i think that will have a impact in the ecb's reaction function, they will struggle to meet what is currently priced into the curve for 2023. lisa: if the ecb pulls back and signals they are open to a 25 basis point hike in december, is that bullish or bearish? jeremy: markets have a say, normally one would argue a lower rate hike would be detrimental to a currency. in a backdrop where you are seeing economic headwinds and we are seeing substantial policy tightening from the ecb, i think

unusually, it may prove to be more supportive. providing a little more tailwind to growth, reducing or precluding some of those fragmentation risks from becoming more. jonathan: the last decade in reverse. in the last decade, we had a cohort of germans complaining about the easing of the ecb. now you hear from the italian prime minister complaining of the tightening of the ecb. the politicalization of the european central bank, is that something they can handle as a institution? does it damaging the signaling that comes from the ecb? jeremy: -- when you were talking before you came to me regarding the difference between balance sheet of the ecb and the fed, that politicization and the differential positions and political backdrops across the euro zone do make a job of the ecb incredibly difficult.

you throw in those fragmentation risks. we are seeing increasing degrees, and probably will see increasing degrees of criticism on both sides of the equation in terms of policy backdrop of the ecb, whether it is to aggressive of tightening in the context of italy, or northern europeans and nordic countries where inflation has been elevated for a contracted period of time. that underlines the difficulties that the ecb has, that is probably why having somebody that has a strong political backdrop, back ground at the top of the ecb is going to be beyond any uncertainties. lagarde is not a trained economist. jonathan: we are going to build on that in a moment. he is going to stick with us as the ecb decision. everyone seemingly once a weaker currency, or once the u.s. to have a weaker currency. mastercard sees the fourth-quarter quarter adjusted growth impact, 6% to 7% i fx. we

have seen a lot of that the last couple of weeks. tom: the stock trade is down 4% here. the new 3% to 4% is the new 6% to 7% in foreign exchange. to everyone's conversation, win is the win of dollar weakness? everyone has every -- everyone has gotten old and gray waiting for dollar weakness. jonathan: waiting for the ecb to fall into that conversation. lagarde would love to see a weaker dollar. lisa: at one point does it feed into u.s. economic growth? we are seeing these companies margins crimped as a result of the fx headwinds. at what point does it become the u.s. problem, where they are incentivized to do something about it? people are saying, earnings continue to perform. jonathan: 99 handle on facebook. lisa: wow. jonathan: 99. lisa: dropping. tom: where is the board? where's the board of directors?

it is a private company. masquerade is a pump -- a private company. is that too harsh? jonathan: stop sants, 23%. ecb rate decision coming up. from new york, this is bloomberg. ♪ lisa: in a few minutes, the european central bank is likely to lift its main interest rate to the highest in more than a decade. it is trying to lower record high inflation, almost all economists surveyed by bloomberg predict a second straight 75 paces point hike today. president xi jingping says china is willing to work with the u.s. to find ways to get along. the comments came before a possible meeting with president biden next month at a group of 20 summit, it signals an effort on xi's part to maintain ties. credit suisse is planning a sweeping overhaul.

it includes a 4.1 billion capital raise, a carveout of its investment bank and thousands of job cuts. it is the most urgent attempt to repair credit suisse after huge losses and management chaos. in breaking up the investment income of the firm will create a second advisory at capital markets business that will revive first boston branding. in singapore, the head of the central bank says southeast asia has done a decent job of allowing markets to absorb some of the shocks from the surging u.s. dollar. -- spoke with bloomberg. >> a lot of things can happen if the exchange rate moves too fast, too far. i think so far, they have been managing it well. lisa: indonesia, thailand, the philippines and malaysia are struggling with more than a 8% depreciation in their currencies this year. global news 24 hours a day, on air and on "bloomberg quicktake." powered by more than 2,700 journalists and analysts in more than 120 countries.

i am lisa mateo. this is bloomberg. ♪ >> the development of the u.s. dollar hasn't seen a decline. therefore, that might make imports more expensive and core inflation. i think the ecb has these things in mind. ask pre-much in line with other central banks. jonathan: the german deputy finance minister seems to be happy with the ecb, a change from the last 10 years. ecb is hiking interest rates is not coming, it is going to ceased and maybe execute qt. the decision is about 50 seconds away. we have a weaker euro, euro

dollar above parity. euro-dollar on the session down my 5%. tom: the tone i had in washington, the vector of the ecb is calling to the netherlands. and germany. jonathan: they are happier with this. tom: they begin the morning happier. jonathan: i said it was the last 10 years in reverse. it is the germans complaining about policy to lose. now, the italians are complaining about things becoming too tight, too quickly. lisa: they have a different leg right now. germany has been on the front foot -- part of the issue of what has been going on and dependence on russian oil, how much is there a bit of, we need to throw you a bone to save part of the union, which is a reason there may be more willingness by the ecb. jonathan: you are being too kind. that decision has dropped. 75 basis points was the previous number. we got -- we go from 75 to 150

on the depot rate. on marginal lending facility to to 25. main financing rate from 125 to 2%. all, slap bang in line with what we expected. weaker euro down .5%, that is where it stays. starts to roll over more. i will get into additional headlines. yields were higher on a 10 year, they stay higher by 10 or 11 basis points. on a 10 year, it is 441. the ecb expects to raise interest rates further from here. lisa: i am watching, at one point, --how much can we get this sense that the outlook is deteriorating? that is what i am looking for and the comments we hear with inflation staying above the target for an extended. of time. jonathan: another statement for anyone following the asset

purchase program at the ecb. here is the quote. the governing council contends to continue reinvesting in full with principal payments from a churning securities purchased under the app for and expended period of time. for as long as necessary to maintain ample liquidity conditions and appropriate monetary stance. -- the pandemic emergency purchase program, the governing council contends to invest -- securities purchased under the program until the end of 2024. to avoid interference with the appropriate monetary policy stance. the council will continue applying flexibility and reinvesting redemptions coming to you in the pep portfolio with a view to counter risk monetary -- transmission to the pandemic. was that enough monetary policy speak? tom: that was impressive.

what i would suggest -- jonathan: is anyone out there? tom: on bloomberg radio, 40 seven people turned their radio off. i would suggest two things, one, how different these headlines are are different than what we see at 2:00 p.m. for the united states central bank. the other thing missing is the draghi confidence of a timeline out one year. we do not see 123, 2024. the draghi time headlines have disappeared. jonathan: we got the 75 from the ecb. am i allowed to do the -- stuff, should i avoid it? i'm going to do the couto stuff. governing council decided to change the terms and conditions. targeted long-term refinancing operations. joining the acute phase of the pandemic, to play a key role in encountering downside risk to stability. an extraordinary rise in

inflation needs to be recalibrated to ensure it is consistent with monetary policy and reinforce the transmission policy rates increase in's two lending conditions -- two lending conditions. -- lisa: ok. this is like english words that are not english. put together. jonathan: none of it is. lisa: central banks being king. to translate, how much of these cheap loans -- i was reading up on this. how much of these cheap loans are a problem for an ecb that wants to tighten conditions for banks? they are saying, you can pay them down now, get them off your books, we will raise rates on you. jonathan: i am not sure the banks are going to be happy with this. tom: alphabet soup with someone who speaks 14 languages. jonathan: maria is going to translate this. maria, i did that for you.

you can be more direct about what has just happened with the ecb peered what are we looking for in that news conference in 24 minutes time. ? maria: the 75 basis points, well calibrated. the key would have been the signal going into december. 75, there is nothing new about that. the market was expecting this. for those that wanted to see real action against inflation, they will be satisfied with this. i am thinking of the german central bank. the other takeaway which is a key is that changes to the tltro program. there are two reasons why this is happening. the wants to drain excess liquidity on this. european banks sit on 2 trillion euros of this, they are changing the conditions for it. we need to witness technicalities around it. they are changing terms. while the banks may not be happy and this could potentially tale

litigation, the pressure is whether they want to take on the central bank. change of intelligence and 75 basis points confirmed. tom: lagarde is not economist draghi. explain the inner politics that are behind her and her press conference and 25 minutes. what does christine lagarde need to juggle within your european continent? maria: she is not a economist by training. that has always been the criticism, she is not technically as mario draghi was. this idea that draghi was the master markets, he could talk are gets into doing anything he wanted. the reality is at this point, you alluded to this in your previous conversation, this is a central bank that has to cater to tensions that are different to countries that are in different positions. when you look at germany, italy, they are sitting on two opposite sides of the spectrum. what i hear repeatedly in

frankfurt, she may not be a trained economist, not technically as good as mario draghi is. at this point, you need someone who has a political instinct to get to consensus and calm things down. at one point, mario draghi was someone who was perceived by some members of the european central bank as to aggressive and taking decisions by himself. the fact she is seen as a consensus maker at this point where this is in many ways territory for the central bank, frankfurt is the best way to go about it. jonathan: we will catch up later. fantastic coverage, as always. reading through the statement, not a whisper of cutie in this. the italian move faded off the back of that. tom: jeremy continues with us. what we listen for with lagarde, she is going to make a formal written statement. i will be blunt. the questioning of the ecb is sharp as a tack the journalist,

what is the question you are going to listen for that she needs to answer? jeremy: i think the market is keen to understand where the terminal rate is and see whether the ecb is moving away from this frontloading narrative and is going to mark the market, meeting the meeting prices. it is going to be driven by the data. i think we need to see and try to understand how the terminal rate plays out. we will see if that reflects back into how that will play into cutie -- qt. from the reading of the language, there seems to be no change in the terms of the ecb language in terms of the balance sheet adjustment. i think the market will be keen to understand the process will be to encourage the ecb to consider growing back its balance sheet to 2023. lisa: i am curious your view on how lagarde should increase the political question -- approach the increasing question of the

downturn. how much does she have to acknowledge the downturn, that they are going to hike as much as they are saying? jeremy: i think the ecb has to remind markets its primary eat those is to control inflation. if we think back to the creation of the ecb in the late 1990's, it came out of the bundy spake hash -- bundesbank. i think that is the primary focus. that has to do and make with painful and palatable decisions. where we are undergoing a slowdown. i think the bank will need to be mindful of the fact inflationary pressures are starting to diminish, they need to remind the market to resume inflation is the preeminent factor. that will provide a more constructive backdrop in 2023 and into 2024. jonathan: wonderful to hear from you.

euro-dollar session lows, negative.75%. italian yields were higher, now lower on a italian 10 year by a couple basis points. they said so much without saying so much at all. for that reason, it is not a whisper of qt. i think that is why the italian yield story is backing away. a incredibly vague statement on two issues, qt and interest rates. tom: i did the math of italy and did a fancy study. it takes me back to 2014. i am back eight years on italian german spreads, well over one standard deviation. what are the consequences if the italian german spread widens were christine lagarde? jonathan: we could get comfortable for 250. it is a relative game. 220 is better than two 50. based on this morning, things

are heading in the right direction. heading in the right direction because they are not talking about qt. let's wait for the news conference. somebody is going to ask about it lisa: how much will we get new information from this particular statement, with expectations? they didn't mention qt. scraping at the edges to have anything in order to make some sort of move. i am not totally understanding the euro move and why the euro is weakening on this. i do not know. is that qt? jonathan: did you understand that statement? lisa: [laughter] tom: it was clear after you explained it to me. jonathan: that is what central banking has become. that is the problem. from new york, this is bloomberg. ♪

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jonathan: data in america about eight seconds away. mike mckee runs into the studio to get prepared. equity futures on the s&p 500 about positive, up by 0.05%. yields higher by five basis points in the united states. what is the data? michael: initial jobless claims,

217 thousand. that compares to 214,000 than the previous week. jobless claims telling us the labor market is in good shape. gdp third-quarter gross domestic product for the first release, 2.6%. which neatly splits the difference between the atlanta fed three point 1% gdp and the bloomberg consensus of two point 4%. the first two quarters of the year, we saw contraction. i have not seen yet whether that has been revised. personal consumption, waiting on that number. i will have to look into this. personal income, personal consumption. we will look for it in a second. gdp price index, not really widely followed because it is a quarterly number is 4.1%. durable goods orders, up .4%. zero point 6% was the consensus. x transportation down way 5%. capital goods orders down .7%.

that tells you businesses are starting to pull back because of higher cost of investment shipments were down 0.5%. it does suggest business spending is weaker then the markets may have hoped for, given the fed and what they had been doing. jonathan: run us through the details in a moment. i will run through the market. bond market this morning, yields up. it pays. there is a big fate in the bond market. that factors into this move. the 10-year yield on the treasury up one basis point, was up 4.05 moments ago. equity futures positive .5%. dollar stronger, euro-dollar -.7%. briefly off the back of the ecb, we did get a 99 handle on euro-dollar. a brief break of parity this morning. tom: november 2 is the fed

meeting. inflation is after that. jonathan: november 10. tom: dude they get a view at the fed of what inflation will be before the report? michael: no, but we get the pce number, the fed's favorite. we get that tomorrow. for the month of september. tom: is the market getting out of a disinflationary track? michael: i do not think so. we've got 75 based in. you've got the idea of a rate cut next year. this fed, you were talking about it before. the ecb decision. this fed is going to be meeting for a while as they see data coming. let's take a look at numbers in the gdp. here is one that jumps out. residential, the fed has clamped down mortgage rates have shot out and residential has gone down by 26.4% over the second quarter. residential contribution.

tom: do you have a gdp percentage of that? michael: residential is just over 1% as part of the overall gdp. lisa: can you expend what that means in terms of subtracting 26.1%? michael: it is not subtracting. it is 26% lower than what it was. lisa: this means the market is contribute into this. how much when you dig into the futures of the gdp report does it highlight we as people were talking about before the surface, if you get a rebound in the average or year-over-year? michael: weakness in business spending, residential fixed up by 3.7%. that is a little better than it was. when you break that down and you take structures, structures fell by 15.3%. equipments up 10.8 percent. business investment hung in there, but was not great.

personal consumption number, 1.4%, down from 2% in the second quarter. up slightly from 1.3% in the first quarter. consumers are spending, but not spending a lot. other things we want to look for or -- our government spending. government spending fairly strong, i am surprised. state and local, 1.7. they're the ones that have the money at this point. federal government has been cutting back. a lot of this spending is national events. 4.7%, replacing that stuff. they are sending over to ukraine. jonathan: would you like to translate this corporate headline from the mcdonald's ceo? sees a mild-to-moderate recession in the united states. what is a mild to moderate recession in the united states? michael: there is a lot of questions on how you define it. some that officials have suggested things along those lines. it seems to be what they are

talking about is a small contraction in gdp. not a big rise in unemployment. if the fed got to 4.4%, which they had forecast, you might be saying ok, that is a mild recession. a lot of people say they are going to have to go higher than that. quickly looking at the other aspects of this, which always fall into the question of how did this workout -- exports were up by 14.4 percent. imports down by 6.9%. trade contributing significantly to the overall package here. inventories up by 61.9 million, up by 10 billion in the second quarter. inventories are subtracting from growth. exports are adding to growth at this point. net exports. it is a under the hood kind of story for the fed. i sent this morning on early surveillance, this is a

non-informational for the fed. it tells them some things about the composition of the economy, but it does not change their view. jonathan: is there a show before this one? tom: there is a early one. jonathan: what time do they wake up for that? that is brutal. you get up for that, too. that is out of order. the ecb came out, we sent everyone back to sleep. tom: michael mckee, thank you so much. he will dive into that data for you, first look quarter gdp. there is a single sentence from holland horse and nathan sheets. his public service to the united states treasury, he joins us now. there is that single line of global gdp in 2023. it is well below the typical 3% level. how bad is the global recession

of next year? nathan: the global economy is looking very soft at the moment. in aggregate, our projection is 2% global growth. if you take out our relatively bullish expectation for china, we see global growth at less than 1% next year. which is right on the border of what is traditionally associated with a global recession. looking more at the details, we see early next year fairly severe downturn in europe. as the year progresses and monetary tightening in the united states leads to a recession during the second half of the year. pretty tough outlook, challenging in a lot of different respects. that is coupled with the

inflation outlook that remains very concerning. jonathan: financial conditions have eased. with the backdrop you are talking about, financial conditions have started to ease because a lot of people are thinking about the federal reserve backing away from the pace of hikes. going from 75 to maybe 50, 225. what do you make of that conversation? nathan: i think the fed has struggled in its communication. it has set up at least implicitly a syllogism that, if we are serious about inflation, we go 75 basis points. when rates are low, it makes sense to have that syllogism. once he moved up 3% and in november, there will be 375. as you move higher, you've got to start casting your determination and framing your determination to fight inflation in different ways.

specifically, the fed can say, we have moved substantially. that reflects our commitment. if you do not believe we are committed, just watch what we are going to do. i believe they are in a tough situation where they have got to pivot, they cannot keep rates up at 75 basis points rate indefinitely. the markets are interpreting that as the fed pivoting off inflation determination, which i think is a misinterpretation of where they are. lisa: i am looking at the gdp components. michael mckee was breaking them down. we saw housing, he clarified residential investments subtracted 1.37% from gdp heard this quickly moving story. under the hood, how much our other inflationary components offsetting some disinflationary moves we are seeing in the housing market, retail, used car prices? you can see on the margins around the economy?

nathan: very clearly, we are now in a dynamic of disinflation in terms of -- prices. that is clearly happening, we expect it is going to come off sharply in the coming months. similarly, the shelter prices are persistent the way they are cap related in the indexes. we are getting these monster declines in residential investment, that is pointing to a soft housing market. where the heart of inflationary pressures remains is in the non-sheltered services. that is tied to the hot labor market, rising wages and rising services inflation. that is what the fed is worried about. that is what the fed is targeting effectively, they have got to see a more contained number in terms of non-sheltered services price inflation.

tom: i look at how we are going to recalibrate. we are going to recalibrate office press conference in four minutes. we're going to recalibrate november 2. frame the citigroup look for next year. i'm going back to your global gdp call of 2% next year. what is your year opening report going to look like? nathan: what we are seeing at the moment, it is looking durable in my mind. we are calling next year a rolling recession and the global economy. we are going to see various countries turned down the vast majority of gdp will see a downturn, that will particularly be accentuated and exacerbated if the chinese economy ends up

being somewhat softer instead of the 5.5% we are forecasting. if it is more like this year at 3.5%. on the growth side, you also have central banks that are going to have to earlier in the year continue to hide as the year rolls on. our expectation is, hold those rates at high levels. next year is going to be a challenging year. i am already turning the page to 2024. tom: skip it. that sounds like what we need from a former government official. [laughter] that was brilliant. jonathan: thank you. in the next month as you know at home, we are going to get the annual outlooks from so many of these banks. i wonder if they will take the nathan sheets view, and say, yeah, in 2024, this is what we think. tom: the ferro rule is the annual outlooks starts in march

of 2031. i have got to say, if you take me back to 2006, me and mike mckee back, it is unthinkable that we would frame sub 3% global gdp with a boy in china. it was not in the framework that we thought about. jonathan: not even in our view. the handle on gdp, sounds like the view. michael: global recession is basically what you are going to get. you are probably already there. sweets today said they are confidence -- their confidence numbers were so weak that essentially tells them they are going to be in recession. you are looking at recession in europe, probable recession in the united states. for all intensive purposes, china's growth rates -- a recession. jonathan: comcast ceo moments ago sees pressure on skype from

a weaker european economy. i talked about mcdonald's coming out with headlines, the ceo has made comments this morning. revenue is a beat, sales were a beat. everyone sees a mild to moderate recession and the united states, he goes on to say -- a more significant recession in europe. franchisees are in financial pressure in europe. china, a challenging environment in china. sees increasing uncertainty in the economy. tom: the -- index is made up of ratios by smart people, the european financial conditions is by itself. the fact is, it is unique and discrete compared to other nations. jonathan: euro-dollar now negative going into this news conference, down .6% lisa: on the euro. lisa:if you can make sense of the moves, the aggressive moves after this particular news

release, please let us know. i personally cannot translate the why behind it, other than perhaps overthinking the analysis. jonathan: you're going to make this my problem? lisa: absolutely. jonathan: president lagarde is walking into the room. it is about to be her problem in a moment. this one, i think they tried to make warring. in europe, i think it is going to be anything but boring for a long time. tom: she is going to be reading off a lot of prepared statements, like chairman powell. she is going to get questions where she is going to simply go to the statement to read the formal answer. jonathan: she will be asked about the step down. intentionally, a step down from 75. what is step down in french? lisa: that is dreadful. jonathan: you've got more important questions than the

step down. lisa: what i want to hear is the outlook for some sort of downturn. that political pressure to keep hiking, even as you see that downturn accelerate is one of the key questions. jonathan: the european central president lagarde focused on interest rates, doubling -- in one single decision from 75 to 150. we do it on a week where we have had pmi's in europe and the 40's. i never thought i would say, pmi's and a ecb rate hike of 75 basis points because the cpi is up double digits. that is the problem. let's take a listen to the ecb president, christine lagarde as the news conference gets underway in frankfurt, germany off the back of a 75 basis point rate hike. a lot of words used in this statement, they didn't say much. i am sure there will be questions about that. there was not much on qt and the balance sheet unwind, i imagine

there are going to be lots of questions about that. christine lagarde starts that conference now. >> the vice president and myself are delighted to welcome you to our press conference. the governing council decided today to raise the three key ecb interest rates by 75 basis points. with this third major policy rate increase in a row, we have made substantial progress in withdrawing monetary policy accommodation. we took today's decision and expect to raise interest rates further to ensure the timely return of inflation to our 2% median term inflation target, following a meeting by meeting approach. inflation remains far too high, and will stay above our target for an extended period.

in september, euro area inflation reached 9.9%. in recent months, soaring energy and food prices, supply bottlenecks and the prospect of recovering demand have led to a broadening of price pressures and a increase in inflation. our monetary policy is aimed at reducing support for demand and guarding against the risk of a persistent, upward shift in inflation expectations. the governing council decided to change the terms and conditions of the third series of targeted, long-term refinancing operations known as telco three. during the acute period of the pandemic, this instrument played a key role in -- encountering downside risks to price

stability. today, in view of the unexpected and extraordinary rise in inflation, it needs to be recalibrated to ensure that it is consistent with the broader monetary policy normalization process and reinforce the transmission of our policy rate increases two lending conditions. we have therefore decided to adjust interest rates applicable to tltro three from november 23, 2022 and to offer banks additional, voluntary early repayment dates. finally, in order to align the remi nation of many reserves held by credit institutions with the euro system, more closely with market conditions, we have decided to send the remuneration of minimum reserve and the ecb deposit facility rate.

the decisions that we took today are sent out in a press release available on our website. the details of the changes to the tltro three terms and conditions are described in a separate press release to be published at 345 time continental -- 3:45 continental european time. another press lease detailing the change to the remuneration of reserves will be published at the same time. i will now outline in more detail how we see the economy and inflation developing, and will then explain our assessment of financial and monetary conditions. economic activity in the euro area is likely to have slowed significantly in the third quarter of the year, and we expect a further weakening in the remainder of this year and the beginning of next year.

by reducing people's real income and pushing up costs for firms, higher inflation continues to dampen spending around production. severe disruptions in the supply of gas have worsened the situation further, and both consumer and business confidence have fallen rapidly, which is weighing on the economy. demand for services is slowing after a strong performance in previous quarters, when those sectors most affected by the pandemic related restrictions reopened. further based indicators for new orders in the manufacturing sector are falling. moreover, global economic activity is growing more slowly in the context of persistent, geopolitical uncertainty, especially going to russia's unjustified war against ukraine and tight financing conditions. worsening terms of trade, as the

prices paid for imports rise faster than those received for exports are weighing on incomes in the euro area. the labor market continued to perform well in the third quarter, and the unemployment rate remained under historically low level of 6.6% in august. while short-term indicators suggest that jobs were still being created in the third quarter, the weakening of the economy could lead to a somewhat higher unemployment in the future. to limit the risk of fueling inflation, fiscal support measures to shield the economy from the impact of high energy prices should be temporary and targeted at the most vulnerable. policymakers should provide incentives to lower energy consumption and bolster energy supply. at the same time, governments

should pursue fiscal policies that show they are committed to gradually bringing down high public debt ratios, structural policies should be designed to increase the euro area's growth potential and supply capacity and boost its resilience, thereby contributing to a reduction in medium term price pressures. the swift implementation of the investment and structural reform plans under the next generation e.u. program will make an important contribution to these objectives. inflation rose to 9.9% in september, reflecting further increases in all components. energy price inflation at 40.7% remained the main driver of overall inflation with an increasing contribution from gas and electricity prices.

food price inflation also rose further to 11.8%, as high input costs made food production more expensive. supply bottlenecks are gradually easing, though they lagged -- the lagged impact is still contribution to inflation. the impact of pent-up demand, while weakening, is driving up prices in the service sector. the depreciation of the euro has added to the buildup of inflationary pressures. price pressures are evident in more and more sectors. in part, going to the impact of high energy costs feeding through to the whole economy. measures of underlying inflation of those remain at elevated levels. among those measures, inflation excluding energy and food, rose

further to 4.8% in september. strong labor markets are likely to support higher wages, as is some catch up wages to compensate for higher inflation. incoming wage data and recent wage agreements indicate that the growth of wages may be picking up. most measures of longer-term inflation expectations currently stand at around 2%, although further above market revisions to some indicators mourned continued monitoring. the incoming data confirm that risks to the economy growth outlook are clearly on the downside. especially in the near term. a long-lasting war in ukraine remains a significant risk. confidence could deteriorate further, and supply-side

constraints could worsen again. energy and food costs could also remain persistently higher than expected. a weakening world economy could be an additional drag on growth in the euro area. the risks to the inflation outlook are primarily on the upside. the major risk in the short term is a further rise in retail energy prices. over the medium term, inflation may turn out to be higher than expected. if there are increases in the prices of energy and food commodities and a stronger pass through to consumer prices, a persistent worsening of the production capacity of the euro area economy, a persistent rise in inflation expectations, above target or higher than anticipated wage rices -- prices. by contrast, the decline energy

cost and a further weakening of demand would lower price pressures. bank funding costs are increasing in response to the rising market interest rates. borrowing has become more expensive for firms and households. bank lending to firms remains robust, as they need to finance high production costs and buildup inventories. at the same time, demand -- to finance investment has continued to decline. lending to households as moderating, as credit standards have tightened and demand following's has dissed -- has decreased in the context of rising interest rates and low consumer confidence. our most recent bank lending survey reports that credit standards tightened for all loan

categories and the third quarter of the year, as banks are becoming more concerned about the deteriorating outlook for the economy and the risks faced by their customer in the current environment. banks expect to continue tightening their credit standards in the fourth quarter. summing up, today, we have raised the three key ecb interest rates by 75 basis points and expect to raise interest rates further to ensure the timely return of inflation to our medium term target. with this third major policy rate increase in a row, we have made substantial progress in withdrawing monetary policy accommodation. the changes to the terms and conditions of our targeted, longer-term refinancing operations will also contribute

to the ongoing policy normalization process. our future policy rate decisions will continue to be data-dependent and follow a we stand ready to adjust all of our instrument within our mandate to ensure inflation returns to our medium-term inflation target. i now stand ready to take your questions. >> thank you, president lagarde. the first question goes to caroline from bloomberg news. >> good, president lagarde. can you tell us whether you are comfortable with the expectation that interest rates are going to slow after today's decision and peek somewhere around 3% next year? secondly, since we are now at the lower end of the neutral rate estimates