>> from new york city to our audience worldwide, good holiday trading day to you. this is bloomberg markets live. i am caroline hyde. it is my joyful day to be walking -- to be working alongside paul sweeney. a little bit jetlagged.

>> where are you coming back from, the u.k.? >> yes. >> this is a day off for you guys. >> i wanted to be here filled with your cultural awareness. with markets, the extraordinary day continues. >> the china story is amazing for me this morning. the question for a lot of folks, what does that mean for the global economy? caroline: when we first chatted this morning, markets were tentative, dollar pairing. it seems to be the bond market dictating trade here in the u.s. at the moment. paul: a little bit of lift in yields, 10 year treasury 80. markets and equity markets on this holiday week, s&p down .7 percent. mastec off about 1.3%.

i want the latest on china. this is a story that continues to evolve very quickly. alan long joins us with bloomberg news based in hong kong. are you surprised how quickly china has pivoted on its zero covid policy? >> i am very surprised. after three years of covid testing apparatus and so much money, it basically bankrupt local governments for this testing apparatus. they got rid of it just as quickly. what was probably the last major structure allowing overseas rivals to come to china without having to quarantine in hometown. this policy had a major impact on the economy and left the whole country isolated from the

rest of the world. caroline: what now? you have testing rates that you have testing within 24 hours of travel. the american economy thrived on chinese tourism. in the short term the certain lift up of these covid necessities and zero covid policy, we are seeing a lot of people turn very unwell very swiftly. allen: the downside to all this, policy, a lot of young people are feeling pretty well. it seems everyone i know has it. unfortunately for a lot of the older people, especially the ones that are vaccinated, hospitals overwhelmed, doctors going to work, seeing a steady influx of numbers.

it has been very tough. it sounds like in beijing they are starting to peak. we are not quite there. we don't know what the official numbers are. the government has been telling us three to 4000 patients a day and that sort of flies in the face of everything we have seen and heard on the ground. even what some of the provinces are telling us, shanghai said they have a million cases right now and expect another million more before it actually peaks. paul: what do we know of the vaccination rates in china? what vaccines have they received, how effective are they proving to be? that might give us a sense of how this might play out because we don't have a lot of evidence here in the west. allen: china will say 90%, the

population is vaccinated. that may be true that if you dig deep, especially with people over old -- people over the age of 80, two thirds of a lot of old people haven't been vaccinated. in terms of vaccines, we have the inactivated vaccine here, not the mrna. i had the chinese shot, two of those. last year i went back to new york and i got the pfizer shot and i still got covid a year ago. luckily i was symptomatic so i attributed my good health to getting both shots. there has been talk for foreigners here they will be getting the be up -- getting the biotech vaccine soon.

right now there is not enough go around. that is what it seems like to me anyway. caroline: allen wan of bloomberg, we thank you. we want to talk more now about not what it is like for the people in the streets what this means for the economies. there has been so much build up a head of this reopening. this is what the market needed to take us on the next move higher. is it? kathleen entwist is with us, morgan stanley economic director. what are we seeing stocks under pressure at a moment we talk about china reopening? kathleen: there is a lot going on and a lot of hangover from inflation, interest rates continue to creep up. we are not taking into account

company earnings. the earnings are going to be a real issue going into the first quarter and it hasn't been priced in the market yet. we priced in what the fed has done we haven't priced in with the corporations have done yet. china is opening up, somewhat of a big deal but it is not moving the market as a lot of people had hoped. paul: boy, you are bearish. that gets you to maybe the s&p can dip down to 3300. the s&p is at 3800. that is a big move. what do you think the earnings risk is in the s&p 500? looking forward? what is the downside? kathleen: the downside is companies have been kicking the can. we expected them to come forward with earnings last quarter and they didn't so that means they are going to come out with earnings this quarter. we have got highest -- we have

got higher interest rates. companies have to pay more to borrow. consumers might be a little bit more concerned about spending. that is going to hit the bottom line of corporations. the final thing is the cost of goods sold. it is going up and somebody is going to have to take that into account. it doesn't look like the consumers are going to be buying into it which means the businesses will take some of the hit. caroline: let's talk about inflation. at the end of the week looked like inflation and travel were what people wanted to see. we wanted it to go stronger and faster but we are starting to see a cooling and inflation. how optimistic are you that this remains in travel from a consumer perspective? kathleen: inflation is going to cool second half of the year. that will help someone. it is going to be hitting the consumers now. they are running out of all the extra money they had to spend.

they are putting things on credit cards. it is going to become a net that it is going to become a problem next quarter, quarter after. it is cooling but it is going to take the consumer a little bit of time to step back in and start buying again. paul: tough year for stocks. but it was an unprecedented year for bonds year. i am looking at the two-year, 4.36%. should i be buying some bonds in 2023? kathy: absolutely. we like bonds overstocks for 2023 for sure. when you look at the return of bonds this past year with corporate bonds, double-digit losses in bonds has been unheard of for quite a long time. it is a good buying opportunity. we start talking about buying bonds with year and it has been paying off. going into 2023 as well, where else can you get these nice returns without the volatility?

we are past the volatility in the bonds. just click your coupons for the time being. caroline: where are the upside risks to all of this? from an economic perspective thinking about the upside and not planning, they might look more positive in the longer-term. china opening will be that. where are you ensuring you don't lose the upside and protecting yourself to the downside? kathy: absolutely. we have short-term and long-term views. a short-term it looks a little more negative. long-term is always a more positive view. we want our clients to be invested for the long-term we also don't want to start jumping in before we think it is too soon. a stock market has always been the leading indicator of where the economy is going and it will be one of the first things to come back quickly and fiercely before the economy turns. what we don't want to happen is people to lose sight of that and wait until everything is picture

perfect before they start investing in the market again. that is where we like dollar averages in the market and taking advantage of dips and buying the dips. if you are a long-term investor you have a long-term view and you want to buy at these lower prices today. paul: how about high yield? i don't mind taking a little risk but in the face of resection -- in the face of recession would it be -- which mark kathy: i did see quite a bit of high yield companies go into bankruptcy. it is a possibility corporate always has that issue. i am keeping my clients away from the riskier higher yield bonds and sticking with more of the investment grade. paul: we really appreciate that. getting a good outlook for these markets with kathleen entwist, morgan stanley strategist.

caroline: we are still used to the morgan stanley more bearish. mike wilson and the management side of the division, everyone is still wanting to protect themselves from the downside. today, we have liquidity but the bond market pushing the stock market today. paul: let's get an update from the world with national news. we can do that with ritika gupta . >> president biden has declared a national emergency after four feet of snow dumped on new york city. he has already canceled more than 2500 flights today. the carrier expects the chaos to last a few more days traded in michigan today a federal judge will sentence a man described as the driving force behind a plot to kidnap the governor gretchen

whitmer before the 2020 election. he could get a life sentence. fbi informants helped law enforcement rake up the plot before it could be carried out. his lawyer says he was manipulated by the informants. china is reopening its borders to the world by removing the final covid zero restrictions starting january 8 edging will no longer require inbound travelers to quarantine. they will only have to obtain a negative covid test within 48 hours. while the chinese government may also change the frequency of reporting cases, changing it to a monthly report. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg. ♪ caroline: the u.k. is all for today. let's bling it looking at the s&p 500. big tech for the entire year off

by 1.3 percent. looking at the rest of the world for not only stockmarkets but bond markets rate this is the dog on the day. bond markets push up, yields on the higher side. paul: 10 year treasury up five basis points. 3.79. the two year is up five basis points. caroline: look at commodities. we have been held up a little bit better. the dollar is on the weaker side. that all has to do with china reopening. this is bloomberg. ♪

caroline: welcome back. this is bloomberg markets live on bloomberg tv and on radio. we are simulcasting on this holiday thinned out volume day. i am caroline hyde and paul sweeney. i look at a market trying to make its mind up. s&p underwater. bond yields push higher, taking

the wind out of equity market sales. financials have been under pressure on the day and under pressure on the year-to-date as well. paul: net interest margins got to start turning into favor these banks. we have. we have seen some move higher in rates. it is going to be interesting to see how they perform in 2023. what will volatility do for their trading markets? caroline: the stock market doesn't reflect much buying of these particular companies in the last year or so but their profits have been seismic. yes, 2021 was where it is at. 2022, talking about the worries in the pressures going forward. that is a scenario we can go blue -- that is a scenario we can dig into. this is a deep dive. $1 trillion profits american banks have made. paul: it is a trillion dollars in profits.

bloomberg news big tech stories just great. hannah, you talk about $1 trillion profit over the last decade for big u.s. banks, how do they do it? >> $1 trillion profit is unfathomably large. the banks have been these engines of profit. very few companies made more in profit than these firms. there is not one kind of thread. it is more a series of threads. if you look at the volatility during covid and the trading process that led to and the steel boom and things like that and tax cuts. caroline: i love the first line. what is so beautiful you have

written about these, you take an individual's take for the stock. morgan stanley back in 2009, we all remember those days. you would trash talk -- you were trash talked at parties he went to, but since 2009, to 2020, people got their mojo back when it came to banking. in particular the managing director, he was doing a lot of deals. when we think about the future of banking, whether these trillion dollar profits are here to stay, dealmaking has been thin to none? >> if you look at how the banks got there over the past decade, they have navigated through more people -- through multiple

administrations and scenarios no one would have expected. they made even more profits. it is not any one thing saved for a recession moving the needle. paul: hannah, i am looking at your story and it is not just wall street but the top six banks you focus on, jp morgan, bank of america, wells fargo, citigroup, bank of america. is that a typical bank for you? >> i am a little biased. a really good way to see the overarching trends is to look at j.p. morgan. they are massive on main street and massive on wall street. wells fargo is more weighted towards consumer, goldman morgan

stanley weighted towards wall street. jp morgan does both. it has been 50-50 as far as consumers being the biggest profit engine. that is an interesting way of looking at all the different ways. caroline: it is a great weed -- it is a great reader. look at wall street's big $1 trillion profit in a decade. jamie dimon as a leader of jp morgan hasn't been the most bullish on the world of crypto but he does like the underlying world. the future of banking, the future of finance pool, the crypto explosion, was probably a topic of many peoples tables

over the holidays. in the new york times there is a great piece about the founder. paul: he has donated a lot of money in the bahamas. to some people he hasn't gray shaded himself down in the bahamas. caroline: particularly when the bahamas has hooked their future on the company's crypto hub. hannah miller is here in new york in the studio. thank you for joining us. give us a sense of where is he now? hannah: his next court hearing is scheduled for january 3. we are all waiting to see what happens. the big question is what kind of plea he is going to make, is he going to make a plea deal like former alameda ceo and gary

wang. paul: they are aligned against him. that would make his case impossible. it will seem very difficult if he has these two colleagues aligned against him. is there an expectation he will enter a guilty plea or a not guilty plea? >> it is an uphill battle for him. prosecutors have a massive trill of evidence against him. communications, public statements made by bankman-fried, witness testimonies from his employees. we know they have a lot against him. it would be possible he could make some kind of deal. both ellison and wang are facing up to many years. with bankman-fried being at the heart of all this, he is in a tough position. caroline: it is so apt, paul you

mentioned, he gave a lot of money to a lot of different people. the sprawling nature of spf makes this element of bankruptcy make this hit, refill investors worldwide, a great headline. lewis kaplan being a united states district george serving for the southern district of new york was reassigned because the previous judge was refused because the husband worked for ftx. the idea you might have a clean shot at any of these things, there are an awful a lot of overlap. we know the legal element of this trait what about crypto? how are they managing to pick themselves up, particularly in front of their family dinners? hannah: the crypto industry is that a major reckoning right now. at 2023 is going to be an extremely interesting year. people are very downtrodden within the industry.

price of bitcoin is well below $20,000. caroline: and down from 47,000 at the beginning year -- at the beginning of the year. hannah: people are taking time to think what can we use this technology for? people are saying if we use d5, things like ftx cannot happen. that is a centralized industry. people are stepping forward saying this isn't the end of crypto. paul: you still have bitcoin. i am surprised it is not much lower than it is. it is hanging in there. that suggests sam bankman-fried's issue is an ftx issue would not necessarily a crypto issue. caroline: well said. if you talked to many people in crypto at the beginning of the year, theorized it will go down, bitcoin at 17,000, they are saying i will take that. hannah, thank you so much for coming in.

hannah miller and helena -- and hannah levitt on the day. amid the fallout of ftx and what ripple effects over at twitter, many have been questioning leadership, work culture about whether you should be sleeping in the office, should you not be? what about burnout? this is bloomberg. ♪

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caroline: welcome back. this is bloomberg markets live on bloomberg tv and bloomberg radio. it is caroline hyde and paul sweeney. it looks like the market is trying to dust off its heaviness today. paul: s&p off about .1%. the dow up .2%. the nasdaq is where we are seeing a little weakness .7%. abigail doolittle joining us in the broker studio. abigail: an interesting day. at some smaller moves coming out of that christmas holiday, that long weekend date s&p 500 down a little bit. the dow is so interesting trade we had this divergence all year. it is higher. nasdaq underperforming down .9%.

it yields going higher. one piece of concern. tesla down once again. this stock having its worst year ever down more than 60%. today there is a reuters performed -- a reuters report saying they are not selling any more stock. suggesting this huge decline, there could be dip buyers. last names down zoom video, meta-platforms, align technology, rivian en lucida, it is not just tesla in terms of the ev space. let's watch and see if we see these turn around and see her. caroline: abigail, we thank her so much greater meanwhile let's talk about how you feel in the office right now. are you working from the office, are you working from home at the moment? how fluid and flexible is your lifestyle? how do you feel at the end of

what has been a monumental year? we talked about that with -- she is now the founder of thrive global and its ceo. she recently joined bloomberg tv to talk about whether we are managing to get rid of the cold of overworking burnout. take a listen. [video clip] >> we went from sleep deprivation, exhaustion being a badge of honor and celebrate it to being the opposite. we have major ceos including jeff bezos talking about getting eight hours of sleep. we have major elite athletes like lebron james and tom brady and roger federer talking about the importance of recovery for big performance. all these people are very hard-working this is not about

working hard, this is about working smart and not having the diminishing returns we have all experiences when we are exhausted and burned out and running on empty. the science and the data are so unequivocal. that is what i find fascinating. i am a bit -- i am a big admirer of elon musk. he is unquestionably a genius. someone who understands so perfectly renewable energy when it comes to cars is missing out. is using incredibly outdated modes of human energy when it comes to how he wants to run his business is. >> is elon musk not only going back to his playbook? i want to bring up something you said in your op-ed that he is showing the downsides of a model fueled by burnout and lack of sleep in his own decision-making. that made me think about reporting from 2018 at when musk

said he was sleeping on the production line with his engineers. and if he does have a good track record of getting these companies, be it tesla, be it spacex through moments of duress and you look at those two companies now, they are the clear marketing comments for electric vehicles and commercial space launch. ariana: the pandemic has dramatically impacted the cultural shift from away from burnout and wearing it as a badge of success. when elon musk asked his twitter employees to commit to a hard-core intense way of working, 1200 of them resigned. that would not have happened in 2018. what happened with the pandemic is people looked at their lives and what do they value?

millions of people said we value hard worker, we value being completely engaged by our work but we also don't want to be defined by our work. and we want to be able to also prioritize our own health and well-being. that is the moment we are in right now. i have no doubt that if elon musk started applying that scientific, clear date or point -- clear data point around business, she would be even more phenomenally amazing across all his companies. >> what is interesting having been a board member. holding executives to account making sure there is the right corporate governance in place, many might look at two of these leaders you single out that they either have people on their boards who are perhaps yes people or they don't really have a board at all. do you think if we had an

economic slowdown or downturn people would put more focus on --? arianna: it is obvious ftx didn't have a board. isn't it stunning having a company without a board? at uber i saw firsthand the dangers of burnout and the decisions it led to. all of us brought down the company. we saw what happened with ftx. we have so many examples that it is not time to start celebrating and out modeled way of working. i have looked at where this started. it goes back to the industrial revolution when we all started revering rich -- we all started revering machines. for the human operating system, downtime is not a bank, it is a feature. once we accept that, it changes

the way we run business. caroline: we structure our monday to friday as the way henry ford first was pioneering. i am interested in your expertise as a woman who led the charge in new form of media. you must be fascinated to watch a new form of media, citizen journalism we call it. how do you think that landscape will evolve? arianna: when i launched the huffington post, 2000 five before you were born, caroline, the focus and the vision was to democratize media. now we see the marketization of media and there is a lot of great stuff about it but i am also seeing how people gathering around just what they believe. the whole danger of confirmation bias and only reading things you agree with is a tremendous

danger for democracy and for the truth. caroline: arianna huffington speaking to bloomberg technology on our show december 16. welcomed by my coanchor in that show ed ludlow right now. are you still in the u.k. right now? ed: i am. i am in london. caroline: i am a little bit jetlagged today. get us up to speed with some of the leaders she referenced in that conversation, one elon musk. tesla not performing. ed: tesla has been the story of the week the last several sessions. last run since september 2018. we forget outside of north america twitter is a global platform. the world club -- the world cup was a great success story for twitter. the world cup made in qatar,

easily outshined previous performers in the tokyo olympics and the 2018 at world cup. the overall focus right now is less on the kind of improvement and the new things on twitter and it is very much on elon musk it's -- elon musk himself. what he is tweeting and commentary. that is a contributing factor to the downturn of the tesla stock. the other company --. paul: company stocks are down nearly 70% today. this is a disaster for tesla and its shareholders. now we have some slowing production coming out of shanghai being reported as well. the next shoe to drop might be is anyone crazy to take the ceo a spot -- the ceo spot at twitter? ed: we don't know where we stand.

musk has reiterated this idea he is committed to stand down once an appropriate candidate has been found. respective media reports of who that could be, the insiders that helped him set up twitter when he took over. but we haven't gotten anything concrete on that. there are people out there who are available. something that carolina, for example, knows the former meta executive. i didn't think it would be speculation that she would take the job. we are waiting for this to happen. the more important need, chorus of voices -- the growing chorus of voices on the tesla side, that has the momentum behind it. caroline: when elon musk isn't busy running twitter and sleeping on the floor or running tesla and sleeping on the floor or spacex to a certain extent,

in theory, he is proper sizing about whether we are going to hit a recession. i saw in the terminal today elizabeth warren is worried about the fed hikes pushing the economy into recession. let's talk a little bit about recession risk worried about the economy and how it affects some of his visits -- some of his businesses. ed: he has really concentrated those thoughts in the last two weeks. sometimes it is in response to users flagging the downward pressure on tesla. it is interesting to see him respond but indirectly say if you look at tesla, there is weakness in the global economy, consumers slowdown in key markets like china. he has talked about the fed and the risk of the path the fed is on to higher rates. it is hard to draw a conclusion on why he is doing that. the type of ceo he is, he still

talks about if he stays at twitter, wanting to leave the engineering charge. that is reflective how he works at tesla and spacex. he is not a pencil pusher or ordinary management style ceo. he is very hands-on and involved in the product. there have been a lot of tweets lately about the global economy slowing down and also annoyed by that. they want to clear explanation about what is happening at tesla. paul: a lot of people are looking for a clear exit nation what is happening at twitter and tesla. we see stocks down another 6.7%. ed ludlow color -- ed ludlow covering that story for bloomberg. world and national news, reading group to, what you have for us? >> southwest airlines chaos called -- caused by a massive storm. canceling one third of its

typical stage -- covering one -- canceling one third of its typical schedule. i slump in the u.s. pricing -- a slump in the u.s. housing market. taiwan the sending a signal to the u.s. and china that it is serious about defending itself. extending compulsorily -- extending compulsory military training to men. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika gupta, this is bloomberg. caroline question mark -- caroline? caroline: whether it is tesla stocks you're looking at, airline stocks, we are managing

to push off some of our lows in the market. s&p 500 managing to pull closer to the green by 1.4 at the moment. higher in the dow. paul: dow jones industrial up a solid 500 points. about .3%. you expect that the day in between new year's and christmas. not a lot of volume and a lot of leadership. caroline: coming up, we talk about the future of supply chain.

caroline: welcome back this is bloomberg markets live on bloomberg tv and radio. i am caroline hyde joined by paul sweeney. as we think about the reopening trade there is a little bit of a moon music. china seems to be ripping open the view of potentially a zero

covid afterlife and the fact they are going to reopen this economy. what does that mean for supply chains? what does that mean for the bottom next? -- for the bottom x? paul: china is a big part of the global supply and global flow of goods. there reopening overtime has to be a good thing. caroline: there are going to be some pain trades and people suddenly exposed to covid and the huge ripple effects that has a cross industry at the moment. what is going to be hopefully a more long-term positive story is the reopening in particular not only reopening of tourism and supply chains. we want to talk about these bottom x so hard at 2022 and how we readjusted. are we now seeing post-covid world where companies are more willing to invest in technology that helps relieve bottom x? when we look at the weather here

in the united states, that is another key issue for bottom x and supply chains. robert falck is the developer of einride. the software system help to deliver that's great robert, you founded the business. you talk to the coca-cola, the elon musk, how are these supply chains looking in the future? robert: thank you for having me. it is a fascinating point in the overall economy right now because from our perspective what we are seeing is we don't really see that slowdown happening right now. a few of our customers are seeing taking a longer time to make a decision. overall for the transition from -- the transition to electric, there is a clear engagement. overall the consumer looking at

the downturn of the economy is not really starting to hit yet. that is what we are saying. people are still doing business. in some we are a little bit less. we are not in a recession yet. we might be in next year. but overall a lot of people are doing business. paul: your company raised $500 million in equity and debt. what are the use for equities there? robert: doing our transport together with our customers, we are deploying a lot of transport vehicles and the supplying -- and the supply structure to support it. caroline: you are prevalent across europe, sweden, and the united states. what of china and that $500 million you get to put to work? is it about global expansion, alleviating some of those

pressures we have grown to know? robert: the supply chain for electric and the whole infrastructure for all that comes to electric transport to still be actually traded. china has a key point in being the supply. we are in a very weird position from a historic play. china is the leader in a lot of batteries and engines and the ecosystem when it comes to electrification. for us, china is an extremely important part of that supply. the rest -- the western hemisphere it needs to focus clearly as they catch up to the maturity of the chinese ecosystem when it comes to electrification. paul: give us a sense of how much road freight on a global system can contribute to global co2. it feels it is a big contributor

and it is right for some innovation. robert: 100%. globally it is between 7% to 8%. coming from heavy road transport. we are still in the ecosystem created more than 100 years ago. with technology we have the potential to rewrite that. it is not about the size of the battery, it is not about creating a better truck, it is about creating new infrastructure for direct transport. we see 40% to 50% of electric should be electric driven by the business today. caroline: you are helping found this business in sweden. companies that care -- countries that care an awful lot about climate change. the u.s. has been known to be behind europe in many ways.

many felt the supply chain and particularly the energy crisis, we need to drill, make sure we have energy security in this transition, how much has that helped or hindered your business? have we felt that at all? robert: i am opposite to you in what you are stating here. i think this will happen first in the u.s. due to the fact this is driven by business. in the u.s., electrification is the best business case. something i love with the u.s. market, if there is business case, it will happen. the european market are still struggling to change and make that change happen. from our perspective we are seeing a clear engagement back to energy security. the electric grid is more reliable than the prices of oil. even if we have some fluctuations, especially in

europe right now, it is actually a way of mitigating the dependencies of oil. if you have both of those it is better solution and a cheaper solution. this transition would go very quickly. paul: i get the whole ev thing. i just drove my first ev ford one -- ford f-150. explain your approach. robert: we have been chasing flying goats. google and waymo have been pioneering the industry and they have done, set the standard that is going to be the standard. it is going to take a long time before we can deploy it on real roads. that approach, a pure silicon valley approach has been a

challenge since the start because it requires us to chase our own tail for the whole industry. when we started the company we took a different approach. our ambitions to start have been to do bit by bit to find the right business cases to scale autonomous. when you look at a lot of other industries in factories and warehouses, we have been doing autonomous electric transport for more than 30 years now. we take a different approach. technology wise the industry has been pushing it. when it comes to actually finding use cases and real applications for it, it has been lacked a been -- a bit. paul: appreciate you taking a few minutes to bring us up to speed about what you are doing over at einride. einride founder and ceo.

caroline: i have got a swedish car, a volvo. i spend most of my time driving on autopilot. paul: i don't even use cruise control. i didn't drive and f-150 electric truck. matt miller made a phone call to his friends at ford. before you know it it was sitting in my driveway. for a few days it was very cool. caroline: we were talking about electric of -- we were talking not electrification. did you see that report ne-yo out of china having to downgrade to deliver 38 thousand vehicles. that stock really taking a hit. this is about supply chain constraints. i wonder how much ev's are going to be limited getting stuff off the ground. paul: sourcing a lot of material for the batteries, the cars itself is going to be challenging. a lot of that comes out of

africa. we had a story on last week how china has an outsized presence in some of these countries in africa. that could be a strategic challenge for this industry going forward. it is also weighing on tesla stock 7.5%. some people are starting to question the real demand outlook for these ev. you have supply chain issues but you also have amanda potential issues out there. by the way, every other automaker in the world is getting into ev's. caroline: the distraction effect. all of this at a time when we think about the chinese economy, the hopes it is going to reopen, the impact it will have on the economy worldwide and talking about the ability to reopen and go without quarantining, kind of phenomenal. so much to come in the hour ahead. stick with us. this is bloomberg. ♪

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caroline: from new york city to our audiences worldwide, welcome to a holiday day of trading. volumes are thin. hearts are full at the moment. on tv and radio with the one and only paul sweeney. i am caroline hyde. paul: here in our radio studio,

matt miller and i usually do the show every day. it is great to do the simulcast here. looking at the markets today what you would expect, light trading. mixed tape, red and green. yields a little bit higher. it feels like a trading date between christmas and new year's. and boxing day in the u.k.. caroline: we are back at the grindstone. the stories are not then. we are watching what is happening in china. today the fact that covid, the lockdown, the quarantines suddenly just lifted. we are going to have 48 hours of taking a test and we can be in beijing. paul: president xi jinping had his congress wrap up.

and say let's get back. i am sure it will be very difficult for folks in china over the near term. we experienced that in new york and other places in march of 2020. it has to happen. at some point. it looks like now is the time. caroline: an interesting move we see in the global commodities market. the dollar still a little bit weak. we hope a longer-term reopening trade we see in china. spiking in today's trade. we have seen a little bit. commodities where they should be at. the economic impact, this is not just the impact in the short-term, it is about people. the ability to stay healthy. in the longer-term, what does this mean in terms of the global economy? what we now factor in? carsten brzeski, joining us.

talk to us about what this means china reopening from a global perspective. >> it means a lot. supply chain on the very short run. we have lifted restriction but going to see many sick cases, people cannot show up in the factories. in the medium-term we talked about, the supply chain should go away much faster than we initially thought because china is giving up on zero covid. that is good news for the global economy. we are looking into a recession in europe in 2020 three. looking into a recession in the u.s.. if china would now really start to recover, starting second quarter 2020 three, this could help the global economy a lot. paul: talk to us from the

european perspective what this needs. such a big trading partner with the european union and china. where are you going to look first for some impact on the european economy from china? carsten: lifting all the restrictions means there will be more supply chain frictions. i am looking into european industry. probably having more supply chain frictions over the winter. the winter is already going to be a tough economic months in europe. somehow settling into -- china somehow settling into this new post zero covid, they are so dependent on input goods from china. in germany more than 50% of the manufacturing segments say they are one way or the other

depending on china. germany and europe needs growing china's economy. caroline: the chinese proverb you quoted at the top of your note, we have lived in interesting times past two years. not just the story of china, the story of global disruption, notably one of russia ukraine's impact on the devastation inflicted on europe in particular. with the warmest snap we are expecting, there has been easing off of concerns of energy supply there. talk to us about how your comfort levels look for europe as an economy with respect to europe. carsten: i found it is not a proverb but a curse to start with. but looking at europe, the picture changes by the week. one or two weeks ago we were

saying this was a cold winter spell hitting the entire region. what we saw happening a week ago, gas consumption in europe was above historical averages again. now it is turning around. we see temperature shift back almost 20 degrees. this will really help the reduction in gas consumption. it shows us there will not be an energy supply issue for this winter. what we still have is an energy price crisis in europe. it will determine how severe this winter recession will be. it looks a bit more positive. this recession is going to be a mild recession. more important, especially for europe, is what is going to happen in the second half of 2023. we have many forecasts saying europe would return to precrisis growth levels.

i am a bit more cautious because i think we are still in a period of high energy crisis. we are still living in a period of structural changes. i am a bit more concern europe will experience more subdued -- in 2023 the more people expect. paul: the bank of japan signaled it was open to higher rates to fight inflation along with the bank of england in the u.s. federal reserve bank. what do you think the next move is for this federal reserve bank giving what we know now about economic conditions and another data point with china reopening? carsten: you will argue the bank of japan if all banks starts to be concerned about inflation, there has to be a serious issue. that was the big story of 2022. the bank of japan is also likely

to join this group of western central banks with hiking interest rates. the only question, where the bank of japan starts, will we see other central banks, particularly the fed aching a pause or stopping the hiking cycle already in the first quarter. we think they will. the step -- the fed is going to step in q1. we are a little bit more doubtful about the ecb because the ecb has been talking very hawkish lead since the last meeting over the last couple days. it looks like the ecb is going further than the fed. we will see more rate hikes in europe even when the fed stops. the big story for the second half of 2023 will be whether central banks will actually dare cutting rates again or if we will stay at a higher level for longer.

caroline: is inflation going the direction we want it to? the bond market doesn't have the buyers that it used to when we see borrowing costs in japan. carsten: in terms of the fed, inflation is going to come down fast. that has to be with the real estate market, has to do with what the entire inflation is asking. -- what the entire market is asking. data points for suggesting this is happening and inflation will come down very quickly. this is a big reason to pause. turning back to japan, we have an economy that could benefit from the opening up of china.

we have an economy that is not suffering as the european economy from higher commodity and energy prices. this is an economy where fiscal policy has done the tough work for almost two decades. it is likely we will see the first policy rate hike in japan coming up. paul: i have the paul sweeney inflation index. it is down to three dollars from a peak of five dollars. here in the u.s., inflation has peaked, it is coming down. you can look across several different measures. do you expect it to be more sticky in europe? carsten: yes, we are somewhere close to the peak.

in the first quarter of 2023 we will see that eurozone in london start to come down. it is also getting harder for companies to really pass through the higher production costs to consumers. we will see a gradual retreatment. on average, inflation in the eurozone will come in at 6% or 7% in 2023. it also means there is enormous pressure on purchasing power, lasting purchasing power or failure. paul: carsten brzeski, chief economist for ing-diba ag based in frankfurt, germany. giving us a good global view on economic output including the news of reopening china.

certainly good news for many european companies who do a lot of business with china. let's get world international news. ritika gupta, what do you have for us? >> southwest airlines expecting the chaos called by the massive winter storm hit over in the u.s. to last another few days. ceo told the wall street journal the carrier expects to operate just over one third of its typical schedule so it can get cruise in the right positions. southwest has counseled more than 2500 flights today alone. russia's foreign warns ukraine must surrender or face continued war. he spoke to the state run music agency -- news agency saying it is for their own good. russian troops have been forced to retreat in a series of damaging defeats. china is reopening its borders to the world by removing the final covid zero -- zero covert

restrictions. no longer requiring inbound travelers to quarantine. they will only have to obtain a negative covert test within 48 hours. they may also reduce the frequency of reporting cases changing to a monthly report. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika goop the -- i am ritika goop to --ritika gupta, this is bloomberg. ♪ caroline: european stocks pushing hard -- pushing higher. volumes very low in europe by two thirds trade nasdaq looking at volume off by a 9%. tech the most under pressure today. oil pushes higher on the back of that china hope. paul: it has got to be a good thing for a lot of the

commodities. oil being top of the list. it will be interesting to see how this reopening plays out on main street in china given where they are in their vaccinations, given the efforts -- given the efficacy of their vaccinations. then the reporting, how accurate will the reporting be of hospitalizations and deaths? so widely reported here in the u.s. in the early days. caroline: data is what we live and breathe on. we are going to get you up to speed with just how difficult your flights home might be. this is bloomberg. ♪

caroline: we welcome you back. bloomberg markets live upon you. tv and radio for your consumption, post-christmas, pre-new year. caroline hyde alongside paul sweeney. i am very lucky. i managed to make it back here pretty easily from london much

to my amazement. amid strikes, weather concerns. this is not the case if i am traveling internally in the u.s.. paul: storms coming across the country for the last week have done a number on travel, all modes of travel, most notably airline travel. how bad is it out there madison? >> i got in at 8:00 a.m. this morning and was supposed to get in christmas night. i am experiencing the christmas travels. caroline: you were meant to arrive christmas night? what happened to your holiday madison: it was a bloodbath. i got to do a lot of reporting as i was in the airport for 72 hours. which is why i am excited to talk to you about this today. i was not on southwest, i was on jetblue. southwest is the airlines watch today.

60% of southwest flights canceled today. 90% of the flights canceled today are southwest airlines. my big question is why southwest, why not the other airlines? according to southwest, 23 of its 25 top airports were affected by this terrible weather we are experiencing. also some of their airline employees are talking about how the system needs to be updated before those same concerns from southwest in previous big cancellations they had back into thousand seven. we heard the same thing from the airline. if they are the biggest carrier to an area like buffalo, they are going to experience a lot of issues. caroline: you are reporting, where were you trying to get to and from and where were the people that you spoke to trying to get to and how disastrous was it? medicine: i would love to tell you how disastrous it was. i was going from seattle to jfk, trying to.

the thing i really noticed was because of the things we talk about all the time, inflation, economic pressures people are facing, they didn't have as many options as they might have traveling other years. i spoke with a single mom who was with multiple kids and she was just fighting to get a voucher for a hotel just to have somewhere to sleep for a few hours that wasn't the airport. she stayed in line to talk to these agents from 2:00 a.m. to 9:00 a.m. and never got her voucher. typically you might say put it on the credit card, we have just got to get some sleep, but people just don't have the option this year. i also spoke with one couple, they were deaf so they were struggling to understand gate changes. there were not a lot of staff present to help people who were differently able and experiencing different challenges. something as simple as figuring out where your gate change was, people were not available to help those folks who really needed that additional help.

it was a really tough time. i did see a lot of people coming together in a nice, positive way. i didn't see any of the horror stories people screaming at the airport. people were really helping each other out. the holiday spirit was very present at the seattle airport this year. caroline: humanity, folks. thank you for coming on. against it all and bringing us your reporting, mary -- madison mills. jetblue is under pressure today, southwest under pressure. delta airlines is down .25%. this discussion around inflation, ticket costs, in many ways this has been a bit of a boost to some of these companies. delta had been previously upping some of its guidance for that outlook feeling they are maybe going to be able to see this level of demand went to continue post the holidays. we got to speak with the ceo of

delta airlines last week. take a listen. [video clip] >> we have updated our earnings. finishing the year strong. we will be on track for total year of three dollars. that is ahead of our three-year plan we laid out a year ago for investors. we got into a strong outlook for 20 to three and where we will have earnings growing five dollars to six dollars a share. cash flow $2 billion. on target to be at seven dollars per earnings-per-share in 2024 and $4 billion cash flow. the outlook is strong as we end the year. very proud of the delta team and everything they have done. revenue has played out as we expected. we had a really strong holiday season. we knew there was this unusual period between thanksgiving and the holiday year ended season of three weeks. our teams kind of called that period and it has come in right as we expected.

the nice thing with that, bookings for first quarter are very strong. january builds for september, february continues to build and a very good outlook for a large period of time. we are optimistic going into the new year. caroline: when you say off trend, what does off trend mean? >> just how the holidays fall. nothing structural. more about the calendar. the good thing is our teams had seen it. they were talking about in september, october and they called it the right way. caroline: talking about demand, how sustainable the strong demand is, what gives you that confidence? it is amazing you are giving us 2023 and 2024 forecasts in this environment. what gives you this confidence? >> last year we laid out a three-year plan. we are here in december, 2022 we are still on track. the year unfolded friendly than

we ought when you think of omicron, geopolitical, high fuel and labor. but the team was agile. they managed through it and we are outperforming. they are on that plan and that track. along with our bookings and the feedback we get, corporate survey data, our corporate customers are telling us based on what we are seeing so far, they are going to travel more in the first quarter than they did the fourth quarter. all our indicators continue to be strong. certainly more mindful of what we see out there. we will continue to watch for cracks but we don't see them right now. caroline: given some of the layoffs we are seeing in parts of industry, is the pricing going to be a strong? >> pricing is very good for corporate. they are fighting to get their seats on the plane. we have corporate revenue that has recovered 80% overall as it relates to the system. the outlook is for that to continue. a lot of that is driven by more

companies and employees coming back to the office, more frequent flying. traveling more as you going to the new year. good fundamentals. caroline: when you talk about labor, i think about also some of the supply sides how you mentioned, you detailed some of the things that have been pervasive in 2022. is it going to be with hot demand and some of those supply-side issues some high prices? >> there is good demand. whether it is labor, with pilots, with the equipment manufacturers, planes, engine makers, numerous constraints on the system right now that will constrain growth to some level as we progress into next year and probably into 2024. caroline: doesn't that frustrate you? >> no. there is a good structural drop in the industry. good demand with capacity that we are in.

a good backdrop. we have been fortunate. at delta we have hired over 25,000 people over the last 18 months. we have been more in a training cycle and it is about building that operational capability in order to ensure we can deliver that capacity in a way that we expect ourselves but more important the way our customers expect of us and what they have gone -- what they have grown accustomed to. on time and with bags. caroline: talk about the smaller communities you service and due to capacity perhaps you have to serve them less frequently. is that something that has to be suffered at the moment? >> that is a reality, especially with the regional carriers. our regional capacity next year will be down 25% to 30%. frequencies in the smaller cities has been impacted. caroline: dan janki there, the delta cso. talking things from labor to the supply chain, optimism. the shares are still down 14% on

a year-to-date basis but they have come off the lows from october. paul: business travel up 80% more than normal, that was higher than i expected. we saw the leisure travel come back pretty quickly. the demand from the business class was a little bit slower but starting to see that comeback. he sounded pretty optimistic for 2023. caroline: are we optimistic about the stock price, about global stock price? perfect guests coming up next from societe gnerale. join us, next. this is bloomberg. ♪

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>> bloomberg markets live for your dose of an between holiday extravagant. i am caroline hyde in with paul sweeney. as i recover from eating a little bit too much but having a wonderful time with family and friends, we are thinking about what a to mulch year it has been. we have managed to keep crypto out of the combo on christmas day. i'm sure everyone is itching to see what 2023 is going to look like. >> we have seen stocks, bonds, epic declines in fixed income. and energy trade for a lot of folks. >> the only interest group that is higher on the year but ending lower some of the day looking at

the s&p 500 in the u.s. european trading was higher as we see people optimistic about where china is going in lifting up covid zero policies. the dax is up for's -- 0.4%. we are off by about a 10th the volumes are lower. let's talk about where we are going to go broadly in the market. society generali is calling for a 33 percent price targets on the s&p 500. we are currently at 31. we are going to trend lower. societe generale equities sis -- analysts. when you are looking at 2023 potential china reopening, what makes you think market is going to trade sideways? >> it is a balance between the

slovo also issues of --. as far as the u.s. is concerned, evaluations being back on central stage is not a very good thing. if you think of it this way, the is actually outperforming. what this shows is that is the good news for 2023. we have entered 25 years of falling bond years with people buying growth stocks. where is the growth? the u.s., not europe. now there is the end of that long cycle. at last, evaluations will have a good time. paul: some folks are so concerned about earning risks in this market. how do you review earnings in the s&p 500? how much downside might there

be? >> overall flat on the year but that is the rosy scenario most likely. it is down 55 digits. earnings will be down and there will be downgrades across the board. i think that is expected. what we need to see is where there are pockets where investor sentiment is in. we can draw many conclusions, certainly what we are looking to think of japanese banks. in europe, we are actually fine. rankings -- earnings will go down. caroline: talk to us about the individual you just mentioned. i think i heard you say japanese banks but they have surprisingly

been underperforming pregnant a down 30% even though yields have is higher. can you speak as broad brushes? can you say the industry groups are going to outperform like they have done this year? do you have to be stock specific, rather than sector specific? >> as you pointed out, despite rising yields, there has been an appalling performance. what was the missing block? economic growth. real growth. if you do not have real growth in your banking sector, your shares will not grow. our expectations is that -- from an economic perspective in terms of real growth, and financial circumstances, i take it outperform. dividends and buybacks, more than 10% yields in the deliver of stocks.

this will become an issue of do you have the evaluation angle? the answer will be no train insurance had it. thanks had it but are you missing something? our hope is that we will get real growth. some of these inflation traits, not stagflation traits, to outperform. paul: you mentioned energy. i am looking at some names like exxon of 80%. a lot of these of 50%, 60%. have i missed that trade? >> you will think that the cash generation that may be offered in the totals that will return the are offered on both sides of the atlantic. i think there is a steel center we have to hold. caroline: where, globally speaking, is underrated? >> number one, the european consumer.

what we have seen as a massive rise in the risk with anything you have had to do with europe on the back of the war in crane. the people went away from europe and there were booms from european and equity this. we seem to be joined through that winter but saying what we have in europe is 1 trillion's of extra savings starting to be spent. in terms of evaluations, these guys trade 60% discount to the sectors. it is rust away, thinking the european consumer was dead but it is not the case. what we have seen his rebounds over the past few months. paul: since a great financial crisis in the equity markets, the leading group has been technology whether it is the

stocks or were broadly defined technology. in a rising interest rate environment, cannot still be the case? can tech be a leader or not in rising interest rate environment? >> the answer is no. the reason behind it is the gap in evaluations has to narrow because valuations early on start to matter. then what you see today in the case of the eeev -- name -- ev names and what happens on the back of the covid policy in china has one side of the equation. just five stocks have been accounting for the performance of the index. still have a lot of gaps in evaluation. when things start to be

expensive, due to financing, think of staff, think of some of the tech. that means taking the valuation out of the rotation of the names on the screen. caroline: what then as we see interest rates rise and we start to see the consumer may be under pressure, waiting for some sort of growth? is it consumer discretionary down? consumer staples? are we in any way betting on consumer staples? or do you think european consumers are underrated? wife's i would much rather -- >> i would much rather look at consumer names. i think some of the fancy producers in the u.s. can be fragile and be in the market as a? . what this means is indiana and these to pick up from the fed. what's the u.s. industrial names

need is not a range gets but a growth trade back. the news from china to today goes to wall street traded industrials in the u.s. are a consumer in u.s. and europe, more of a consumer. if you think about the big moves of policy we see in the was context, it is really suggesting that many will benefit from that spending in the states. surprisingly, the u.s. will be a place of great transition in 2023. it is not just about the european great deal. paul: really appreciate you taking a two minutes to talk. societe generale equity strategist joining us from paris. if we look ahead to 2023, i don't know, i have felt like i

have seen the conflation. i do not know about the earnings and how much more earnings risk is look. caroline: and we have not been to laos today. i feel like that was such a story of 2022. particularly in the technology side of the business, layoff after layoff. but much of this is not showing up in the unemployment numbers. largely because these people are able to find another job somewhere else really quickly. when is it not people? paul: if you look at the joe stayed at, it is still a $10 million figure. i do not know how to square that whole but at this point in time, the labor market seems in pretty decent shape. you'll certainly painted to that in the months ahead. bloomberg first wrote with

national headlines. ritika gupta. ritika: the trade deficit is now to the smallest in almost two years. 15% is the most since 2009, now $283 billion. a big reason is the 4.6% drop in and works. ukraine wants to meet at the peace summit in the united nations in two months. calabria says moscow must face a war tribe tribunal -- a war tribunal before meeting. china is reopening its borders to the world by removing the primal covid zero restrictions. starting january 8, beijing 10 longer require foreign -- will no longer require foreign travelers to test. the chinese government may also reduce the frequency of cases,

changing to a monthly report. in south korea, the military has sent drones across the border into north korea for a first time. it is an and precedented move that followed north korea sending five missiles into south korean airspace. kim jong-un just opened a major meeting to set security, political policy. southwest airlines suspects the chaos caused by the massive ice storm will last for a few more days. the carrier expects to operate just over one third of its typical schedule to get cruise in the right positions. southwest airlines has canceled more than 2500 flights today alone. caroline: southwest is one of the worst performing stocks from the s&p 500 at the moment. tesla is the worst on the s&p 500. one of the key contributor to

the downside in terms of points. apple as well play down the index by two points. it does not feel it the optimism the market would be flooded with on the reports that covid easing is happening in china. paul: the question is it will be a long-term positive but what about the near term? how much pain will be there be in china and how long will that last? what are's move the affects will see in the global -- are some of the affects we will see in the global economy? during thanksgiving and christmas, i try to stay local methyl is a good strategy this. caroline: wear you off? february? paul: i go february, january, march. i am going to aruba in february. caroline: you are taking three vacations in the first few months? you are my kind of man.

paul: during the summer, i just go to the jersey shore every weekend. very simple. caroline: there and sort of lies the element of how much usa consumer are willing to spend and go out and have a wonderful time on the beach of aruba. how much is the federal reserve keeping an eye on that? what is inflation what is the impact of you and i wanting to go out and enjoy these times post-covid? we are going to bring all that together with the cleveland fed president. this is bloomberg. ♪

caroline: welcome back. to new york city and our audiences worldwide. we will be taking a pause in the overconsumption when it comes your stomachs and looking at the stocks over the course of the year. we are seeing muted in terms of

volume at the s&p 500 is under pressure. paul sweeney is in the house we are doing a simulcast on radio and tv for your more easing into the virtual end of the year. paul: this last week of the years going to be quiet as always. it was a tough year for investors across the board. 20 for of percent declines in equities but then you get double-digit declines in fixed incomes and investors have not seen that ever. the 60/40 portfolio, what do you do? caroline: it is almost like investors today do not want to look at it. they do not want to look at the weather -- look at what their portfolios have done. they are talking about the accident as a website and want to be the web md for couples living up to that tells you all we need to know about what we are reading at the end of the year.

it -- the only place to hide has been on energy stocks. we have tried to digest with the story will be in terms of global economics and they reopening in china and i think we can do all of this in terms of the overall market sentiment on the day and as we time of the year. emily is here. wonderful to spend time with you as we wrap up a tumultuous time. talk to us about what is happening in terms of the s&p 500? i think it is pretty muted considering asia trading higher and europe trading higher overall. emily: we are bouncing off the lows but still in negative territory for the s&p 500. the nasdaq 100 still underperforming. then about 0.7% for the dow on reports a table to the rarely reduce production. crews still higher on the day by 1%.

airline stocks are really the market story. they are down about 5%. southwest cancel almost two thirds of its flights today. the interesting story is the rivals have been able to fare better amid this winter storm. we have united, delta, american, and jetblue say no more than 2% of their flights were canceled. that is a big difference compared to the 75% of the flights canceled by southwest. alaska air is also lower but southwest is getting hit the hardest. one bright spot is the dow industrial average. the 30 blue-chip stocks. we are up about 0.3% on the day. all year, take down industrials has been relatively better. the dow is still down about 8% year-to-date but the outperformance is doing better. paul: all right, great.

just recently, michael mckee sat down with loretta mester to talk about the economy and rates. michael: what is your forecast for the federal funds rate at the end of 2023? mester: i am a little higher than the media and the s&p 500 because i see a little bit more inflation persistence than the sce p -- the sep. the committee path and the sep is very valid. we need to continue to bring up interest rates into a restrictive stance. we did a lot of work this year in getting expeditiously to the a stance. now just in starting that, we are bringing rates even higher. i think we are going to need to be there for in while in order to get inflation on a sustainable downward path. my path is a little bit stronger than the median path next year. the median path had i table

between 5-5.25 and i am about that. the mass for the sep is we have to continue to raise rates because we have more to do with inflation. although we have had some good news, inflation is too high and we need to do what we can with our monetary policy tools to bring it down. michael: that raises the question of why you and your colleagues race bpce inflation rate at the end of 2023? mester: we put in the forecast, the last pce that shows inflation did ran higher -- run higher than this year. we are starting at a higher level. the work we are doing with interest rates over the next year and following years going to get inflation down. if you look at the sep, there is material improvement in inflation position next year. now back to 2% inflation but coming down.

then we'll have to adjust policy to ensure inflation is sustainably down, back to 2% after that. that is the job of the fed, to make sure we get that inflation movement back down. that is what our policy has on the s&p two conveys that we are getting back to 2% price stability. michael: we had two pci reports and a bce report that was lower. did that not figure into your thinking? mester: of course it did. it was welcome news and great to see some of them move down a bit. right now, my read is that the evidence changes a bit and we see signs of inflation stabilizing. i have not seen a lot of evidence that service crises have moved down. we have some tentative signs and housing. if you look at the rent and new leases being signed, they have one down.

cleveland federal says that takes about a year to see federal pci and bce as part of those. that is a good sign. we have seen goods prices and commodity prices move down which is a good sign. we know service price inflation is really persistent and we have not seen much improvement there. the level of inflation is still way too high. 7.1 on the cpi, 6% on the pce measure year-over-year is well above our goal. that is why we have to continue using our tools to get inflation on the sustainable, downward path. i expect to see some volatility. we need to see some really consistent and cumulative evidence. the median path and the median forecast are not one person's forecast but a way of summarizing a lot of different forecast. i think we should be prepared for high interest rates.

the exact timing and when it will be appropriate. it is not tied to a calendar but to how -- half we see evidence, and good evidence, that inflation is on a sustained downward path to 2%. you can look back at history to see how long things will have to be where they are but we are basing our forecast, and i am basing my forecast, on my projection where the economy is going to be. when people say are you data-dependent? i say yes, i am. it is the data coming in. anecdotal evidence and other evidence that we get. that informs my outlook in that i base my policy decisions on that outlook. my own outlook is we will have to keep the funds rate up above 5% next year until we get

inflation moving back down on the consistent basis. then, we can move into the next phase. we are really, basically done with phase one. the skit expeditiously -- let's get expeditiously to the start of a restrictive phase. we did that this year. now we are in the phase where we are going to move into restrictive territory and a sufficiently restrictive stance to get back to the time in a way. paul: let me ask you, what is a sufficiently restrictive stance? mester: that is what the data or evidence in the sep tells you that most in the committee believe it will be above 5%. it is going to be both how fast is inflation moving back down, and informed by how much is demand and supply coming into better balance which only needs

price crushers that we have seen rise so much over the past year. it is data dependent in terms of we are going to let the data come in and have to use the data and evidence to inform our outlook. right now, our best evidence and our modelss up, ongoing increasm the current rate to above 5%, and hold there for some time in order to get inflation back to 2%. that is what we are doing right now. caroline: cleveland fed president. still got inflation, isn't it? paul: it is. still about inflation, but i has it? caroline: stick with us. this is bloomberg. ♪

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announcer: from the road of politics to the world of business, this is balance of power with david westin. david: