>> what the fed is indicating is they are willing to put up with a lot of pain. >> the market wont give the fed much credit. >> whatever it is, we need to go ahead and get it done. >> we dip into a recession and you could have a fair amount of earnings weakness. >> the recession is not a question of if, it's a question of when. >> this is bloomberg surveillance. jonathan: waking up to a little but -- little bit of optimism this morning, good morning for our audience worldwide, this is bloomberg surveillance.

we will catch up with evercore in a moment and equity usurers are negative on the s&p 500. goldman sachs dropping is eurozone recession call in the last 24 hours and morgan stanley getting super bullish on chinese assets. a little bit of optimism this morning. tom: after the inflation report friday, everybody will recalibrate. what i would look at is the elephant in the room, the bloomberg financial conditions index. it make a positive. there is absolutely no way i would've guessed that three weeks ago. chairman powell has to regard that and even the people looking for a more common effect needed chairman that can say no, we are not going to be that accommodated area jonathan: if you are long risk, are you fighting the federal reserve and

chairman powell will speak about three hours time. this morning, we changed our view from bullish? lisa: it's interesting it's happening in the second week of january. it was a dip and rip. that was 100% you. he said it will be reversed and it will be a better-than-expected first half and a worst than expected second half and now he has neutralized, overweight on credit and neutral on cash and in some cases underweight so this is a recapitulation of his original view. tom: you don't do this for ed hyman. jonathan: i don't do this for anyone.

max kantner said the first have might be better than people expect, what do you say? >> you know we are in the dip and rip cap. being in the consensus has always been a point of other for now. you are fighting this notion that the fed will hike at least 50 or 75 basis points more and the ism's, services are in recession. jonathan: equity futures right now are down zero .1% on the s&p 500. china reopening and getting bullish on europe and we will talk about that as well with futures negative and the 10 year yield this morning is 354. lisa: people are leaning into

the long bond trade. can the fed pushback enough? atlanta fed president rafael bostic said i am not a pivot guy so maybe chair powell will say something similar at 10:00 a.m. on a panel discussion. he is speaking at the riksbank in stockholm and will be followed by a host of others including the ecb governor. they will also speak around 10:30 a.m. eastern and how did they talk about the move in the markets? you meant -- you mentioned easing of the financial markets and they will have to push back and what will they say that will get the markets attention? two-year yields in the u.s. have plateaued but in germany, people are buying into the story that it's not going to be a hawkish ecb partly because of the optimism and you have seen a reversal of some of the errors calls of goldman sachs saying that europe will not enter a recession and will the ecb kill

that excitement by raising rates? it has been recognized in fx markets and bond markets. at 1:00 p.m., the u.s. will test the waters. the u.s. is selling $40 billion of three-year notes at a time of so many questions around what will happen with short-term yields. one member after another in the fed said they will hike about 5% and keep it there for a long time. the market is not buying it. tom: is there something called auction gloom? jonathan: some of the views have been endorsed. let's start with chairman powell, three hours away, financial conditions had eased somewhat so will he pushback against that? >> he will. jonathan: does it work?

>> the issue is there is a lot of positioning going on in front of thursday's cpi. from the aspect of a cap being on risk assets like we saw basically two hours into yesterday's session, it probably does work but it could be an entirely new narrative after that report comes out. tom: your shop invented the synthesis of equity analysis and economic analysis. a guy from texas did this a few years ago. synthesize right now the enduring belief that america clears itself like nobody else. we will get through higher rates, we will get through all the tech layoffs and the other drama that's out there. synthesize the optimism on your floor now. >> point blank, ed has been of the view for nine months that inflation is going faster than the market believes and thus far, it started to materialize,

is full your inflation forecast is 2.5%. that is an entire new set of circumstances for the fed to deal with if that's right. that is probably in and of itself, the argument for risk assets we think to realize is at the end of the year. lisa: but not in the beginning of the year. i understand what max is getting at. people say the data is not that bad and there's been a change in facts with better than expected weather and reopening. why isn't that enough to sustain things for a bit longer be for test before people hear what rafael bostic is saying? >> it surprised me. i looked at natural gas and realize it has a three handle on it after what we see in the last months. that's a big deal but at the end of the day, we have this set of circumstances where the fed is

intent on reining in the labor situation and the only way you do that at this point is to cause, i wouldn't call it a material slow down but ed is looking for a couple of negative gdp quarters, what we used to call a recession. lisa: i understand but people say it didn't actually happen so what causes the upside of the fed is determined to bring inflation down. if they are going gangbusters, you don't necessarily get some sort of the school impulse or anything to drive things in the other direction? >> it's essentially the idea that there is a terminal endpoint to the hiking. you don't necessarily need to see the easing in the market [no

audio] . i think we will hear this in a few hours, they will not say they are incorrect in believing there is any sort of material easing in 2023. without a capitulation, were without an emotional volatility spike and that clears the playing field for the next will market and we think that will happen. tom: if i'm not 100% cash, where am i? >> we continue to think that value has value. it is going to be challenged for the next couple of weeks tom: tom:. dividend growth? >> that's part of it. we are very defensive minded right now, consumer staples, health care and energy continues -- it's the pin yada with waves of emotion and ticks in the oil price but at the end of the day, even if we dip into a recession, energy is 5% of the index weight and will account for 9% of the earnings this year. jonathan: you don't think tech can retain leadership?

>> in the short-term it can but in the long term, the fact is, the investment public still owns too much fang. jonathan: you are a student of market history and we are leaning on getting a market low before the recession. >> in a nutshell, absolutely. we have to take it from the jump up point that everything we have seen in the last three years has very little if any historical precedent but this is one of these things, the entirety of 2022, we were asked when is the capitulation and the emotion? it's coming. jonathan: stick around and we'll talk about europe as well. the number one thing you needed is a meteorologist to bring you of weather forecast for the

europeans. tom: it is a surprise. it's also happening in the united states as well. i agree that has been the magic pleasant surprise. i keep getting a message on this. deutsche bank saying we could escape recession. message after message, research after research saying the same thing. lisa: this is where the price can determine the sentiment because other indicators are moving small ways, small business optimism is below estimates. jonathan: when was the last time the fed hiked with the ism up 50? >> there has only been up couple of precedents and we ran that yesterday. just a couple of times in the

outcome has not been terribly pleasant over the near and medium term. jonathan: a unique moment for this fed. tom: they speak at 9:00 a.m. so this is a morning event. i think summer is important and it's a toxic brew of dip and rip. jonathan: it's unclear how much the fed will address current monetary policy. we might get all keyed up and get absolutely nothing but we hope we get something. amy silverman of rbc is with us coming up. lisa: keeping you up-to-date with news around the world.

the former engineering chief of ftx is seeking a cooperation deal with executors. he met with federal attorneys last week. i cooperation deal would leave sam bankman-fried more isolated. two former executives are already working with prosecutors. the house voted to repeal billions of dollars of internal revenue service funding that democrats approved last year. it was the first vote on legislation with republican speaker kevin mccarthy in charge. the measure is not expected to pass once it's sent to the democratic-controlled senate attorneys for president biden discovered classified documents well packing up the washington office he used after serving as vice president. the white has says the materials were turned over to the national archives. the justice department is reviewing the matter and former president trump is under investigation for his handling of classified materials at his florida estate. in the u.k., ambulance drivers

will go ahead with another strike plan for today. a senior union representative called the government's latest effort to avert more strikes in the health service and insult. the prime minister is facing pressure from his own conservative party to fix the crisis. microsoft is in talks to invest up to $10 billion in the creation of artificial intelligence bot.global news, 24 hours a day and on bloomberg ai. two companies have been discussing the deal for months. global news, 24 hours a day and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪

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>> the fed is actually not data-driven. they are path dependent and have chosen a policy rate at or above 5% and the goal is to get there and hold that level in place for an indefinite period of time, most likely the balance of this year unless the economy crashes or financial markets rash. jonathan: fantastic yesterday, from new york, good morning. equity futures are little bit softer. in about two hours-40 minutes,

you will hear from chairman powell. we will get you all the headlines from michael mckee as well. the euro dollar is back with a $1.07 and goldman dropping its recession call, saying we no longer look for eurozone recession reflecting the growth momentum sharply lower gas prices and early china reopening. mariatodeo joins us now, where is the eurozone optimism come from? annmarie: maria: you talked about the note from goldman sachs and they drop the recession call. they talk about this mild temperature and the reality is we were told this was going to be the winter from hell. i had a nice break in spain and

temperatures were not freezing. we had that are then expected weather. gas prices have dropped massively which removes a lot of the risk premium and the china reopening which they say will be good. we also had a note from deutsche bank almost an hour later that said when you look at the pmi come it looks like the recession can be averted and noted the china reopening is positive for the euro. jonathan: if we can escape the recession, the ecb will go harder? maria: if you are a member back to the december meeting, they indicated they would not have it and they would continue to hike no matter what and they would be restrictive and there were no limits potentially to the actions they could take and this was their number one priority and repeated it so many times. that's where it was left and that's where they would want to pick up the new year.

the data, will it change for them when you look at goldman sachs? they say 50 basis points in the next two meeting and 25 basis points in may. jonathan: thank you very much. euro strengthened dollar weakness in the dollar is down almost 10% from the highs. that's quite a move. tom: a momentary print of a $1.02 deal and that's a huge difference. this is a reaching to make among fx people. is this a week dollar trend? jonathan: $1.03 on dollar index right now. what do you make of the euro optimism we are waking up to and the dollar weakness as well on the back of the china reopening story? >> in the immediate term, in

terms of the reaction of euro dollar, that's understandable. the bigger picture is what the last nine months of been about is ridding the euro zone of the psychology of negative interest rates. it's very difficult to overstate how important that is for risk assets, for investors assessing capital allocation decisions in that part of the world. frankly, when you think about the discount for over a decade during which time the dollar rally almost consistently, it makes sense in the case for europe. tom: what does revenue growth if we get an inflation scenario? what does corporate revenue growth to given a rapid disinflation? >> it will certainly decline and it will decline faster than the

market expects. is it going to go negative? unlikely because you have the other side of the fact that you got so much stock of consumer savings and in that environment, one might be able to argue that you will have, not a soft landing, but not a crash to call it over 5% in the unemployment rate. you will still have that backstop that gets you through the shallow recession to the recovery in 2024. lisa: does that mean the fed in the ecb can remove accommodations completely and go from negative or 02 4% without causing a financial crisis or crash that leaves a couple of potholes but not much more? >> it's very difficult. it has literally only happened in 94 n95. when you look at 94, that was the only other year in the

bond/stock wandered where you had negative returns to bonds and stocks. though -- they were nowhere near the scope of 2022 but the upside is it possible. lisa: we reverted back to low yields after that but it entered the re-decades of the incredible bond rally. if this is the new normal but 3% fed funds rate and ecb rate of 2%, does that mean we can live with that and it's basically money isn't free but will not cause a complete re-rating of stocks? >> it's possible. it will compress multiples and it will compress leverage and it will compress valuations across asset but it's not a deal color -- killer and it doesn't protect -- to press materially the concept of earnings and earnings wrote which is what drives stock prices. jonathan: this goes beyond the weather in europe, it seems to walk back to china. so many calls or more optimistic

about china reopening. for many people waking up this morning in the market, they want to work out whether they should be investing in a story where growth slows were investing in a story where ruth rebounds, which is it? -- where growth rebounds, which is it? >> we think there is a good case to be made for china assets. our strategist thinks we get to 6.2% gdp growth this year. tom: just stunning. >> exactly. tom: wow, my head is spinning over where we were three weeks ago when the world was ending as we know it and now we have this optimism in only one thing has

changed, disinflation spain, in france and some other place i can't remember. this stunning 6% call is stunning. what will we see thursday in the united states? jonathan: it depends where you look. if you look to china, things are better but maybe things look worse in the united states. the question we ask almost every year is whether we can get outperformance. is it beyond u.s. sure is? >> it's a fits and starts type of argument. if you look at the broad sweep, it's because of the prevalence of negative rates and much of the rest of the world and because the dollar has rallied. we are not saying you are in a dollar bear market but the dollar has topped in our view and that is tailwind for the rest of the world outperformance. jonathan: this was great, thank you for being in the studio.

tom: the idea of disinflation in america but we are a week away from what we will see thursday. i'm sure i missed somebody but to me, it's a monster. jonathan: and goldman. and morgan stanley as well. tom: i'm distracted because someone said the tops may go on sale. jonathan: wouldn't you like the money? tom: i don't know. ♪

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jonathan: the main event this morning, chairman powell 2.5 hours away. good morning to you. negative on the nasdaq and the s&p 500. a big move on the two-year. down 25 basis points. in the fx market, the call from goldman, dropping their recession call on the euro zone, euro-dollar through $1.07 and maybe having a look at $1.08, up

by about 0.1% and this could change with the words of chairman powell later an inflation coming up thursday with inventions -- investors questioning whether we have seen the peak. that's rafael bostick on the next meeting. he was asked once we get to 5%, how long we will say there? he said a long time. it's really about how they stay at terminal. tom: these well-meaning people like mr. bostick are very visible and they are in the queue and a wherever they are. do we want the presidents of the fed gaming 25 or 50 basis points

like a derivative trader? i just don't participate. jonathan: hold on a second. lisa: it matters because what they are trying to do is set up a 25 basis point rate hike that is not viewed as a dovish signal and they are trying not to ease financial conditions but building insurance. it's difficult but that's what they are trying to signal. tom: i think what they are trying to signal is getting to thursday's inflation data. jonathan: hold on a second. i agree with you. lisa: carry on. jonathan: it's quite straightforward but you are fired up this morning. chairman powell will be talking this morning. is that strong? tom: i don't like the aftertaste. it's like coke zero. let's get intelligence on this.

the chief economist is with us. our viewers and listeners, their heads are spinning in atlanta gdp is a stunning 3.5%+ guesstimate of where we are in the fourth quarter looks pretty good after all the gloom. where is the assuredness of economic slowdown in this 90 days or dare i say q2? >> the assuredness i think comes from the weakness we are seeing on the part of the consumer. the consumer is not out in the marketplace happy and healthy. we would expect a meaningful decline from that robust basis we saw in the second half of the year. against the backdrop of negative real income growth, higher borrowing costs and many consumers facing the risk of variable debt, restating -- resetting in the first quarter, this will compound the usher on consumers. tom: you are reading my mind.

the chart yesterday had the credit card interest rate eight -- as a variable rate but hold into your analysis, it occurred rates that were 22% that are now 28 or 30%. how does that play into the caution. >> it plays in significantly as savings are now drawn down to near zero levels. the consumer was very much supported by this accumulation of wealth during the pandemic and the immediate aftermath. we estimate there is an additional $6 trillion in terms of wealth cushion supporting consumers and that removed any sense to revert back to the normal labor force participation formation we have seen in previous cycles. going forward as consumers draw down their savings, we are seeing the return to her alliance on credit card debt. the household balance sheet is beginning from a relatively

healthier position than in previous cycles but we still don't have unlimited amounts of wiggle room for customers to take on the new amount of debt and as that debt is repricing at higher levels, this will compound the pressure on consumers limiting their ability to go into the market place. it doesn't mean consumers will fall off a cliff but it means a meaningful loss of momentum. it's the key part of the economy and it will be nearly impossible to maintain that level of 3% growth as we turn the corner to the new year. lisa: would you push back against the optimism that we have heard from people who have been pessimistic since last year? >> the timeline for the pessimism to sit in was extended and consumers proved to be read -- resilient for much of this turmoil and 2022 area it doesn't negate the fact that these outlying variables will weigh on the consumer and limit their ability to spend. there is only so much savings we

can draw down, only so much credit card debt that consumers can ramp up. looking at this quantitatively regardless of our qualitative optimism, the numbers suggest consumers simply will not be there in the first half of the year. lisa: does changing the timeline change the depth of the downturn you expect to happen? does it make it more or less is new excesses build up? >> the depth and duration of the downturn will very much be hinged on monetary policy and the sticky nature of inflation. the higher prices remain and the longer and this uncomfortable level relative to what the fed can withstand, that will force the fed to raise rates higher and potentially keep rates higher for a longer pertiod of time and that will be the scenario that will compound the downturn and duration of the downturn. tom: 6% plus for china gdp was

mentioned. if we get 5.8% or whatever, what does that do to x words and imports in your u.s. gdp math? >> certainly, it will be difficult to get to 6%, that's extremely optimistic but it seems as if there is nowhere to go but up when you talk about an economy emerging from a nationwide shut down or a more restrictive zero covid policy. what we've seen thus far has been for roman ideal reopening. it is not a flip the switch scenario so it's more going to be a slow bleed particularly against the backdrop of a number of black swans with over heightened optimism, new variance, a lack of natural immunity to the ball -- to the virus.

any of these are inappropriate or intolerable to the government and could lead to many of the zero covid policies. i think it's overly optimistic to think that once the door cracks open, it will swing wide open and get us back to that fluidity we saw prior to the covid pandemic. jonathan: i think many people are waking up thinking they've heard conflicting things. we've got this big room that people are talking about in china and they are wondering if they should be racing in slower road or a growth rebound. tom: to go back to your earlier insight, the variable-rate. england is the land of the variable rate and all that. how big a deal is the variable rate in america? >> i think it's a very big deal particularly when we go back to the conversation we had about consumers.

when we talk about credit cards as a key support to consumer spending going forward, as that interest charge continues to rise, that will limit the ability for consumers to access alternative sources of income aside from returning to a more traditional position in the labor market. this could be somewhat of a double edge sword buzz of -- but a positive that if consumers feel they cannot rely on these alternative sources, that may create more of an incentive for the sideline workers to move back into the labor market and help increase the labor force participation. we have seen this upper pressure -- upward pressure on rate dish on wages and if we see the resort just the reverse, it could put downward pressure on wages. lisa: if you choose a data point to edify your view, which data would you be watching most

closely for a true read on the pace of how the economy is developing? >> when we turn the page, looking at the consumer, i think negative real income growth for the better part of the pastor tells a longer-term story about the unsustainability of positive spending activity. that is really going to be the driver of 2023 and whether the consumer can continue to shoulder these elevated rises against the backdrop of negative real income growth jonathan: thanks very much. jay powell will speak a little later this morning on my big change from the team at hsbc. they think the consensus is wrong and they say they have a variety of reasons to be less optimistic in the first half.

he was max underweight equities for so much of last year. tom: he has the gloomiest guy we visited and london jonathan: we will catch up with max at 7:15 a.m. that's a big change from him. tom: you folded into what steve majors talked about so what does that do to the long-term caution on the certitude of higher rates? jonathan: paul said the china gdp story. tom: that's something we will remember and monitor six to nine months out. jonathan: everybody was thinking six handles for china. lisa: they were not thinking about elevating the debt levels so there are many different factors, not just the reopening in china. tom: all three of us say enough on bit coin. this is heating up in the last 24 hours.

coinbase was out moments ago with layoffs, 950 people but the only have under 4000 people so it's like a 20% cut. the bombshell here is yesterday, forbes magazine had an article of the money walking out of this binance. i'm way more interested in the investigation and the allegations and speculation about binance than any of the spf stuff. that's what i'm watching in january. jonathan: when we get news, we will bring it to you. tom: we are up front the crypto. jonathan: we will talk about foreign-exchange next. tom: should i have a gray beard? jonathan: i like you with a beard. there is a cheery beard and then a grumpy. .

mike mccormick is coming up next, this is bloomberg. ♪ lisa: keeping you up-to-date with news from around the world with the first word. the u.k. attempt to send the for satellites into orbit from its own soil has failed a rocket launch from a version orbit boeing 747 that took off from england malfunction. that led to the loss of its payload of nine satellites. the jumbo jet and its crew returned safely. after years of drought, california is in a long led by since the end of december. ways of storms of rolled in off the pacific ocean and the kill at least 14 people, close tie was enforced residents to flee. there was an evacuation order for montecito. china is striking back at countries for imposing covert related curbs on chinese travelers. beijing has suspended issuing some visas for south korea and japan and is their first attempt at retaliation for a number of

nations that implemented testing requirements for travelers. apple wants to make more components in a house. the tech giant is dropping eight key broadcom white tie and bluetooth chip in 2025 and they reportedly plan to make its first cellular modem chip by the end of next year or the following year, swapping out electronics from wall,. global news, 24 hours a day and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪

this is ge aerospace, advancing flight for future generations. ♪ welcome to a new era of flight. and it's easier than ever to■ get your projects done right. inside, outside, big or small, angi helps you find the right so for whatever you need done. with angi, you can connect with and see ratings and reviews. just search or scroll to see upf on hundreds of projects.

and when you book and pay throug you're covered by our happiness it's easy to make your home an a check out angi.com today. angi... and done. if your business kept on employees through the pandemic, getrefunds.com can see if it may qualify for a payroll tax refund of up to $26,000 per employee. all it takes is eight minutes to get started. then work with professionals to assist your business with its forms and submit the application. go to getrefunds.com to learn more. >> the starting point is the sdp -- sdp. that's a reasonable place to

start and as the data rolls in, do we need to go higher or can we stop earlier? something above five is absolutely going to be likely when i say that, i still have uncertainty around that but that's where i'm owning it now. jonathan: so much fed speak in the last couple of days. we will hear from chairman powell later this morning. equity futures down about 0.3%. so much optimism this morning compared to the pessimism the last few weeks. euro-dollar is $1.07. the move in the dollar since the highs of late said member, dxy down by almost 10% with some real dollar weakness. more so in the last couple of days. we heard from mark mccormick. this is what he had to say.

major moves in the korean you on the last couple of days. tom: i'm looking at adxdmy. on a technical basis, i am dead set on the death cross. it's a mickey mouse at mathematics. there are other things related to it that are really important. there is a three moving average, exponential study which has finally shown week dollar trend in the last couple of days. there are other indices that people like mark mccormick use to confirm that. they have not confirmed yet and that's a set up for mark mccormick.

in 1978, we looked at momentum and they came up with something called adx-dmy. its awaiting a trend and will we get that or will it confirm a moving average study? >> i think we are come i think we are moving in and out of regimes and that's the way we've been set up during the pandemic that we get 3-6 months and then move into the other. we were kind of moving totally out of the inflation regime and some -- and into something new and it will be focused on how the local economy reacts and has certain countries have divergence across financial conditions but what will drive us is the reversal of the terms of trade and repositioning of equity markets. the optimism around equity and growth is not really optimism

but stabilization of the global economy and moving out of stack elation so that will help confirm the trends in the price action. tom: in the last decade, one of the people codifying regime changes is james bullard area he talked about the trajectory on higher interest rates. can your world stay together if we get mary daly at 5.25% terminal rate? >> i think 5.25% is manageable but i think is the journey. the price discovery and volatility came across different volatility. all of that had to do with the discovery of where the terminal rate is at and even if we go to 5.5%, i don't think it needs to be a tremendous shock to markets but it shakes up positioning. in the short term, we could see the dollar consolidate, maybe

get back 1.5% for the next move over the next two quarters is a 5% move lower. we are in this environment where positioning and technicals will matter but we are moving into a momentum based regime change that will ultimately be bearish for the dollar. jonathan: what's the next move? >> we are still extremely bullish and there is a good upside for the euro if we can get back to $1.05 and we can use that to buy to a move to $1.10 and the other currencies like asia, those guys look appealing in this backdrop. i guess it would be a little bit of rotation on the back of a stronger euro which would probably support poland. jonathan: i saw the move in dollar-you on, everything was

stronger. where does the aussie fit in? >> it's quite important because it's a reflection of chinese growth and it's a reflection of the dynamics around what's happening with commodities. over the last three months, the commodity sector performance is really the most important factor. energy prices have underperformed and industrial metals have outperformed. this is a focus on the chinese reflation trade which is still in its infancy. consensus is stumbling over itself to push of chinese growth for his this year so aussie fits in which means asian equity markets are outperforming and aussie's will be locked into that and of chinese growth is per warming is for his trade improving, that will give more confidence in that will support capital and trade flows. tom: within these interdependencies, if we get evercore isi 6% plus gdp call

for china, what does that import into america in terms of the in lesion guesstimate out six months or a year? >> that's an important question because the commodity prices, particularly different parts of it, maybe not energy but other things will move higher so we have a bit of a tug of war. we will introduce more inflation into the u.s., me but the supply-side mechanics, if you look at the feds supply disruption index and pmi delivery time, they are linked to china closing and china lockdowns. what we have is the supply-side which has been not focused on the last year. i think the big thing is that china re-opening basically helps supply-side improvement even if it's somewhat stimulative for

inflation from the demand perspective. onnet, we probably have inflation moving lower but maybe it settles at a higher level with china reopening. tom: it's been said that risk assets can win this year which is an outlier call area do you suggest risk assets can win? >> i think they could and it's largely a function of linking the things we talked about around stagflation. from fx, you think about global economy, where we were in said timbre and china was never going to reopen and the eurozone would have long drawn out session based on energy prices. we got the miracle whether we were looking for that was a good cushion to get eurozone passed this further recession and the data is coming in better than expected. if you think about what risk assets need, they were focused

on stagflation. we no longer have that. we might not have an acceleration global growth because the u.s. is now the laggard but we have stabilization at the exact same time when we should see some acceleration coming from europe and china to offset the slow down in the u.s.. this is a great environment but not for u.s. assets but for non-u.s. assets particular equities in asia which is why this is bearish for the dollar. jonathan: i keep hearing the same thing about x u.s.. as for europe come i and before we worry about next winter. the optimism is there for all to see. tom: you don't do it in a vacuum. kent domestic g3 equity markets also rise? i think that's left out of the discussion now. jonathan: in regards to china,

on the supply-side, mark touched on it and is this is -- is this supply-side lisa: relief? lisa:we don't know. many are seeing this as relief and fueling growth more than anything else including shrugging off the potential demand for crude and natural gas. jonathan: what do you want to ask mark kettner in a few minutes? lisa: i want to talk about the downturn he expects in the second half. jonathan: is that the second half rip? tom: it's a toxic rip. i think we need to go to london and send -- and see the entire hsbc team. it's either london or indiana, either one. jonathan: no offense to indiana

but - ♪

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>> what the fed is indicating is that they are willing to endure more pain. >> the market will not give the fed much credit, frankly. >> it smells like a recession but it's not one. we need to go ahead and get it done. >> if we dip into a recession, you can have a fair amount of earnings loss. >> it's not a question of if, it's a question of when. this is bloomberg surveillance. jonathan: let's get you set up

for the trading day. live from new york, good morning for our audience worldwide this is bloomberg surveillance on radio and television. equity futures are not doing much this morning. the few hours away from hearing from chairman powell. tom: i have trouble, he is in sweden? he's with an historical bank but will he get obnoxious questions like he gets from michael mckee. excuse me, sir, i'm from america. lisa: he probably wouldn't take the question but would he answer it. tom: i will call this whipsaw

tuesday. where we were three weeks ago versus the conversation this morning, my head is spinning over the shift. jonathan: the chairman and his words carries more weight than the rest of the committee. have those words lost weight over the last couple of me+ -- couple of lisa: lisa: months? if you take a look at two-year yields over the past couple of months, they have plateaued. they are not going higher even as you see this optimism for yields in the euro region to increase. the market says we are seeing something you are not because your rhetoric has not changed if you say 5% is low. jonathan: shelley talk about the optimism? goldman sachs dropped their recession call. morgan stanley got on chinese assets and growth that maybe pushes close to 6%. evercore's says they could get 6% plus.

so many turns and more constructive on risk. this is actually rooted in true events and if you have a reopening of china that is rising and fiscal support coming from china, that is surprising and the weather that is historically warm in europe and their natural gas tankers floating around that cannot find homes. there is that much in terms of oversupply. tom: at one point, you had a 20,000 handle to ship across the pacific and it's crash down to $2000 which is an indicator. jonathan: did you expect the weather? lisa: we need to bring in a meteorologist. tom: i think it's too unpredictable, it's like the red sox. jonathan: my issue with the weather story and the crude story is this was one winter so what about the next one?

wendy do you start worrying about the next one? lisa: people say they are better set up for the next winter because there are 98% storage so it could be a better set up heading into a time when they cannot access russian stores. people are optimistic even on that level. tom: the heart of the matter is do we have disinflation like the late 40's and early 50's were nothing else matters and everyone has an opinion? jonathan: cpi thursday. the markets and price can change quickly. based on thursday's print, things could change again and equity futures are down 0.3% and in the bond market, yields are higher by about three basis points. euro-dollar is not changed but we have reclaimed the $1.07

handle. tom: one call is that euro-dollar should be one dollar $.20. lisa: the euro call has been amazing. we've been talking about the big event by chair powell taking part in that discussion hosted by the riksbank in stockholm. what will he say that will matter? is curious to see how the response will be given that region given how significant the selloff in bonds are and how much people have recalibrated the optimism and how much the central bank has to push against that to bring core inflation lower. there is an auction of $40

billion of three-year notes and what will the demand be like when you have yields that are meandering. they haven't gone up as much as the fed would like to see. do people start to buy the idea the fed is selling? jonathan: great work as always. some bond issues in the mix as well. tom: there's been a big issuance and you wonder what cfos will be doing. do you expand your waiting of fixed income? jonathan: amywu silverman joins us next. i want to start with your line. this is setting up for a boy who cried market, what does that mean? >> it's setting up for a boy who cried wolf market. what i mean by that is we did a postmortem of 2022 as we did error volatility 2023 out.

owning the s&p and buying puts was bad. you got the draw down you would've expected but you did worse hedging and did -- and you are better off selling puts an owning call so a counterintuitive market. people are not set up for any downside but are focused for upside up crash and that could be a boy who cried wolf market. tom: what she said is incredibly important. i want to go to the reality which is tech has underperformed, there is a raging that that the waiting of tech and spx will change. you look at the moments, the variants there, amazon, apple

and the tech fail. tell us about the cross moments if we get a tech underperformance? >> i think this is hugely important and i'm fixated on this. i will still this statistic, if you get a contribution to return analysis, the majority of drawdown from the s&p lester was a handful of panisse. it's shrinking but it still has a long way to go. as you know, volatility is a component of index weights and it's a correlation less volatility. where that correlation goes matters usually. if tech continues to shrink, that helps the s&p but doesn't help these other tech atf's to the relative performance this year will come down to six or seven names and what they do on earnings because of rates. lisa: up crash is a new phrase.

what could drive and up crash in terms of where the leadership would come from in the s&p 500? >> in the same way we talk about tech shrinkage, the opposite of that. if we get it tech reit weighting, that makes these indices more related and ramps up your volatility and that's what investors are positioning for even if options investors tell you they are bearers, that is not reflected in the market right now. they are concerned with that we get a runaway rally and they don't participate at all and then we get a better than expected data and earnings. that is contrary to what we've seen these last two earnings cycles. we've had massive downside beats and that's when i think you worry about this up crash and that's what investors are

focused on. jonathan: what is your favorite trade going into earnings season? >> the second-most well performing strategy and 2022 was butterfly strategies which are essentially high payout and low premium strategies. i those -- i think those continued to do well i looked those on the tech etf's because that's where the punch is the highest. those are the kind of trades i think are attractive now. jonathan: thank you for being with us. tom: was there enough jargon in there? jonathan: she is fantastic. what she said is so important with regards to what people say is what they do. sometimes there's a big spread between what they tell us and what they are actually doing. tom: my quote from last year was my favorite and the answer here

is these are the subtle movements of which ever probability distribution you believe in. it could be a bill curve, it could be traditionally what's called alognomer curve. the answer is the adults on wall street are looking at these nuances. with tech, it's an important study. jonathan: the takeaway seems to be investors are position for upside risks. lisa: it's basically led by tactic people are doubling down a did not get rid of their tech and they hope they will get a reprisal of the gains they previously saw. tom: that's the single most important thing we've heard today except for the 6% china call. jonathan: we've had some big calls this morning.

max was bearish for the whole of 2022 and we entered this year and it's january 10 and he has become constructed. max kettner will join us next. look out for that conversation in about five minutes and watch out for chairman how on a little bit later. tom: we may get up positive bloomberg financial conditions index. three weeks ago, that was impossible. jonathan: is that easy? tom: that's accommodation that chairman powell does not want. jonathan: will he push back? tom: i am 100% certain. mary daly told me. jonathan: when did she tell you that? a number of months ago? tom: it wasn't in a diner but it was in a bar. that's with a drink in san

francisco. she said we have to have a san francisco drink. she is my favorite, full disclosure. jonathan: i thought we didn't do favorites. tom: mary daly has a handle on america like nobody jonathan: and now she's leaving? jonathan: this is bloomberg. ♪ abigail: lisa: keeping you up-to-date with news from around the world with the first word. the former engineering chief of ftx is the latest member of sam bankman-fried's inner circle to seek a cooperation deal with prosecutors. he met with federal attorneys last week. a deal would leave bankman-fried even more isolated. other executives are already working with prosecutors. the house will repeal billions

of dollars of irs revenue funding the democrats for a year and it was the first legislation with republican speaker kevin mccarthy in charge. the measure is not expected to pass once is sent to the democratic controlled senate. coinbase will cut 950 jobs it is -- as it tries to whether a slump in the industry which has lasted more than a year. the company had more than 3700 workers at the end of the year and they say the restructuring will be substantially complete by the end of the second order. -- by the second quarter. global news, 24 hours a day and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪

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>> what the fed is indicating is that they are willing to put up with a lot of pain. some of the data gives them additional impetus to stay elevated much longer at the risk of significant slowing in the economy. i wonder how long they will stay there. jonathan: the question in 2023 -- let's get straight to the quotation from max kettner this morning who makes a shift for this year. our previous view was that a recession would hit in the first half.

there is a man for the whole of 2022 who was max underway equities and all of a sudden, in january, makes a shift. tom: it's a shift from a house that event -- that's been very nimble. we talk about nor -- about morgan stanley but hsbc has almost a kinetic energy going back 30 years with jonathan anderson in asia and others. the people we know at h as d.c., there is almost a frenzy to it. jonathan: he's a friend to the program. tom: i can't remember everyone's name. there is lisa --

let's go on now to the important conversation on global wall street. how do you dovetail your shift into steve major's call for low interest rates? >> good morning, the key question is around the sequencing but not so much where the end result will be. it's really a sequencing question. there are these really pessimistic outlooks we got from the high end the sell side in the last couple of months. there is a strong contention that it is the most concentrated consensus we had since the end of 2017 back then, we had the ideal of globally synchronized growth and that went horribly wrong in 2018.

that is probably as much of a consensus as we have now some people were saying that it was such a concentrated consensus that there is a lack of downside catalyst and surprises and therefore, you are on your way up. jonathan: your word is super depressed growth expectations, is there any indication those growth expectations are captured in the price right now? where are you seeing that? >> i think so, we look at market prices and equities versus rates and rates against pmi and against fixed in, so across asset relationships. all of that looks more realistic now. it's not like we are super bullish. the only thing i will say is why it it will not be a rocky horror

show, we will not see such extreme pessimism against the backdrop of this. you don't need an awful lot of positive surprises to really make risk assets get going to the upside in the first half of the year. it could change in the second half of the year. that is something for nine months time, not something to fret about now. jonathan: why do i get the feeling you practiced that line? lisa: 100%. jonathan: where are you allocating capital? we've had big calls in china reopening this morning. where's the cash call go now? >> it's not going to full on overweight equities.

we haven't been going that crazy. we are getting into high yield credit and debt and dipping into risk assets. we still actually like european equities. more than u.s. equities. to the back drop of china reopening, there is still underlying estimate is him on chinese growth. people are starting to drop recession calls for europe and the euro zone. all of that should continue in the next couple of weeks and as the reappraisal continues, that should be beneficial for em equities and european equities. lisa: talking about the first

half, what are you looking for to determine whether you should go back to defensive's? >> once we have seen the negative rates changing and inflation play out which should happen in the next four or five months, then the negative rates of inflation is in the rear mirror. now let's talk about the ultimate level of an elation in the state. does the fed and other central banks have to keep rates higher for longer? that could be leading to perhaps a re-tightening of financial conditions with higher credit spreads and lower equities? that's something for the second half of the year and once the focus shift from the negative

rates changing. lisa: do you think the ultimate path for european equities is more positive then you previously thought because of this deemphasis on u.s. tech? there might be a downturn but the optimism around europe is sustainable? >> i think so, especially against expectations. we trade data versus consensus. we care about how it pads out consensus expectations. two months ago, there was barely any fault to be found in your. that shift has just started. i wouldn't expect that there is more of a positive run to go for europe on the credit and fx and

equity side. jonathan: great to catch up with you. he put out a note that got a ton of attention and's january 10 and we are already getting pushback lisa: the second week, we get an overhaul of what was established a couple of months ago and it shows you how things -- how quick things are moving. jonathan: do you get the feeling that many people will follow hsbc? tom: lisa: lisa: 100% because you are seeing it in the pricing. jonathan: how different the conversation will be at 831 a.m. eastern time? tom: i think it's a lot of hot air. i'm waiting for the data. we will watch the data next week. jonathan: we were told it was all about the earnings and all

of a sudden, it's about china reopening. i would double-barreled them. on a global basis, the china reopening and get the scale out of 5% and for them to clear the real estate market with that fiscal input you talked about would be extraordinary. jonathan: that call from evercore, gdp growth in china -- lisa: they can manufacture if they want it and they seem to want it. jonathan: when will we see china gets what it wants? lisa: when we get the mobility data and covid progression. ♪ dinosaur? we just got an order from a dinosaur, colorado. start an easy to build, powerful website for free with a partner that always puts you first. godaddy. tools and support for every small business first.

jonathan: these are softer yesterday, chairman powell coming up later this morning. equity futures down 17 on the s&p. futures of soccer by .4%. nasdaq 100 down. tom: vulnerable. jonathan: we have had a move of 25 basis point on the front end. today we are trying to bounce up on the two-year. lisa is asking the right question. if chairman powell speaks, will this market listen? lisa: is this a market that hears what the fed is saying, we

are going to be hawkish, we will get to 5.25% and hold it for a long time? jonathan: softer wages. i don't think you are right. lisa: we will have to see. jonathan: euro-dollar shaping up as follows. 1.07 handle. if you had to look at the fx market in yesterday's session, pretty much everything is stronger against the dollar g10 come in asia. the korean won is flying. a little bit of optimism around europe, goldman dropping its recession call. tom: korea is unique in that it is considered the most american, the most fluid of economies over there. the equity market has been the roulette wheel of asia. that is where you get play.

the korean won is very subtle, not only dollar-won, but the cross rates. jonathan: dollar weakness all over the place. lisa: especially with the reopening of china, the feeling that the rest of the world will fare better. here is the zombie rollover. you are seeing consolidation. oak street shares surging by 30%. cvs exploring and acquisition of this. this goes to consolidation among the strongest players that we will see you broad-based. interesting to see weakness across the tech space. this is after the time on semiconductor space posted disappointing profit.

ongoing weakness and projections from the tech sector amid concern about what could potentially happen. bed, bath & beyond. they are going to report earnings. they will have a call at 8:30. some of the details coming out about what happened to them. basically, their suppliers went on strike, so they increased the credit terms. if you are seeing empty shelves, it is because they could not get the supplies which is interesting. tom: oak street health, i was not aware of. they have gone from 60 to 20, the shares have cratered also with other companies. i'm looking at the income statement. the big difference is it is a whole new world after all for them, money cost something. they are looking at negative ebitda. revenue is snapping.

jonathan: have you ever watched "undercover boss?" i would like to see tom go and do undercover boss as the boss of bed, bath & beyond or something like that. tom: shut it down. jonathan: when they disguise him? tom: john was talking about me being an undercover boss for bloomberg tv and radio. jonathan: what would you be disguised as? tom: they said, i don't think so. work the studio floor. that was my first job, i was terrible at it. they said, get on tv. tom: let's save ourselves.

zachary griffiths joins us, senior strategist at credit insights -- creditsights. he parses out the segments of fixed income. lisa: the place to be, not to avoid. this is the shift that we have been seeing pretty consistently. given that we are looking at a situation of a potential downturn, central banks are determined to stymie growth, why are you getting along into high-yield bonds? zachary: the yield look too good. for what we expect for 2023, balancing it out, we think the potential for returns in the 12% area makes high-yield an attractive place to be. we are also optimistic on the economic front which is important for our call on high-yield. we can avoid recession in 2023, growth falling to below potential, but we don't have

that recession driven by our fed funds call, which is more dovish than the market expects. we think you are seeing a turn in inflation which is set to continue. the fed has acknowledged this. i recognize the message this week has been more hawkish. we think they will be more hawkish on a forward guidance perspective until they are certain inflation is coming lower. we think that is coming sooner than the market expects. lisa: people were saying if central bank decided to abandon some of their low rate policies, it would be armageddon in credit spaces. you would end up with companies unable to finance themselves. why are you saying that that entire scenario is just wildly wrong and that high rates will lead to a good scenario for bond investors? zachary: it's been incredible how well the market has held up so far. if you look at the move in real

rates, it's been so substantial. going into 2022, many thought the market, credit or equities, wouldn't be able to handle it. 2022 is an awful year in asset classes, but the balance of risks are a little more balanced than what the market is suggesting at this point. when you think about where yields are, how good economic fundamentals are, fundamentals for companies coming into 2023, we think the risk perspective favors going into high-yield credit. we think these can withstand how your yields at least throughout the year. tom: tell me about energy and credit. energy and high-yield has always been the challenge. i think energy was doing well at $120 brent crude. we are not there now. is energy challenged as they refi high-yield? zachary: we have a more balanced outlook for energy in that space.

we have been more constructive in 2022. as you have seen energy prices come down, it will be less of a tailwind for markets. we think that it could hold up decently well in this market, as economic growth remains positive this year. but we don't have the full throated -- tom: i want to talk about regret. 12 months from now, if we get a bounce in the bloomberg total return index, price, healed down, are we going to regret missing that? what is the magnitude of the bounce that we could get on the total return index? zachary: we think it could be substantial. we expect yields to be elevated throughout 2023. we think the 10 year treasury is heading back to 4%. we are more in a buy the dip

territory from a duration perspective. it will be interesting to see what happens with cpi this week, certainly a huge figure going into the fomc meeting at the end of the month. we expect a 25 basis point rate hike and think that that may be able to pause from their. atomic perspective will be difficult. we have been looking at different inflation scenarios, think it could be coming back to 2% by the end of 2023. we think the fed has recognize that but messaging has been hawkish this week. it will be interesting to hear from chair powell. jonathan: to clarify what you said, coming back toward 2 at the end of 2023, do you think that we land at 2 or going toward by the end of 2023? zachary: both. the fed has recognized, in several adjustments to the statement policy, recognizing risks are more balanced than they have been in some time.

the fed is looking at inflation on a forward basis. we think the services disinflation especially from shelter cost is coming in the second half of the year. as they calibrate policy over the next couple months, those factors will be crucial. that will be what emerges over the next couple months with a policy pause, not pivot. jonathan: zachary griffiths, that was great. we joke about everyone being consensus but we have had calls this morning. another 25 basis point hike and that a pause. convinced of getting back to 2 by the end of the year. lisa: how does that fit into the labor market story we been hearing with a structurally tight labor market? this is the conflict that is inherent in a lot of calls. tom: olivier blas join us in an hour. new book out. he says stop sweating this to percent silliness.

just bring it down. 5, 4, 3? jonathan: too early to discuss that? tom: the fixation with powell today will be to present. jonathan: what is interesting about this conversation is it is about central-bank independence. at a time when they are saying unemployment needs to go up, and i'm sure many people, elected officials wouldn't mind unemployment to go up. they would say this is why we need independence because we have to make these hard decisions, to make sure inflation is low. people would respond and say, what happened last year and the year before? lisa: people don't believe that they will stick to their guns. people don't believe that they will go against what an economy could potentially do in terms of higher unemployment. tom: a different royal family

decided to buy the boston red sox, los angeles dodgers, this country would be apoplectic. this behind the culture of qatar, manchester, liverpool, even spurs. jonathan: it is attracting a lot of capital. tom: newcastle was taken out by the saudi's. is this a middle east takeover of your support? i want to see fulham and tottenham. lisa: you are looking for a full ham. jonathan: are you looking for excuses to go? tom: i don't care about the future of the totts. i just want to see full ham. jonathan: you are killing me. [laughter]

lisa: keeping you up to date with news from around the world, with the first word, i'm lisa mateo. uk's attempt to send the first satellites into orbit from its own soil has failed payment a rocket lot from a merging 47's -- 747 from england malfunctioned. that led to the loss of its payload of nine satellites. the jumbo jet and its crew returned safely. after years of drought, california is in a long floodlight -- flood fight. monday, there was an evacuation order for the town of montecito. china is striking back at countries for imposing covert related curbs on chinese travelers. beijing has suspended issuing some visas for south korea and japan. it is china's first attempt of

its allegation after a number of nations implemented testing requirements from the country. bmw outsold mercedes-benz for a second year in a row. meanwhile, mercedes shipments were down 1% to a little more than 2 million. bmw did a better job dealing with supply chain issues that hampered auto production. in college football, georgia has won its second national championship in a row, pounding tcu 65-7. the georgia quarterback threw for two touchdowns and ran for two others. i'm lisa mateo. this is bloomberg. ♪

this is ge aerospace, advancing flight for future generations. ♪ welcome to a new era of flight.

>> whether or not this is a recession, something that smells like it is not quite one, whatever it is, we need to get it started from an equity market perspective.

markets cannot handle that will we, won't we. they just want to rip off the band-aid and get back to business. jonathan: that is the message from rbc capital markets. will we get there this earnings season? jp morgan reporting numbers this friday. before that, cpi on thursday, chairman powell later on today. equities turn lower by .7% on the nasdaq. on the s&p 500, softer by half a percent. crude holding onto $75 a barrel. tom: interesting day. wrapped around all of this is loyal. a lift in the last two weeks, getting up to 81 on brent crude, we are almost there now. tom: an odd start to the year. the calls are coming in more optimistic again off of the china reopening story. tom: we are with ellen wald,

senior fellow from the atlantic council. i want to go to your acclaimed "saudi inc." and your knowledge of the royal family. they are in the news with geopolitics, mr. putin, maybe with president biden, as well. what are you studying about the saudi family early 2023? ellen: the question for saudi arabia this year is army going to see any big shakeups in terms of the line of succession? are we going to see mbs move into an official position of power? i think nabel probably keep things status quo for this year unless there is some sort of health crisis.

that is probably the biggest source of instability that could face them now. oil prices are generally not a source of instability for them. tom: how do they fit in to erdogan's desires in turkey, iran -- falling apart is too harsh -- but how do they want to be a regional player with their marginal oil power? ellen: they definitely want to be a regional player in the biggest sense. for a long time, they were content to be the source of money and the source of religious authority, to kind of play that role, not so much in the big, flashy media sense, but as the soft power, both religious and in terms of money. now i think we are moving into a phase where they really want to

be out there as the guys doing the big business deals. the source of the biggest and the flashiest. i think that is a new look for them. the younger generation, this resonates with them, but there are a lot of older and more conservative types in saudi arabia who are much more hesitant to see themselves as out there in front, making the splashy media pages, and they are not very comfortable with that. lisa: let's talk about where those deals may come from. in the china reopening, wondering about its influence over crude markets, why is there perhaps not more optimism or pessimism that china's reopening will push up demand in crude markets? ellen: this is a really good question and definitely the number one question on the minds of oil traders, everyone

wondering about oil prices right now. when are we going to see that big surge in chinese demand from the reopening? i am actually thinking that we may not see a huge jump. it may be more of a slow push upward, curve upward. i'm not sure that china will react the same way that western economies have. we may see more hesitancy on the part of -- some parts of the chinese population to jump back into flying, driving, going around. i wonder, if we are not going to see that, the real question is who would know? i think the saudi's might be the first to know what will happen with chinese oil demand because they have deals with chinese refineries. they are a huge source of oil, so is russia, but saudi arabia has a long-term deals.

i would say they would be the first to know from the chinese government when they think that oil demand will start going up. we may see some movement in terms of the price that saudi arabia is selling oil to china, or the amount they are selling to china, moving before that search upward. lisa: if there is not a surge offered in demand from china reopening, do you see prices going lower if this more weather holds? ellen: the warm weather is definitely helpful, but once we hit summertime, that warm weather will cause a surge in oil demand. if we don't get a surge of words, if we see a slow trickle upward, all of a sudden the day will come, oil demand is huge now, are we have finally hit that mark, but no one necessarily saw that giant jump. that could change, the.

ough. the chinese government has ways of compelling people to do what they want and may push the population in that direction. tom: where is oil going to be in a year? do you buy the talk of the bulls site 120? ellen: i don't make forecasts -- tom: it is tv. come on. ellen: 120 is a possibility but i don't see it as a sustainable number. jonathan: that is how you do it, say something is possible. ellen wald, fantastic, thank you. what do we always say? how do you make a fool out of someone? ask them to predict the oil price. so hard. it is ridiculous. based on what is happening in china, who knows what that will

look like. lisa: i wonder if people will have an outsized reaction to whether saudi arabia or opec-plus decided to cut or increase production, looking at the tea leaves of their knowledge about production. as ellen wald was talking about, there are discussions about what china is desiring in terms of see mobility among residents. jonathan: where did he go recently? lisa: riyadh. tom: what is irrefutable is a generational shift in saudi arabia, no question about it. jonathan: and that has come with some tension. over the last 12 months. have we resolved any of that? tom: i don't have the knowledge base on that. i would say it continues into this year, particularly the

relationship with the white house. jonathan: that on a moment going into the opec-plus meeting, the saudi's accusing the administration of asking for a delay until after the midterms. lisa: this was not exactly a fist bump that got any particular leverage. jonathan: what is happening with the spr? lisa: the administration signaled that they would start refilling by february of next year. potentially if they do it without moving the markets, it would be considered a win for them because they sold high and bought low. there is a question if they can reveal it enough. i don't understand the dynamics, how that could push prices up if they are buying. tom: who do they buy from? jonathan: the administration is saying that we buy around 70. so they have a floor of 70, with the administration saying we are ready to buy. then china reopening.

what is the floor for crude this year? lisa: you have to imagine it is 70 if not more than that. the question is, does it go to 75, 78? all great questions. if they plan to start refilling it in february. jonathan: about one hour from now you'll hear from chairman powell. optimism around the europe story. james athey of aberdeen investment will be weighing in. your favorite firm. how do you pronounce that? tom: it is like the tots. jonathan: i cannot believe they changed their branding. we all thought it was a joke when they did it. every time i ask anyone at aberdeen, they just look at me. shut up. i don't want to talk about it.

[laughter]

>> i think what we are in for is an awful lot of choppy trading as the market reacts to the ebb and flow of this volatile news flow. >> the market has been so

volatile the last six months. >> we have to get used to an inverted curve. >> deep yield curve inversion is not a soft landing story. >> a soft landing is one that you can walk away from. the economy is strong enough now that it looks like it will do so. >> this is bloomberg surveillance. tom: good morning, everyone. nela richardson out front with the optimism today, and it is optimistic tuesday. jonathan: is that what you are calling it? tom: on the way to inflation thursday. jonathan: goldman says no recession in the euro zone. morgan stanley comes out and says we are underestimating the positive impact of china reopening. hsbc, analysts are changing

their view. tom: let's go to the thermometer. spread market. does it suggest optimism? lisa: yes, it's been ripping. high-yield bond spreads are at their lowest in months. she huge inflow going into corporate credit because people believe that companies will move forward. it is counterintuitive because everyone was calling for armageddon when rates rose. tom: mike wilson made it clear that he is earnings eccentric, but so many others combine that with the inflation call globally. jonathan: he thinks earnings could be dreadful and there could be 20% downside plus in the equity markets. the imf saying that high-yield were in for some tough times. it doesn't scream top times at

the moment, does it? tom: olivier blanchard will be joining us with my essay of the year. this is the whole debate. if we get inflation, what does it do to mike wilson's world if we don't get to 2%? lisa: exactly where i wanted to go. lululemon. even if you get this positive economic data, what does this say about consumers pushing back on the margins against prices going up? this has not been talked about enough, small business optimism index coming out at the second softest reading going back to 2013. there is not optimism everywhere. tom: i want to digress. crypto -- much more on this this afternoon. dana bass kills it with the newest idea, chat gpt.

artificial intelligence, so lisa's kids can do their homework. jonathan: let's talk about the news and then we can talk about the homework. microsoft is maybe interested in investing as much as $10 billion. that is the creator of this bot. they could be valuing ai as much as $29 billion. none of us had access to internet in the same way the kids do these days. they get to cheat, basically. can you go on and get a first draft from chat gpt, edit it, and send it in? lisa: theoretically this has been an issue at home. jonathan: how is it working out in reality? lisa: it is not quite good

enough for high school level, to pass as a kids work, but they are testing it out, so maybe it will get there quickly. tom: the fossils of us will get here. you go to this silliness, artificial intelligence homework, and you can do the history of jonathan ferro's london according to dr. seuss. you put that in, and this is what you get. it started as a small town by the river thames so wide, but it quickly grew and flourished with buildings tall and wide. i think this is a great idea. i am glad your kids are cheating through school. lisa: they are not getting away with it yet. tom: it is my kids you are cheating through school. $10 billion for the latest idea? jonathan: think about how may

people it could replace. sam ask this question recently. do you remember sam rowe? he was absolutely awesome and asked this question. what would your editor do if you are order and you are filing first drafts that were authored by chat gpt? and they were pretty good, but no more than the average editor would correct on a given day? lisa: they would fire that person and just use chat gpt. this is one of the search engine that you are dealing with with google. trying to use this to get better results, but at what point does this replace human intelligence? tom: is technology overrunning the methods that we knew? jonathan: it is the human touch. . tom: it is like a peter gabriel moment. jonathan: one day our producer

will just go on chatgpt. tom: i am looking at massive accommodation in chairman powell's comments. jonathan: we will see if he pushes back. it's a form on central-bank independence with riksbank, the oldest bank. we will see what the questions are. futures on the s&p down half a percent. tom: james athey joins us, always adding value with aberdeen. are we in a disinflationary trend? james: i am so glad you did not ask me about chatgpt. i am pretty sure based on that little poem it will be replacing me soon. i think we are in a cyclical disinflation. the base affects are such a

hurdle for the inflationistas to clear. we will have negative bass effects for a while, so we will see headline inflation, if we don't get another rise in commodity prices. i think that disinflation will filter into core, and the picture will look different. you have already been discussing the china reopening. that is the most obvious risk to my cyclical disinflation view. secular inflation, i think there are some interesting arguments. i don't claim to have the answer there at all. for me that is a question of levels and changes. does a deglobalization mean a higher price level, one off move, or an ongoing multi-year inflation force? jonathan: let's get to where this leaves europe. you know the call from goldman. better growth momentum, lower natural gas prices, earlier

china reopening. would you go along with that based on the data that you have seen so far? james: you can understand how they get there, goldman guys are much more bullets in general. they think already we have passed the peak impact of the fed tightening, therefore, the jobs market has survived. i'm not convinced by that argument. the delta they have noted, low gas prices, is a relief for governments, should be a relief or rates. china reopening is definitely a boon to german manufacturing and exporters across the region. i'm not sure that allows them to avoid recession. if we end up in a place where goldman is right and these economies avoid recession even with this monetary tightening we have seen, it raises questions about what central banks have been fretting about for the last 10 years, the damaging impact of

tighter monetary policy. lisa: are you hoarding cash, moving away from risk in order to counterbalance the recent optimism? james: you and i are probably more biased to be on the miserable side. [laughter] not really known as an optimist. i would be cyclically positioned anyway. we are seeing lots of dead cat bounces. the market is so accustomed to the fed ringing the bell, everyone celebrates and buys risk assets. i think there is more of a secular decline. i think we are headed for recession. like mike wilson, i get to a similar number. earnings around $200, average pe of 14 or 15.

around 3000 for the s&p. jonathan: how would you characterize the move in em? it has ripped. james: the dollar has been weak, good for em. in the bigger emerging markets, we have seen a much more credible response to the pandemic, both on the monetary and fiscal side. you take an economy like mexico, you cannot see a deviation. the monetary response was quite rapid and orthodox. a lot of those essential things are more ahead of the curve. therefore, there is more in the price, equities look cheaper relative to the economic outlook. i would not be piling in. i like local em rates. that is more of a story for me. tom: thank you. jonathan: you should do a

podcast with bramo. what would you call it? tom: miserable. lisa: i am sure xoma my people would listen. [laughter] i was thinking what my response would be, and i went to chatgpt to create one. it is at capacity right now, so i don't have a response. tom: the weather in europe, the ski resorts. lisa: he snowboards. jonathan: is one of us going skiing? tom: not me. lisa: chatgpt. jonathan: coming up, eight: 30 eastern time, kathy bostjancic.

lisa: keeping you up to date with news from around the world, with the first word, i'm lisa mateo. the former engineering chief of ftx is the latest member of sam beckman's freed to seek a deal with prosecutors. bloomberg has learned he met with federal attorneys last week. two former executives are already working with prosecutors. the house voted to repeal billions of dollars of internal revenue service funding that democrats last year. it was the first vote on legislation with republican speaker kevin mccarthy in charge. the measure is not expected to pass once sent to the democratic-controlled senate. attorneys for president biden discover classified documents while packing up the office that he used after serving as vice president.

the white house says the materials were turned over to the national archives. the justice department is reviewing the matter. former president trump is under investigation for his handling of classified materials at his florida estate. coinbase will cut about 950 jobs as it tries to weather a slump in the industry that has lasted more than a year. at the end of december, the company had more than 3700 workers. they say the restructuring will be complete by the end of the second quarter. 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'm lisa mateo. this is bloomberg. ♪

>> like us, canada and mexico, who do enormous trade volumes. i would say this is one of the most successful trading relationships in the world. the three countries have been trading together for over 30 years. 2021 trade volumes, we have done nearly $2 trillion every day. billions of dollars worth of trade every day. these are significant numbers in trade between the three countries. jonathan: that was the canadian trade minister as the three leaders get together in mexico city. the three of them set to

announce a deal on climate goals, according to dow jones reporting. we are about 40 minutes away from hearing from chairman powell. equity futures are slightly softer by half of 1%. as mike mckee said yesterday, chairman powell talks, sort of, but it is about central-bank independence, and we are really hoping for the q&a, some pointed questions about policy in the u.s. tom: what we will see is a wait for thursday. every day since the jobs report, every hour, that becomes more germane. is it core or topline that matters? i would suggest both. jonathan: knee deep in earnings by that time. did you see the jeffries numbers? lisa: better than expected. jonathan: still pretty dreadful. lisa: but is it the absolute

number or the bar they have to cross? how much of the disappointment has already in doing -- baked in? jonathan: it is relative to expectations, so we will see. tom: let's go to mexico city, annmarie hordern traveling with the president of the u.s. she comes to us in front of that iconic statue in mexico city. the angel of independence. we speak to the angel of independence this morning. what is going on in washington? the clumsiness of the republicans and what speaker mccarthy agreed to. to be clear that mystery up today, next week, or never? annmarie: it remains to be seen what kind of fights we will see on the house floor. one that everyone is talking about is when it comes down to the early summer, raising the

debt ceiling. he cleared a significant hurdle yesterday, able to get the rules package over the line even though you had some moderate republican grumbling. one of them did vote no, tony gonzales. that was a clear hurdle for him, but we cannot be naive. he is a week speaker bite now it has given these insurgents in his party in the veto power on him. i know you talk to french hill a lot. he says this decentralizes the power the speakership has. tom: this is fascinating. a phrase from the former president, these republicans in name only -- i don't want to allude to french hill like that. these republicans, what is their power now after the theater that we saw last weekend? annmarie: you are seeing a divided party.

20 rebels voted against mccarthy. the power is what they were able to negotiate with him. the biggest things are the motion to vacate, meeting only one member can call for his ouster. it was the threat of that kind of vote that caused speaker boehner to leave. the second thing that mccarthy negotiated with, and this will be interesting for our viewers, is a cut in spending. 130 coming off of the spending budget in 2024. lots to cap it at 2022 levels. this is why central republicans are concerned because they think it will hit defense spending. lisa: much have you seen a change in tone from president biden about what he can actually promise, get done, in terms of getting congressional consensus behind him? annmarie: it is the second week in january, and president biden

is in mexico. i think you'll see the president lean into his foreign-policy this year because he knows there is gridlock in congress and there is really not a lot that he can get done. e must pass issues, but we already know those issues like the debt ceiling, funding the government, those will be very contentious because we have a divided government with the democrats controlling the senate, then majority of republicans in the house, and they are struggling to agree on basic matters like who should be the speaker. i think you'll see biden lean into foreign policy, but it is not lost on me, it is the start of the new year and he is sitting down with the president of mexico and the prime minister of canada. lisa: how much is the anti-china sentiment still a bipartisan consensus right now given the potential reopening, business opportunities?

annmarie: i think you will see a lot of that. the one thing that republicans and democrats, whatever side of the isle that you sit on, this is something they can agree on. usually the debates are how they will combat it. when you think about defense, you heard from some republicans saying they would make a trip to taiwan. how can they go there if they are talking about cutting their own defense? what message does that send to their allies? but it is politically opportunistic, especially going into 2024, whether you are republican or democrat, to point your aim at china. that is also coming up here in mexico city. president amlo saying that he is seeing more ships with asian goods ending up in pacific ports, and that is something that he wants to put an end to. jonathan: thank you so much. near-shoring, mexico could be a

massive winner in that. that is why she is talking about it. lisa: it is not a clear shot between what we are doing now and near shoring. how much will businesses lead in that? we need something more secure in case there is something. multi-sure, instead of just focusing on asia. jonathan: lower cost, outsourcing production, now, china online some of that. tom: it is about the new globalization, i would take her point on that. i would go back to labor arbitrage. this is not only china to mexico, which is frankly pretty ancient, but across the pacific rim as well. vietnam, you mentioned korea. they have the high ground on this. the labor arbitrage here post-pandemic is an unknown. lisa: the question for me is

whether shareholders will allow inefficiency to be baked in, or whether that arbitrage will be shrugged for strategically better positioned supply chains. ultimately, there will have to be some pushback from shareholders if they do prioritize profits in a near-term over everything else. tom: i would suggest that china will aggressively respond to any labor arbitrage. jonathan: you try to incentivize it with credits, and that is happening with ev's in the u.s. tom: is that ev thing working? jonathan: what do you mean by working? tom: is the experiment working? the cars are really expensive. jonathan: there is massive demand. just ask ford. huge demand. there is a risk factor for that industry, and analysts are on the same page.

you invest a ton of money into this for projects that will go on for decades, and then all of a sudden a better fuel comes along. lisa: or the potential for the scarcity of lithium, the ingredients that go into these batteries. ev sales nearly doubled from 2021 to 2022, accounting 25% of all car purchases. tom: did i say something wrong? jonathan: i have places to be. matt horn on the weaker dollar. karen dawson on why the bull steepener is something to be afraid of. matt miskin in the next hour.

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tom: good morning. an interesting tuesday morning. don't forget crypto this afternoon, new york time, a really tumultuous moment for crypto. i don't want to go into it because i'm not qualified, but look to crypto this afternoon. binance and all that is going on, including the coinbase announcement. the number is not a big deal, 950 bodies out at coinbase, but on a percent basis, that is a large number. lisa: when you are dealing with right now is a reckoning in the

crypto space. i wonder how far that goes, the tentacles of that, tech investment, some of the firm that invested with these crypto platforms. tom: i thought arthur levitt was brilliant yesterday, the former chairman of the sec. he was heated about the limitations u.s. authorities have because of all of the shenanigans of foreign domicile and all of that. lisa: which raises questions about the trust people have in foreign domiciled trusts and brokerages. tom: the vix is giving me no love. we have seen stunning movement on what is an optimistic set of discussions over disinflation. we forward that discussion with kathy bostjancic, chief

economist at nationwide. i want to go to chairman powell. 30 minutes from now, maybe we get news, maybe we don't. what is he supposed to say about the gross accommodative trends seen in the different financial conditions indexes? kathy: good morning. happy to be with you. i think he has to be cautious at this point. we are just a few days away from getting the december cpi report, so i don't think he wants to weigh into heavily before that number. as you said earlier, this is not really the right forum to make any new pronouncements, but certainly the dialogue has changed in markets, among analysts, that this soft landing scenario has received increased probability. i am still in the cautious camp, the lisa camp, whatever people

call it. companies are losing pricing power. tom: i have questions, but if she is in the lisa camp, we may as well go to lisa. lisa: how would you pushback on some of the optimism that people have about disinflation, soft landing, that you are seeing wages come in even with the unemployment rate going down? how do you pushback against that and say not really, the fed needs to do more, and growth will slow and go negative? kathy: it is possible. we never rule out the miraculous disinflation and soft landing. there are so many uncertainties and we have to be humble, especially after the past year of forecasting. even if inflation manages to come down, wage growth starts to ease even amid a tight labor market, the flipside still

concerns me. these companies are losing some of that extraordinary pricing power they had, which was elusive the past decade. that has to feed through to revenues, profit margins, eventually to equity prices. you cannot rule out that it will be may be a somewhat softer landing, but i'm skeptical at this point. we saw the ism service data on friday overshadowed by the fact that wage growth slowed more than expected and that prices paid declined a bit. we have ism services, ism manufacturing, along with real estate being in recession territory before nonresidential joints that camp. it seems to me that recessionary scenario is still there. the question is is it mild, moderate, something else? lisa: there are diversions right

now between profit margins coming in, the likes of lululemon, other companies, versus an economic downturn that includes a downdraft in the labor market. could we have a rocky year for equities, like mike wilson thinks, because of contracting profit margins, but a resilient economy where the labor market stays intact? kathy: again, it is possible, but it is threating that needle -- it is difficult to do that. unless companies have adopted a different mantra this time -- instead of saying it is so hard to hire workers, we are going to hold onto them. i think the pressure will be to let go of some of those workers. luckily, they were able to quickly find jobs, but i don't think that is true across the board. tom: you are one of the nation's

best in all of these confidence measurements, soft economics. i do not mean that in a derogatory way. what is the confidence now in what confidence statistics tell us? kathy: you are going back to my time at the conference board. tom: what does it say about gloom and doom? what does it say about the lisa camp? lisa: oh my goodness. kathy: what it has told us, consumers are saying we are feeling the pinch, we don't feel great about the macro economic environment. but they had enough pandemic related savings, and the labor market was still strong, so they kept spending. fourth-quarter growth, all of this is concentrated in october. november paused. the momentum going into this year is slower. things are being drawn down. if the labor market turns, even

on the margin, that will curtail consumer spending. the question is the degree of all of these things, whether we get a softer or harder landing. lisa: just to be clear, i am gloomy at looking at certain things, and that is my nature. but there is this question right now of what if you get a bad situation for companies but a good situation for the economy? that seems to be increasingly relevant. tom: let me clarify. the only thing lisa is not gloomy about is the new york mets. other than that, it is straight gloom. lisa: that is a team for people that like to be gloomy. yes. i do want to make a point, and kathy was talking about this, the cost of goods sold online declined because companies are losing pricing power. they are steep holiday discounts. this is actually a good thing. at what point can the fed look to this as a disinflation, lack

of pricing power that will lead to that 2% level by the end of 2023, or close to it, the way that creditsights was gaming out? kathy: the federal reserve want to see price pressures ease, absolutely. my point is, in getting that, how that unfolds will be harder for companies to adjust because they will lose some of that pricing power. they are working off some of these high inventories. if they feel they need to cut costs further, that means there could be layoffs coming. that will hurt consumer spending. that is the difficult challenge here, how you get inflation done without hurting the economy. maybe things are already in play. ism services and manufacturing service index both below 50. you don't see that unless you are in recession. tom: kathy bostjancic, thank you so much.

she is a part of the lisa camp. joining us now -- he is not in the lisa camp --michael mcgee. i saw your beloved denver broncos, good luck with that. mike: the georgia bulldogs won large. did either of you see the game? the quarterback, unwanted, unloved, now two national championships, led the destruction of tcu last night. he is an economics major. so let's hear it for the economists. tom: are we going to see the destruction of accommodation from chairman powell in 20 minutes? mike: i doubt it. this seminar put on by the riksbank is about central-bank independence, also a panel discussion. it is not the kind of venue -- tom: but if you are asking a

question. mike: i was about to say, there is audience q&a. if it is just economists and central bankers, they like to nerd out on things like ventral bank independence, don't ask about whether the fed will raise rates are not. lisa: what could they ask, what would jay powell say that would disrupt this market after so much hawkish that speak, that this market has ignored? mike: disrupting the market might be hard. the only thing you can do in that situation is ask whether you would go 25 or 50. everyone knows the fed's argument is we will keep rates unchanged for a long time. lisa: that is where i wanted to go, raphael bostic talking about 25 basis points at the next meeting looks likely but not dovish. the end point stays the same.

is that the message, don't rally if we only raise 25 basis points? mike: definitely a message they want to deliver. if they do 25, jay powell will make that clear in his news conference. interesting research from goldman sachs this morning, as far as they are concerned, the impact of the fed's cumin tip tightening is hitting the economy now. long and variable lags are shorter than we think, which means the economy is growing faster than people think in 2023, and they will have to raise rates more. tom: olivier blanchard with a new book out. this is thin, gorgeous. this is a really important document. he talks here about the algebra underlying all of your world. does chairman powell leave in

the algebra, does he have a model that he can trust? mike: he does not have a model that he can trust, however, they use the models because it is what they have, gives them guidance. at this point, the fed concedes, as everyone does, that this is a different kind of recovery. maybe they can invent some models. economics major. tom: the conversations today have been extraordinary. olivier blanchard will join us from the peterson institute. that will be absolutely must watch. stay with us. this is bloomberg. ♪ lisa: keeping you up to date with news from around the world, with the first word, i'm lisa mateo. jp morgan ceo jamie dimon says that fed's rate hikes may need to go beyond what is currently expected. still, he told fox news he is in

favor of a pause to see the full impact of last year's increases. he says there is a 50% chance the fed will raise its benchmark rate to 5%, and a 50% chance it will go to 6%. the u.k.'s attempt to send their first satellites into orbit from their soil has failed. a rocket launch from a virgin boeing 747 malfunctioned, leading to the laws of its payload of nine satellites. the jumbo jet and its crew returned safely. after years of drought, california is in a flood fight. waves of storms have rolled it across the pacific ocean, killed 14 people, and forced residents to flee. on monday, there was an evacuation order to the town of montecito. bloomberg has learned that the drugstore chain cvs is exploring an acquisition of oak street health, which runs primary care centers for medicare recipients.

a deal could value oak street at more than $10 billion including debt. 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'm lisa mateo. this is bloomberg. ♪

>> two months ago, there was barely any called to be found on europe. that is not long ago. that shift is just starting.

i would not really expect a more positive run for europe both on the credit side, on fx, and equities. tom: hsbc with the optimism on europe and others. dxy with a 1.02 print. last year, in the shock of ukraine and putin and russia, i named my book of the year in february or maybe the first week of march. "putin's world" by angela stent. right now, we are talking with olivier blanchard. "this go policy under low interest rates." this is a must read.

the immediate must read for any economic geek out there trying to get smarter. the former chief economist for the international monetary fund. lisa will go into your wonderful new book, short, but a dense read. i need to go to my essay of the year from you last year, in the financial times, where you said, everyone calm down. the american public does not worry about inflation at 2%. the new 2% worry is maybe 3%. what happens to our financial and economic system if we get the level of 3% with inflation? is that the new 2%? olivier: that is not my decision

to take, it is the decision of the central bank. the book is based on the fact that when we had the target of 2%, which we still have, this implies fairly low nominal rates and limits the ability of the fed to help the economy if it slows down. you can only decrease the rates -- let's say the nominal rates are 2% or 3%. what we have seen over the last 20 years is that it is not enough for the fed to do, or the ecb, any central bank. i have argued it may be better to run the economy on average at 3% which would imply higher rates, which would give more room for monetary policy, and would make some of the issues in my book less relevant. it should do most of the job. if it cannot, fiscal policy has to come in, which is the title of the book. tom: this is so profound. talking about 4%, and that was

hugely controversial in 2008, 2009. this is a different conversation from what we have heard from adam posen. lisa: do you let it run hot. the title of your book, fiscal policy under low interest rates, trying to fuel growth when monetary policy didn't have room to do so, is that flipped on its head, especially after fiscal policy created the policy that monetary policy is now trying to address? olivier: as you may know, fiscal policy can do too much. in large part, a major fiscal mistake, there was no need for the very large program that we saw in 2020. more especially at the beginning of 2021 which lead to overheating of the u.s. economy,

supply chain disruptions, which were there, but were aggravated. in general, overheating in the world. the central bank is using fiscal policy too much. the biden administration -- there are some other reasons, ukraine. but there has been higher inflation and the fed has had to react the other way with high interest rates. i think that is the face. the book is written looking beyond this current episode, higher rate episode. one of the thesis of the book is that we will return to an environment where the rates that the central banks need to choose in order to get the economy back to potential is low again. we will be in a situation where

that may constrain some of the monetary and fiscal policy needs to do more. the point is, at this stage of the discussion, it's about higher rates. it is a provocation, coming out with a book where the title is low rates. i would argue that they are low in the battle against inflation. there is no reason to think that they will not go back to something that we had before covid. lisa: where does that leave the federal reserve, ecb in terms of the balance of risk? is it to go too far on benchmark rates, hold them there, or not do enough, given that we are going back to something that is slightly different from what we experienced over the last several decades? olivier: with respect to the inflation process, i have seen it before. it seems to me, i have seen it

before. the issues are always the same. inflation is too high. part of it will go away because part of it is due to energy prices, and these will decline. we still have to basically slow down the economy a bit. we don't know how resilient the economy is. in the simplified stories that you hear on the radio, you increase interest rates and economy slows down. but you don't know how easily you get to that. that is what the fed, ecb, central banks are facing. should we do more, less? then there are two issues, if you give me a few minutes. there are lags. even if it works, it does not work right away. you have to stop tightening, go easy, before you have seen the results.

the results take six months, a year. the other aspect which is relevant in this case, some of the factors which increased inflation turned around on their own, independent of the bed and ecb. energy prices go down. inflation falls -- and it is falling month to month -- and some people say, ok, good. we are done. tom: i have one minute left. i have alan blinder writing in the wall street journal, disinflation is intact. you know the history of 47, 49 into the eisenhower deflation that we saw. olivier: i am not that old, tom. tom: but robert is, who you dedicated your book to, 97 years old. do we have any clue what we are doing, given disinflation in

place amid technology? do we have a clue where we are given the technological progress that solo invented? olivier: i think we do but there is uncertainty. there is the usual amount of uncertainty. the economy is always changing so you have to take this into account. the risk profile changes. roughly we are where we need to be. it is a really difficult issue. what is the unemployment rate that we can sustain? we can get inflation down to 3.5, as it is now, keep it there, or do we have to accept slightly higher unemployment in order to stabilize inflation? that is the big issue. tom: we are out of time.

olivier blanchard from the peterson institute, my question of 2022. i will read it for you cover to cover. "fiscal policy under low interest rates." it is blindingly terse but very dense. lisa: i love how you handed it to me quickly before talking to him to read. thank you. i understood it all. honestly, his point is well taken talking about the balance of risks. it is wrong to just take the disinflation we have seen and say game over. tom: can you handle this chart? this is a chart for the lisa camp. major shout out to larry summers and bloomberg economics david wilcox for pushing blan chard to write this beautiful economic treaties. this is bloomberg.

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jonathon: chairman powell just around this morning -- just around the corner this morning. the countdown to the open starts right now. announcer: everything you need to get stat basket set for u.s. trading. this is bloomberg "the open" with jonathan ferro. ♪ jonathon: live from new york city, we begin with the big issues. wish bets on china. goldman sachs dro