>> to a certain extent, these forecasts about recession are a bit out dated. >> i think it's actually improving. >> the central banks are still hiking. >> p overhanging event of the year will be what amount of damage the central bank has done to the economy. >> for the end of 2023, risks are to the downside. >> this is bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. jonathan: it is cpi thursday, live from new york city this morning, good morning, good morning, for our audience worldwide, i am jonathan ferro.

bramo will be back in a couple of days. tom: really important, michael mckee trueness with a great set of guests on the ramifications on this. it's a great partition, it is goods dynamics and services dynamics and adults like michael mckee will look at the service changes. jonathan: the fed credit -- president is leaning toward a 20 5% rate hike. tom: i think that's the parlor game and we will not stop the show on this but it's a global cpi thursday. it's the same debate in china. in japan this morning. post pan dimmick, is inflation the metric of all of those ramifications? almost outright deflation in the united states. jonathan: you mentioned japan,

will we get a change of policy in japan? the local newspaper suggested their mate will be a policy review as soon as next week. tom: i went to the japanese data which i'm not been expert on. you look at tokyo court inflation off the bloomberg and it was 2.5% and all of a sudden, it's 2.7%. there institutions are pushing against rising inflation. citigroup is out and they say they will polish the yield curve control. jonathan: they are not far away from that upper band. tom: not that it's been a failure but they are doing it in steps and so much of this is maybe an asia method. jonathan: it's becoming deeply unpopular in japan. a survey from the boj and more

than half of japanese households said their livelihoods have worsened. tom: i take issue of how it's covered in the west and is just rising inflation and they are 3% inflation within the spirit of their economy is equivalent to five or 6% inflation here. jonathan: it's very close to 130 all over again. we will pick up on that in a moment. this is the price action, equity futures are unchanged on the s&p 500. in the bond market, yields are lower by one basis on the 10 year. at the close yesterday tom: back to -7.0 basis points. that's significant. jonathan: at the last inflation

report, we were at 422. tom: we've had four days of equity joy are we going to get 4000 spx? jonathan: i think that's on the table. tom: or will we recapitulate the next 30 days? we miss bramo. jonathan: let's go there, what do you think the conversation will look like? >> there is a lot of hype for this number at the beginning of the year in the last inflation report before the next fed meeting and markets are focused on in laois and but on markets have done that forever and equity folks of operating within a cpi thursday but literally, there is so much hype that i'm concerned we've kind of over tweaked it and we might be

disappointed that it could be flat or higher than expectations. it could mess up the markets here. tom: are we disaggregating in our inflation information too much? >> not only are we doing that but we are also extrapolating. we seem to be heading lower in inflation and i think that's right but this is the more difficult time between now and march we're inflation will be driven lower. at this point, it gets more noisy and you have different degrees of disinflation versus inflation. this will be a hard one to call. tom: you've been doing this for years so whatever the estimate is maybe six point 5%, olivia

er blanche art says we will not get back to 2%. what level would make you comfortable? what level of inflation provides comfort? >> as we get closer to 3% but a frankly of average inflations around point two month after month, if we see stability -- volatility has been an issue as well. it's been high and random. if it stabilizes here somewhere around three and then you have chair powell's new measure, the core services and that historically has been around to post gfc but before it was at three point 5%. it's currently running at 6.8 or higher. that's a metric that jay powell has emphasized. i think this will cause the fed

to freeze or go even harder. jonathan: we were talking about the immaculate disinflation, can we get wage growth to come in. do you think we can? >> i think it's tricky. the variable lags of fed policy is still working its way through the system and we just don't know we have accelerated the jobs picture and have had mixed signals in the job market which is still relatively healthy. i think the fed wants some slack back in and they are projecting a higher unemployment rate but it's going in the opposite direction. they will have to fight for it. jonathan: i want to share this with you -- financial conditions are now easing and have been for a couple of months porting economic growth. i think the life is short and

predictable. what do you think of this short-term call? >> a lot of this comes down to not just liquidity to nymex and the tightness of fed policy relative to market conditions and a lot of it is global. it's what's going on with qt and changing policies. how much further can you get with financial conditions easing so i think a lot of this is priced in. tom: our viewers care about the housing market. they've got to come down a lot to resurrect the american housing market, right? >> right, this is a stalemate in the housing market. buyers and sellers are not looking at each other with a leader i and no one is flinching. at some point, prices will have

to start dropping or reits have to come off that we won't get that with inflation. tom: of another time ago, irving fisher says is interest rates linked to inflation? do they actually decouple? >> we've had moments of that before but you still have core base rate of a fed looking to go to 5% or higher and it will be hard to see the 10 year diverge from that. our market is pricing in a reception. jonathan: a local news report today is about a potential policy review of the bank of japan. they could drop control completely so where are you on that? >> with the changing of

leadership at the boj with the inflation backdrop and the need to open up the national trading markets within japan being sponsored by the boj, we think you'll curve control will ease at some point. it's been a year of record losses in 2022 and we have these big changes in japan. i think they will take their time to ease their way out i think tom is right that this will not be one fell swoop but will have a profound effect on japanese markets but noticeably the u.s. bond market which has been a recipient of flows for so many years. jonathan: they've had some anchors over the last few years, thank you as always. if you look at the fa screen, japanese yen strength and absolute -- an absolute

standout. tom: it's coming in stronger. i will go to the eco screen on bloomberg in one of the tea leaves out there isn't laois and adjusted cash earnings. in japan, we talked about disinflation or outright deflation. there is real inflation there and real cash earnings. we're are supposed to be negative 2.8% and now it's 3.8%. this bank is not dealing with chairman powell, they are dealing with the people of japan. citigroup would suggest we will see it with corona. jonathan: so this happens before we get there. tom: too much to talk about but it's inflation. we got the countdown clock on the cpi report.

jonathan: that's 18 minutes away. will michael mckee talk about super core inflation? he will weigh in. pushing ahead to cpi in america. the final month as we get down to five. a real disruption yesterday. we will talk about that next. tom: bramo got nailed. jonathan: futures are unchanged on the s&p 500 in your cpi or in 15 minutes -- report in 15 minutes. lisa: keeping you up-to-date with news around the world with the first word.

investors in the federal reserve will be looking closely at today's u.s. consumer price index. projected 5.7% increase would be well above the fed goal that would explain its intention of keeping interest rates higher for longer. the year-over-year price route would also show moderation cpi is due at 8:30 a.m. new york time. the u.k. and european union are preparing to enter an intense phase of negotiations to end their dispute over brexit the talks will begin next week area the disagreement has to do with trade. both sides originally agreed to allow the northern island to remain with their arrangement but so far, the u.k. has failed to implement parts of that. president biden's efforts to quell private documents has become more difficult a second set of papers has been found and that is likely to fuel criticism from republicans, even though they dismissed more serious allegations against former president donald trump.

at more than $10 billion. sources say the process is still in the early stages in the privately held company could decide against it. it's one of the world largest quick service restaurant chains with 37,000 locations but the rep has been tapering off. 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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>> we are coming up on the faa reauthorization indicating resources and strategy we need for the next five years to make sure the faa everything they need. we will not allow anything to take place that is not safe. jonathan: the u.s. secretary of transportation we didn't celebrate christmas because of the events of southwest starts the new year and there is an issue with the faa. tom: forget about the politics of this, there is no head of the faa. the reason he is so visible, can

you imagine amh as the head of the faa, she would've been on the tarmac. pete buttigieg has nobody. jonathan: from new york this morning, good morning. no disruption whatsoever after yesterday. the s&p 500 is totally unchanged and equity futures are putting together two days of gains. deals are lower by a basis point or two. euro-dollar is $1.07. crude is 78.35. jeff curry had a better reopening play and he said it's crude. he came up with a monster number four copper. 11,000, 500.

500. tom: i did not know how to get lme quotes. jonathan: i think tom: whatever but the screen for dummies like me is lme which is important. we are not deemphasizing commodities right now are youamh joins us with the resident in mexico city. she joins us from her studio in washington. how antiquated is the faa and can they improve the budget given the budget frugality of a group of republicans? annmarie: i was able to get home and i did suffer a little bit of the delay but my photographer is still stuck at a hotel close to the mexican city airport. he was delayed because there was

chaos with the faa. it didn't just affect domestic flights, there was effects for international flights as well in april, the fai test the faa said they were going to begin receiving and using $1 million of the five billion dollars allocated them from the heart infrastructure plan. many people have criticized the transportation industry in general saying they don't have enough funding and we spoke to resources talking about the fact that some of the technology that had to deal with this shut down is antiquated. this will become political because the fact that pete buttigieg, the secretary of transportation is potentially on the short list for a potential candidate for president. tom: there is a missed frugality

across capitol hill so there is a fire at the faa and we have to romani at it and there will be something two weeks ago and we have to throw money at it so how do we develop the frugality developed by certain republicans? annmarie: the point i was making is that they are receiving new funding from the heart infrastructure plan which was supported by democrats and republicans. they talked about last year that they are starting to use that one thing. this is everything from technology to restoring towers, across the industry. there is money flowing into the faa. tom: she gave it to me just like abramowitz. jonathan: amh travels with a photographer, did you know that? annmarie: how do you think i got on tv? jonathan: i thought she referred

to him as a photographer. annmarie: he is vote. jonathan: we need to go around with photographers. tom: does she have a waiver to take a dog with her? jonathan: down to mexico? unbelievable. classified documents, the president of the united states, the former president, where is this going? annmarie: this is going to create more headaches for the biden administration be does first reported yesterday is that they found a second set in aleut location -- in a new location and the question facing the president is on the first set on why was the press only issued a statement after cbs news broke this route work? and what is in those classified documents? the press secretary really did not want to answer this question. on the heels of those questions, they have to answer what is in the set of new documents and where were they and how were

they handled? obviously, everyone washington on the gop side is drawing parallels to what we saw with the prior president and his classified documents at mar-a-lago. there are some differences between these two issues but the president will face criticism potentially being hypocritical in his remarks about the former president. jonathan: he said the former president was totally irresponsible. there are some differences here but we want to explore them right now but people are wondering the same thing, why does this keep happening? annmarie: that's a great question. i don't know why. with the former president, the difference is obviously his lawyers signed off that there were note government documents are classified documents at mar-a-lago. that was false and there was a subpoena and a search and seize top-secret and hundreds of other

government documents. the biden administration is unsure why the president had these documents from his time when he was vice president and they were in his private office when he left. what we do know is when they were found, they were immediately given to the national archives. the national archives were alerted and his lawyers have been handling it since then. how does this happen? how is there no procedure at the end of a term to make sure everything is accounted for and is not leaving pennsylvania avenue? jonathan: absolutely bizarre but great to catch up as always. welcome back to washington. tom: francine is a photographer as well. jonathan: we are missing out on that. tom: they cut my entourage back. i'm down to seven people.

jonathan: i change my handle on instagram a while ago. tom: this goes to the inflation ramifications of spain, france, the united states japan, china, this is a global inflation thursday and he has a jump condition call on a weaker swiss franc and stronger euro. that's a big move. tom: the president speaks later. at 830 eastern time we get an ease -- a sepia report and then the president will talk about the economy later on. jonathan: i don't know the politics on this.

i don't know the process but they kind of already have the numbers. they have to have the numbers. jonathan: we will have a chat with mike little bit later on that. a timely guest coming up shortly. next, equity futures not changed on the s&p 500 and bonds are not doing much. euro-dollar, they think it will be $1.10 by the end of the quarter. it's just a bike. wait. they make a treadmill with an intuitive speed knob? yeah. want to try? 92% stick with it, so can you. start a 30-day home trial today. terms apply.

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jonathan: two hours away from cpi data in america. equity futures look like this on the s&p 500, totally unchanged after a couple of days of gains over the last two days. the gains were about 2%. the bond market looks like this, the two-year up almost one basis point. in the fx market, nomura said expect better european data, inflows and falling cpi and more to boost euro dollar toward

$1.10 in short order. euro-dollar is now $1.07. the big move this morning is dollar-yen. there might be a policy review at the boj as early as next week. they might drop control pretty quickly. tom: amy is in the control room trying to keep track of the countdown clock and these are the two heavyweights in tokyo who put out a blistering note in the last 90 minutes and it's real simple. they look for the yield curve control. the major thrust of their note is let's get out front and get this fixed now before the next boj leadership. jonathan: will we see a test of this japanese government bond market? the 10 year is just short of 50 basis points today.

it's bumping up against it. tom: they are looking for $1.15. that's the mixture from a 150 down to a strong yen. this is the citigroup comment. it's a very negative report less damage now versus more damage later. they are looking at a measured path and that means we dollar, strong yen. jonathan: we were talking about a more sustainable policy by the boj. tom: the adjustment failed and

that's with the observation is. i said what makes a good central banker and they said someone who was good at lying. i won't tell you who said that. we're going to talk about yield curve control. i've got one hour and 57 minutes away from the cpi route work. this is what michael pond of barclays has to say about it. tom: this is a treat for global wall street on this incredibly in day. this is serious for global wall street.

they are definitive on the global sense of both faith and credit, debt and inflation. michael bond is with barclays and he is with us. which part of the linkage of inflation to your linkage of yield analysis matters this morning? >> it's all about wages. in the spring of last year, the fed started to lose control of inflation and it kept saying it's transitory. historically, the fed ran monetary policy based on a wage driven inflation approach and have gone back to that. the labor market almost matters more than two days inflation report but the fed is now focused on a sliver of cpi that is weight sensitive. get rid of core goods, get rid

of energy prices, get rid of anything not attached to wages which is still high in that will keep the fed going. tom: this is a global wall street lesson. michael pond, do you aggregate the information this morning or will you slice and dice it in your strategy forward for fixed income? >> absolutely, we will look at the components that give us information going forward. because of wags, there is likely to be a strong report and perhaps the next several months. what we know from incoming data on rents is that the rental market has almost cratered. they have basically shown zero inflation over the next few months.

we slice and dice the data in what gives you more information and that's what will matter. the fed thinks the forward information is all about wages. tom: we are biased by near city but the rest of the nation's what we are living on. tom: jonathan: a few months ago, chairman powell in private -- implied there is no chance for nuance here, is there now? >> you talk about what makes a good central bank and i think it's patience and consistency. the fed has been incredibly patient and consistent since the jackson hole speech which was very hawkish. the market want to hear a dovish pivot from the fed. the market looks at the most dovish piece of information. it dismissed the drop in the unemployment rate and focused on modestly softer earnings growth. in today's report, the market is

again looking for a dovish pivot from the fed but the fed is consistent here. we think that will be good for the markets. jonathan: is that a problem for chairman powell? >> we don't think so because the fed is a risk manager. a year from now come inflation is too high and the fed will see that. if we have a modest recession but inflation comes down, because the over did it, that will be a win for the fed. jonathan: tom: in your world, do you have a conviction to go along-short, long-duration and zero-coupon bonds? are you out in vegas betting on interest rate direction? >> not from a nominal perspective. you really have to break it down to the real inflation components. inflation price by the market is already low and not likely to go much lower unless things really

deteriorate on bonds. real yields are fairly elevated. on the front end, we have real yields at 2% which is restrictive policy and not just in the next couple of quarters, but even deep into next year. we think there is still more real yields to go down. nominal rallies might be challenged by already low inflation expectations. tom: where are we on the 10 year yield at the end of the year? where is it in 12 months? >> i think it could move down further particular if we get a recession as expected. i will not put a specific number on it but a deeper recession could bring us back inside 2%. jonathan: thank you, sir. wonderful to catch up with you. the median estimate in our

survey at the moment is headline in nation year-over-year which makes the front page. cpi year-over-year, the estimate is 6.5% from a previous month which read 7.5%. if we take out food and energy month over month, 0.3% is the estimate, 0.2 percent the previous month and michael mckee will break it all down for us. tom: people like me that don't obsess over the numbers is the adults like michael mckee are looking at month over month. i'm not comfortable with month over month but year-over-year. also three months and annualize it's of take 90 days of data and pretend it's a year long and that leads to interesting charts. jonathan: have these trends become entrenched? tom: you could say goods have

reverted to the vicinity of where they were in december, 2019. there is a little bit of an in services. we are deemphasizing hand signals because radio is complaining. they got i hate mail from anthony from sparta that was vicious. jonathan: i'm trying not to use my hands but i'm very expressive. tom: it's like you're landing airplanes on tv. i grew up like that. leave your hands here. jonathan: the first hand signal you learn as a child is that. tom: we used to quote gold at the king house in london. jonathan: why was that? tom: who the hell knows?

i remember the day that nixon took us off of the gold standard and there was a lot of yelling and screaming there. my mother had so many kruger rents. jonathan: my granddad used to have them as well. tom: her for grants -- kruger rents - krugerrands worked out a lot better. jonathan: the ceo of the china beige book is coming up and where are we with china in this reopening? how does this snap back in? tom: this is serious and there is a lot of notes about inflation already in china where there is a redline of 3% and

they are getting there fast. jonathan: does this disrupt the trends we are seeing in the u.s. cpi read or? -- report? tom: i believe they are interrelated. jonathan: 8:30 a.m. eastern time , we will get the inflation report. after that, you heal -- you will hear from the president of the united states. from new york, this is bloomberg. lisa: keeping you up-to-date with news from around the world with the first word. traders are betting that u.s. inflation is cooling and that will reduce pressure for

aggressive rate hikes from the federal reserve rate we will get the latest consumer price index at 8:30 a.m. new york time with a projected 5.7% increase would be well ahead the fed goal but there would be a report that shows moderation. u.s. and japan are taking steps to pose plans to just -- to strengthen defense operations in land and on sea and on space on the u.s. plans to reorganize its forces in japan so it can deter and respond better to increasing regional threats. china has not updated its daily covid report for three days. that's adding to global concerns that beijing is masking the true impact of the world's largest outbreak. the world health organization has renewed its call for more covid data from china. the corrupted file that led to the breakdown of a safety system that prompted flights to be grounded across the u.s.. the system that provides critical information to pilots

and the backup failed in almost 10,000 flights were delayed. t-mobile made by the budget wireless carrier backed by ryan reynolds. the second largest u.s. mobile service provider has been in talks with but no final decision has been made. 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 vernova, helping generate and move the energy that our world needs. ♪♪ welcome to a new era of energy.

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. >> the outlook was for last year for the global economy was weak. now i think the markets are signaling that the plunge and natural gas prices in europe suggests that your may not have

a recession after all. now with china abandoning the covid policy, and opening up, there is a perception that we make it a terrible wave of pandemic for a few months but then it should abate and china should open. the outlook for the global economy i think is improving. jonathan: cracks in the consensus and the outlook. it's getting more constructive about the outlook area tom: he's been way out front for the last six months. jonathan: he's not the only one. the chief strategist at evercore on tuesday announced quite a call on china gdp. >> we think there is a very good case to be made for china assets right now. our china strategist thinks we get to 6.2% gdp growth. jonathan: 6.2%?

that is phenomenal. tom: it is a phenomenal number and is what we do. speak to an expert. leland miller with the china beige book book and you look at leland miller and you say what's so special about him? he has a granularity on china like no one. he frames 6.2% gdp. what do you do when you hear six point 2% from competent people? how do you react to that? >> i think you could get some extremely high numbers of gdp next your but it's based on the idea that you are not just going to have a cyclical bounce back which is firms restarting investment after covid zero and consumers jumping back in temporarily and getting the pop off of 2022's low statistical basis but in addition to that,

you have to layer on stimulus. you are seeing headlines about stimulus but you have to expect them to be doing all of these things that once. it could happen but it's much too early to be guessing that with any type of clarity. tom: like the electrical grid from shanghai to the west, they put in a fiscal policy, can they diffuse that stimulus faster because of the power of the government? >> it depends on what kind. this is the question of 2023 and we just built a proprietary fiscal index to track the flows going into fiscal spending. what's happened in december is there pumping money in and nothing happened. the activity index fell off the cliff so just because you see a stimulus headline, doesn't mean it's being worked into the

economy. are we going to actually see these big headline numbers even some of the easing more broadly, will it translate more broadly? tom: how does it translate to the medical discussion the nation faces now? >> beijing is doing the best to pretend that covid zero will be a blip for a month or two and then they are on their way. to some degree, this will happen but the fact that they are knowledge in no debts and people think they will see one million debts, there is a cascading effect through the rest of the year. doesn't mean you won't see a cyclical bounce back and it doesn't mean chinese sh -- assets will rally for a while is not something you can dive into her dive out of. you also have the possibility that later on in the year, you have another problem with covid area there is a lot of potential risks that are getting

camouflaged by people's optimism over the fact that the middle of the year should look quite good. jonathan: the china reopening is not the china that shut down. it's a little bit more nationalistic. where will the demand show up? does it go abroad and do people travel like they did before? there are many countries preventing the chinese from traveling, how will this pan out? >> there's been this idea that just because chinese consumers haven't spent for a while, they will run around the world. chinese travelers used to spend a lot of money abroad. they are not buying a lot from abroad but i think even the travel part has to be moderated. people are seeing relatives domestically for the first time in three years. plane ticket prices are through the roof. there is a lot of guessing that people are doing in terms of skyrocketing travel coming back

and china will guide us to the next stage of global consumption. this has never been true so we need to be very cautious on assuming chinese consumers will do anything for the world. jonathan: i think we are trying to work at how much back data we have to look through in the near term and for how long which is what you are touching on. how quickly will this snap back and we will start to see the good stuff in the future? >> i think q1 will be a mess. the second corner is when you will see a reactivation of the economy. you're going off low 22 -- 2022 numbers so people could be pleased with the balance. this could be a head fake. maybe you see three or four quarters of growth but you were in the midst of a long-term structural slow down. for most of this year, people will talk about the cyclical uptick but after that, toward

the end of the year, we will start talking about the structural slow down which is going in the other direction. jonathan: one of the best, fantastic as always. you heard it there, trouble in the near term and then it snaps back in and strong growth for the rest of the year and then you have to deal with structural challenges that still exist in that economy. tom: there are political challenges at the margin. state owned enterprises and real estate is a wonderful discussion. i am speaking from a distance, the pseudo-fiscal impulse will be to bailout once again the commercial and residential, the apartment real estate, the city real estate. jonathan: i wonder when residential picks up again in china? the china that shut down is not the china that's reopening.

maybe they have more capacity to support the economy. maybe they will do something else. tom: in 10 or 20 years, we have become addicted to a 7% china gdp. are going just are they going through this process to reset? will they have only 4% gdp? i can see us in shanghai. jonathan: you want to go to shanghai? tom: yes, we want to get the pulse there. jonathan: you picked it out already. we can listen to some jazz at the hotel. jonathan: you can go. tom: i think the reopening of china is a surveillance special. , not a special, a we commitment. jonathan: you are telling us

earlier how expensive those flights cost. $34,000 business class. that's where we are right now. i saw that on mr. kirby's website. jonathan: is that a month away or a week away? tom: no, it's several months out and then it disappeared. jonathan: i will have a look at that. one hour and 35 minutes until the cpi report with futures unchanged on the s&p 500. 8:30 a.m. is when you get the cpi report and that president will speak after that. we will hear from a number of speakers. james bullard will be speaking later. tom: i'm interested in adam h arkin. they are all different and inflation. what happened to stagflation?

jonathan: it's not over yet. look at the forecast. i'm not sure how money people believe in this forecast. some people have u.s. gdp at zero. tom: malpass was lights out yesterday on the uncertainty about china. i would suggest the enthusiasm of the last week, spx will give me 4000 and this enthusiasm is flat out china opening and that's not in the world bank. jonathan: it's in the commodity price for sure. tom: in chicago, it's three point something. big moves. jonathan: huge numbers with futures unchanged on the s&p 500 and the inflation or or just around the corner. ♪

92% still active? seems high. seriously? it's just a bike. wait. they make a treadmill with an intuitive speed knob? yeah. want to try? 92% stick with it, so can you. rent a peloton bike or bike+. terms apply.

>> to a certain extent, these forecasts about recession are a bit outdated. >> the outlook for the world economy is improving. >> all central banks of the developed world are still hoping. >> what amount of damage have global central banks into the economy? >> for the end of 2023, risks are to the downside to the consensus. >> this perk surveillance --

this perk surveillance -- this is bloomberg surveillance. >> more inflation report just around the corner. good morning. co. go down to that report but also catching up with apollo with a big question, the key question this morning. can be fed and markets get inflation back down to 2% without a recession? >> is going to be good to get a base case for him before the 8:30 report. my problem is the idea the fed has an ability to guide inflation, as we heard earlier. he would suggest wages are what died inflation and maybe housing is a huge component and food huge component. i would suggest a large percentage of our listeners and viewers do not care about core.

they are living 6% inflation. social meshes from blue bring surveillance -- bloomberg surveillance, nobody cares. there is i'll six and a grocery store where i'm trying to get to friday. 6% inflation. jonathan: the price we would have to pay for a year of monetary policy tightening, plus still more to come. everything gets complicated by china reopening. that? >> they are talking about supply-side shocks off the pandemic. we are still in that dynamic and more of a china shadow than we usually are.

jonathan: futures just about positive, up by almost a 10th of 1% on the s&p 500. in the fx market, the euro-dollar not doing much. they have updated your call -- their call. some parity and now we are talking about $1.10, $1.16. lisa: -- tom: they put in red ink on their black-and-white publication. things have changed. as i said to one of our fans from western indiana, we need to go to london, where the shock is there and the nexus between frankfurt and washington. jonathan: speaking of red ink on the bloomberg, the estimate of

$.60. looking at these numbers, fourth-quarter outlook up 16% to 17% versus the fourth quarter 2019. there is a turnaround for you. the stock is up by 2% in the free market. tom: the more beleaguered american airlines and other high flyers, i'm looking at the charts coming into the pandemic it was on a trend downwards and it has only come up five dollars off of $10. a lot of airlines have recovery space to go to get back to the nirvana of autumn 2019. jonathan: decent start to the year for airline stocks. we will pick up on that later. wonderful to catch up with you. run me through what you enter the team are looking for. i asked this yesterday.

inflation is one thing. working out with the market will do with it is another. >> we have no choice but to follow what powell is focusing on. i think it is dangerous to cut it down into such small components. there is so much margin for error there, but we will be looking at that because of its readthrough to wage pressure. consensus says not quite 3%, but i have not seen anyone out there who is expecting 0.3% or above. if there's anything above 0.2%, that is going to be a correction. 0.2%, we are probably find -- fine. tom: do you have a trend in place for service sector disinflation? >> we are looking at the numbers.

services disinflation, we expect it to come through. we are anticipating that core cpi continues to come down over the next couple months. let's take china out of the store at the moment because that could change things, but core services as well as you start to see the economy moderating. we think inflation can easily come down to 4.5%. 4.5 percent beyond is more of a challenge. we can go through the paces and follow the market, but the real story starts around the second quarter of the year when we see if inflation can meaningfully push through that barrier. tom: how does china play into this? you have the idea of unleashing the dragon. china comes back. china improves. what does that do to investment allocation, institutional and

retail, in america? >> it depends on not just the short-term post reopening balance but how it is sustained and whether it can be sustained relates to whether they continue to improve stimulus and keep pushing that forward. none of that stuff goes away, so it starts to tone down some of the optimism. for the next six months, it is good news and the keep in a fishy area is almost southeast asia, key trade partners for china. we are looking at asia more. we are looking at korea, thailand, malaysia. those areas will benefit more and europe to some extent as long as the growth rate for china is sustained. jonathan: we had a guest on yesterday talking about rio.

rio has had a massive rally off the lows of last year. are there sustainable tailwinds behind that rally or is that a big bear market squeeze? >> when you look at the china story, you have to bring commodities into it. six months is great. beyond is more difficult to predict. when it comes to the commodity space, because of the uncertainty of the near term bring in geopolitics and supply pressures, so many dynamics can be disruptive for a near-term view that we take a long-term perspective. for that, we are still positive. anything in the near term is a bonus, but semi-price is a long-term story. jonathan: i think it was yesterday looking at rio. rio off the lows of october.

from the end of october, we have rallied almost 40%, unbelievable. tom: the place to look is australia. the opening of china means a pacific rim pop, as simple as that. what is great is their ability to move. when they move, they are a small section for us but we make jokes . globally, it is a big deal for a lot of the southern hemisphere. look at australia and go from sydney to perth. you have to go north to get to rio and broken hill properties. jonathan: why do you pronounce it like that? tom: my mother did. she would sit there and lecture us on properties by adelaide and all that and then you would go

up from perth to were other minds were. jonathan: have you ever been to perth? tom: no. i'll supposed to go to sydney and they go, go to singapore. jonathan: beautiful cities in australia. the caterpillar at an all-time high. tom: have you been to australia? jonathan: i have. tom: i would go to brisbane to see the veronica's. jonathan: we started in shanghai and go down to brisbane. i think that is our career. 20 minutes to go until the inflation report. futures look like this, just about positive by .1%, yields coming in by a couple basis points. tom: tom waits nailed it.

jonathan: you want to sing us out? you have 90 seconds left to go. people are tuning in this morning because it is going to be a super serious show. i got a message earlier. you will love this. there is too much optimism. tom: it is true. we do not editorialize here, but i am in you'll diamond -- i am in -- china is going to roll over and die. they had a parted congress in november on a calendar date. let's fix covid and off we go. jonathan: i do not have to make a call so i am not going to make a call. every time we thought we knew what was going to happen, something else happens. we have had more than 400 basis

points from the federal reserve. the ecb will keep going. you have the ramifications of that and then you layer on top china kicking back in. jonathan: -- tom: this is a bloomberg read moments ago. bloomberg reports that the three month libor, the benchmark you saw in 2008, we returned to that level. we are four point six, standard deviations on three months. that is a foundational statistic . jonathan: we will continue the conversation with david kelly coming up. >> keeping you up-to-date, i am lisa mateo. investors in the federal reserve will look closely at the u.s. consumer price index. the projected 5.7% increase

would be above the fed goal and help explain its intention of keeping higher interest rates for longer, but the year-over-year price growth would also show moderation. the cpi is due out at 8:30 new york time. the u.k. and european union are preparing to enter an intense phase of negotiations to end their dispute over brexit. talks are set to begin next week. the disagreement has to do with trade. both sides initially agreed to allow northern ireland to allow in custom -- remain in custom arrangements. president biden's efforts to quell a controversy over classified documents at -- in his private possession has become more difficult. aides have found a second set of papers, likely to fuel criticism from republicans even though they dismissed more serious accusations against former president trump. more than 7000 striking nurses at two new york city hospitals will return to work after reaching tentative deals.

union leaders say the workers will see pay raises and improve working conditions. the strike began monday morning after four months of contract negotiations fell through. subway is exploring a potential sale that would value the sandwich chain at more than $10 billion. sources say the process is in the early stages. subway is one of the largest quick service restaurant chains, with about 37,000 locations, but its rapid growth has been tapering off. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than lavrov -- and i'm bloomberg quicktake geo. this is bloomberg. this is ge aerospace, advancing flight for future generations.

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jonathan: david rosenberg on twitter -- take a listen to this. just as prices start to deflate, he is now targeting less than 30% of the cpi. david asked why and answered his own question. to tighten further into the steepest yield curve inversion since 1981. pretty punchy stuff. tom: when he was at merrill lynch, opinionated and worshiped. he would do and inflation report and on the right side of the

paper he would have the subsets of inflation. i will tell you 30, if not 40 subsets of inflation and he would slice them, which is what america represented by merrill lynch was living. jonathan: only a few months ago, chairman powell implied there wasfor nuance and now there is nuance every day. now it is nuance. we are stripping it all out. what do you want to do? tom: i'm going to try to reach down here. i'm going to undo this now. we are doing this year. am reordering will understand. i will put the surveillance cork in my mouth. jonathan: you bought corks? tom: and reordering shipped them to me.

jonathan: ok -- annmarie hordern shipped them to me. jonathan: ok. anything you are about to say seriously -- just take the futures of the s&p, up by about a 10th of 1%. inflation data one minute away. tom: let's cut to the chase on what they did right going back to the foundation of the nation. it is about passing laws. there is a primal scream out there about inflation. forget about all the surveillance mumbo-jumbo. inflation is 6%, and they are saying to congress, do something. what are they going to do? >> you will have house republicans introduced a bill about reining in inflation, something that will target the biden administration.

republicans continue to go after the of a club for the american rescue -- biden administration for the american rescue package because it sent checks to individuals, many of which were still collecting paychecks, and they said this fueled inflation, so there will be mom -- a number of measures on the house side. this is gridlock in washington, so it will not pass the senate. there are a number of issues republicans will do because they have the power in the house, but will not actually make it through congress. but i would agree with what you said in the prior hour, not that i think the administration has the data, but they think today's print will be in their favor and what they can show is inflation is coming down and they have a strong labor market with a 3.5% unemployment rate, a good sign for a president, but i imagine when the president speaks today he will also say that more needs

to be done when it comes to inflation because until everyday americans go out and do not have to think about the price of groceries, gasoline, which we have seen come down but really groceries and services, that is the only time they can claim victory. tom: we have a re-up of treasury secretary yellen a few days ago. what advice is he getting on inflation? annmarie: i think there are a lot of people in his ears. he has a wide variety of individuals he talks to, including larry summers. he has treasury secretary yellen . she plans to stay and biden has asked her to, especially as this year will have difficult legislation like the debt ceiling to get through a divided

congress. he also takes input from people he meets on the street in delaware, soccer moms when he is out and about on his weekends at home. he calls up ceo's like the head of walmart. he wants to get information on what consumers are facing from a wide variety of individuals, not just think tanks or individuals in the west wing. jonathan: i'm laughing because tom keene is bringing out a box of corks. tom: someone sent me a box of corks. jonathan: that is brutal. you mentioned secretary yellen. we were talking about this yesterday. is it a big factor that we have this debt ceiling debate coming up later this year and he wanted someone almost a political writing treasury, someone more focused on the economic side of

things and not interested in the politics in the way some people are? annmarie: secretary yellen does not like the politics. she is an academic. she was the fed chair. this is almost how she runs the treasury is how she was fed chair. she looks at the data. she is honest when she gives answers, which has gotten her into political trouble, but now it is going to be tough negotiations with congress to raise the debt ceiling, and this is something the ministration probably looks at her, who could be seen on both sides of the aisle, as an academic, someone taken seriously even if you do not agree with her politics sometimes or how she views the economy, they do have respect for her, so at this difficult year in terms of raising the debt ceiling and finding a budget somehow to keep the government running, she is the

safest pair of hands. jonathan: can't believe we are doing this all over again. tom: the trend is in place. goods have come back. we are going to plunge down 3%. we were just talking about a sub 2% yield. jonathan: potentially. tom: the fed is moving fast. where i take issues we forget with all our bowtie talk that this is killing people right now. the nurses i see striking out on 3rd avenue at one of america's number one hospitals are no different than the strikes in your united kingdom. people are getting hammered. jonathan: you mentioned japan

and i mentioned the survey. more than half of japanese households said their livelihood was not, the worst rate we have seen since 2010. tom: u.s., 6% inflation is painful given our dynamism. europe is a lower number, 4%. japan is way low. anything over 1.5% inflation, that crushes the people of japan. jonathan: not so long ago, this was the goal and japan. tom: absolutely. jonathan: it has happened. now what? tom: citigroup -- jonathan: ycc is going. tom: they will abolish why sisi -- ycc. jonathan: there is a news report suggesting there will be a rethink as soon as next week. tom: did i ever think and

inflation report will be as interesting as jobs day? jonathan: that has been the story for the last 18 months and will be for the next six. that is the challenge for this fed. what happens when unemployment starts climbing? people say we are on course for a soft landing. equity futures right now up a little more than .1%. this is bloomberg. ♪

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♪ jonathan: inflation data in america 60 minutes away. equity futures look like this, firm or by .1% and looking to build on gains over the previous two days. the fate of the market dictated by what happens in 60 minutes when we get inflation in the bond market. your 10 year yields lower by two basis points on a two year yield, just a little higher by have a basis point. i want to finish on copper.

this year, off the back of goldman, making the call that china reopening is going to deliver a big boom in this commodity market. we are down about .4% on the day, but that is quite a call and has to be factored into the conversation around the inflation story. if we get a softening, does china and its reopening disrupt that in the months ahead? tom: this is a massive move. this is copper vaulting higher. jonathan: there is a tight consensus for expectations later this morning. you have the headline stuff, but banks on wall street very focused on month over month and the super call. all forecasting something like a .3% increase in core inflation month over month. tom: our team has done a great

job preparing you for this important inflation report, on inflation linked data. torsten slok is with us. he has been on fire with blistering notes the last couple days. tell? -- to wax theoretical, as powell did, wages is what matters at barclays, to you. that is a phillips curve analysis. is it dated and to be forgotten? torsten: economic models will tell you we need to get inflation to go down, a higher unemployment rate. maybe inflation today is not driven by demand. maybe to a large degree it is driven by supply, so maybe we do

not need that much more demand destruction. maybe we just need time to sort out problems with supply chains and issues on the supply side, so there is an important link missing in the framework that i am using and the fed is using, which is saying there is a lot of focus on demand destruction being needed to get inflation to come down. so far, inflation peaked at 9.1 in june. we're looking at 6.5 today on headline inflation. if that is the case, we are trending lower without the unemployment rate going up. looks like a soft landing because we are not having that significant increase in the unemployment rate. tom: do we have an inertial force to get us where ed hyman says we are going, which is sub 3% inflation?

torsten: that is the key question. if we were the fed, we would say, we do not know. tom: we like to pretend we are the fed. torsten: why don't we just remain hawkish to go in that direction and as much as needed until we get down to 3% or 4%? jonathan: does china ruin all of this? torsten: the main issue is, it used to be the case that households in china used to be at home involuntarily. with the virus raging, a lot of households are staying at home voluntarily, which means commodity prices are not moving higher as they should have if the china reopening was going to be a big deal for commodities. the conclusion must be able be a more drawn out experience, where throughout this year we will probably get some lift in growth and inflation, but at this point

it is still the case even though it has been announced. if it was the case that we had a significant reopening, commodity prices would still be going up. jonathan: the chairman says we are not sufficiently restrictive at the federal reserve. do you think we are? torsten: that remains to be seen. there is a log debate about has the transmission mechanism of monetary policy shortened? it probably has because they also have forward guidance on the balance sheet, but we are not seeing anything outside the interest rate slowing down. those are the interest rate sensitive components but they only make 20% of gdp, which is hotels, restaurants, sporting events. tom: i cannot imagine the first

report you wrote -- he owns the high ground on flows. what is the flow war he out there that we do not see coming now -- worry out there that we do not see coming now? given price change in japan, china, there has to be not a rate story but a flow story that we do not see coming. what is it? torsten: there are policy things going on globally on yield curve control on what it means and if more is coming and what that might mean going forward for future policy. in europe, it has turned out they will likely have a recession but more recent data was not quite as bad as we had feared but europe still needs to go through and let's not forget the debt ceiling this summer. >> you think that is a legit point of study? >> one worry is the risk of

downgrades. i do not think that is likely, but we are seeing risks over there in terms of what that might mean tom: how do you respond to people micro analyzing what we are going to see? eggs are outrageously expensive. torsten: in terms of goods and services, it is not surprising goods are slowing down because china has been so we can we have not seen commodity prices go up. an important place to look in the cpi report is still services and rent and housing parts of the cpi because we are waiting for that to roll over. jay powell has said we should expect that to rollover, but services is the area most rigid in terms of it takes time before it starts coming down. the sooner it comes down, the

quicker the fed will turn from this hawkish stance. remember we spoke about the phillips curve. it does not take into account what is inside the cpi basket. some areas that are directly a function of wages are limited to only 25 percent, 30%, so in that sense we are not good at measuring what shadow costs are and what is actually going on. jonathan: is that messy and ridiculous? torsten: the fed and ecb just have to live with that and say we have to work with what we have. we all look and they look more than anyone else at other data for evidence of inflation coming down. it is coming down, still trending lower. it is the case that the level of inflation, which is what the fed focuses on -- the fed focuses on the level of inflation but we focus on the direction it is traveling.

the fed will say, do not do that because the level at 7.1 is still too high. tom: the problem i have is we have experience with high inflation, which usually -- it comes in with a vengeance. is that where we are now? torsten: this episode will turn out to be transitory, but the reason it is transitory is because the fed reacted, so that is like saying the patient survived because the patient got the right medication. we got the right medication from the fed and inflation is coming down. it will not be a prolonged period of high inflation. tom: he says we are super restrictive now. are we? torsten: the answer that

question -- we are definitely above that level today, about 2.5 or so, so in that sense we are in restricted territory. that means we should expect to see the fed begin to cut rates may be the third quarter but definitely in the fourth quarter going into next year because we are in restricted territory and needs to get back as much as their issues about how that is measured. jonathan: you are smiling. why? tom: i am absolutely -- jonathan: you hate this. tom: fascinated where we are. torsten slok is put in a position where he has to game out what is going to be solved. we are doing the algebra here. it is algebra thursday. the answer here is we have had r

minas g, which has been a gift for 15 years. is the gift over? torsten: i do not think it is over and that we will not have the rates go back to zero. when inflation is back, i think we will have a new regime where the level will not be zero anytime soon. it will be closer to around 2%, 2.5%. jonathan: you mentioned transitory. i do not want to let that slide. what is it about this moment that you think does not stick? a lot of people think we have moved into a higher inflation regime and have left behind the pre-pandemic years. torsten: the new york fed just published a post saying it is coming down faster so we are seeing inflation persistence improve quicker, but to your

point i think eventually these things will work out if the supply chains fix themselves and also if we are in more restrictive territory, which means demand was -- demand destruction has happened and will continue to get us back. i think the reason why it is transitory is because the fed wants it to be transitory. tom: at the espresso bar at dabo's, this guy just hold court. jonathan: you hold court somewhere else. tom: i am sure apollo is deemphasizing it. are you going to be there? torsten: are you? tom: we have not decided. that was a clinic that you just heard from torsten slok. jonathan: i have made the decision. tom: i told them i told them i'm not going alyssa can bring -- i am not going unless i can bring the dogs. and the photographers. jonathan: thanks for your

perspective. great notes recently. thanks for sending them across. torsten slok of apollo. inflation data 47 minutes away. ♪ >> keeping you up-to-date from news -- with news from around the world. traders are betting that u.s. inflation is cooling caught reducing pressure for aggressive rate hikes from the federal reserve. we will get the latest consumer price index at 8:30 new york time. the projected increase will be well above the fed goal, but the year-over-year price growth would also show moderation. the u.s. and japan are taking steps to counter the growing challenge posed by china and its ties with russia. they announced plans to strengthen defense cooperation on land, at sea, and in space. the u.s. plans to reorganize forces so it can respond better to increasing regional threats. bloomberg has learned a corrupted file led to the

breakdown of an air safety system that prompted flights to be grounded across the u.s.. the system that provides critical information to pilots and its backup failed. almost 10,000 flights were delayed. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo. this is bloomberg. ♪

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>> deflation of the dollar here is a good story for 2023 and beyond. in the short term, i would say dollars oversold here.

we are going to put a right shoulder in the dollar. i would be a seller of dollar strengthening. jonathan: chris joining us from study -- from strategic spirit we are counting down to inflation data at 8:30 eastern time, about 43 minutes away. yields come in about a basis point and monster en -- yen strength today. a local news report on the idea that japan may be backing away from a policy review or introducing a policy review for next week. tom: we visited 129 for a spot of green tea and now we come down. we have not tested those yen

strength we saw weeks ago. jonathan: now there is talk of backing away from yield control. here is a call from eric nelson wells fargo on the dollar. on the back of this reopening in china, we recommend buying aussie dollar, targeting a tactical gain of 4%. the dollar should soft and broadly over the next few weeks. tom: i am glad you put this up. this is important. a lot of different wall street types are looking at big figure moves. jonathan: tactical is the key word here. the rally we are seeing in base metals. tom: let's drive forward the conversation. torsten slok, really fancy.

jonathan: i do not think you have to agree with him to think he is great. tom: maybe sub 2% yield. we continue with eric nelson, macro strategist at wells fargo. what he brings is serious mathematical panache from wake forest and johns hopkins university. let's look on the right side of the equation, the uncertainty out there. what is our level of belief in the data this morning at 8:30? >> we have had soft cpi numbers the past two months, so to see a third one would give the fed comfort at the next meeting and perhaps go 25 basis points. the bigger question is the employment cost index. powell has been focused on wages

, so i think wages will have to come in on the soft side or on consensus for the fed to become triple going 25 basis points, so abstracting from today's reaction, i do think the dollar can continue to soft and over the next month or so. jonathan: maybe -- tom: maybe there is a dollar dynamic to it. wages and benefits. wells fargo has a real knowledge base on this with your countrywide heritage. what is the dynamic of pure wages and benefits now? erik: the number the fed will be focused on is the average wage number. the key with the eci numbers is it is composition adjusted, something we are looking at within jobs.

that is why the fed likes to focus on it. we have seen a little softness from q2 to q3. did that continue or did we see an acceleration? a re-acceleration would spook the fed given what they are focused on here, the low unemployment rate and high level of vacancies. jonathan: your dollar call is a tactical call. you seem to be cautious about the durability of this. can you walk me through what you do not think the dollar weakness will hold? erik: so much of it is a function of the incredible policy tightening we have had over the last year. still very significant cost-of-living squeeze in places like europe and the u.k.. there has been a little more optimism than i would expect around the sort of durability of the economic recovery here and the fact that maybe we can put this energy shock -- interest

rates shock behind us. i am not so convinced, so i worry about global growth over the next three to six months and beyond, about some of the persistent structural issues in china rearing their head again. we need to see more evidence that the global economy can withstand this energy shock before i am convinced the dollar is heading lower on a more sustainable basis. jonathan: this line you have, china reopening could be less supportive over time. run me through the thinking. erik: this is a capital flow story. we have seen optimism around china reopening, looking at the golden dragon indices rallying a lot. that is great in the short-term, but the bigger issue is are we going to see a longer-term return of capital to china after what happened last year? i am not convinced. more fundamentally, looking at a lot more towards outflows, more

goods imports and fewer goods exports as the global economy rolls over, so to me that is a negative cocktail for the chinese currency. tom: on dollar dynamics, there are a lot of bets being played now. in foreign-exchange, is it a big figure, 2023? can you make a legitimate bet? erik: you have to watch dollar-yen. you can certainly see several big figures in a short time. i worry the market is too excited about a successive set of moves, so for them to come out and change policy and then say we are done for a while and do another move, they risk destabilizing the market, and i do not think they want to do

that. i think there is actually upside risk if the boj disappoints. >> thank. big call there on a variety of markets. maybe they disappoint. there is speculation this moving -- this morning and it is a big move relative to what is happening elsewhere. if you look at the dollar, it is a move. off the back of this local news report, maybe we get this policy review next week. tom: the moving averages exactly 108 to 150. we have only come down a third of the way, so they have room to get back to normal. i'm just saying technically that is the breakpoint. jonathan: normal is an

interesting word. the amount of distortion we have had -- it has been years of this now. we have this new threshold from the boj in the last month or so, 50 basis points. we are right up against it at the moment. people have expressed that yield curve control view. they are doing it through foreign-exchange. tom: i agree that they are using the biggest playground to play in because of the liquidity and visibility and are lost within not only foreign-exchange but in others as well. that is what you do. jonathan: what has he said now? tom: i have not read it yet. the whisper is it will be soft, which may help explain the rally

of late. that is just a little blurb. jonathan: the market has been looking for a soft print in this report. that report is about 34 minutes away. your headline number year-over-year, cpi. we are looking for 6.5%, the median estimate. a lot of people on wall street are focused on the month over month figure to try to establish a trend. estimates, 0.3%. tom: he had his morning workout. jonathan: power core. tom: he talks to you more than me. jonathan: because i am a friendly guy. you are bristly sometimes. tom: he sent me the corks. jonathan: jp morgan asset

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>> the fed is really focused on some of the stickier measures of inflation. >> they try not to fall way behind the inflation curve and they are trying to make up for

that mistake. >> prospects are improving but central banks tightening. >> between inflation and the u.s. labor market, it's always going to >> be in place. >>we are moving out of the inflation regime and >> into something new. >>this is bloomberg surveillance with tom keene, jon ferro, and lisa abramowicz. >> the most important 30 minutes here in the inflation report of the united states of america. much to talk about. vincent reinhart will be with us in this hour to slice and dice this report. why is cpi so important? jonathan: it has been for the last 18 months. to date respecting the headlines a lot of people focused on month over month. the number drops in 29 minutes and will this set us up for another step don't over the

federal reserve. tom: let me go to that now. february 1, is it about march 22 part even the may 3? jonathan: i don't think they can make decisions just yet. tom: strongly agree. jonathan: susan collins was speaking to the new york times just yesterday. might lean towards 50. my things to be -- might nice to see some division. tom: i want to for the market into this. we spent a lot of time on japan. spx prints 4000 on futures. up 11. they were there in the middle of december but this s&p 4000 is a different 4000 than 30 days ago. jonathan: the consensus was rep. tom: i can't remember.

jonathan: january 12, and we are already talking about cracks in that consensus. when many of these outlooks were written, when all these people get around a table and start talking about the year ahead we all said the big asterisk there was china reopening. another version china reopening. we try to work out what this all means. does it upset the disinflationar y goods trend? tom: i will go with that being the elephant in the room. we have had, i would emphasize it is more than just china and what i would look at his corporations and people adjusting. we are adjusting at light speed. jonathan: the market adjusting too. to see european banks.

i think it's a huge move so not just then, the minuses well. em equities, high yield spreads people talking about recession in america. tom: brent crude $84 a barrel. can you imagine brent crude at 80.90? review copper, i think you do a good job of that. lme is open. jonathan: 39 k in the last 24 hours. this year, potentially. taking back and which is why i keep saying if you got this outlook for disinflation, i get it. but before i get upset about what is going to take place in china that is the unknown. tom: i'm going to start with the financial conditions index still elevated a positive number, not

what chairman powell wants. jonathan: all the speculation last time around there was a leak, still no real clarity to what happened. do you remember that? the market started to move on it before it even dropped? let's hope we get none of that. that got some scrutiny. there is no question that we saw that as well. foreign exchange has been front and center this morning. yen is somewhat stabilized here. jonathan: building strength. let me take a snapshot on the screen on the terminal which is w crs if anyone is interested. everything else is pretty snoozing. tom: michael mckee set to join us here in a bit but we start strong with david kelly, chief

global strategist. he brings an old world tinge to the new world this morning. is it global disinflation, david kelly? >> yes, i think it is. even with china reopening, we have softness in the u.s. economy. we have had time we had this spike in prices in the middle of last year. we have seen increased distribution produced consumption and even though we seem an increase in growth later on this year in the world i think that is giving suppliers time to get commodities to market created i don't expect much of an inflationary impulse out of a chinese reopening. inflation coming done is the big story over the course of this year. jonathan: what are the chances that the fed is done after february? >> i don't think they are.

i think they need to stop, this is a war they have one and they are in danger of tipping the economy into recession. i wish they would be done but i think the debate is 25 basis points on february 1. if we get an act consensus number today i think that locks in 25 basis points. i think the majority of the fed are thinking about this, they want to go 25 in february, 25 in march, 25 on may 3 and hold it through the end of the year. that is what they want to do. the question is, is the economy strong enough? i think we will see that. jonathan: what are we learning so far about that, david? is it still to soon? >> it is. what we know for sure is the economy is going to be growing slowly. we are at full employment. and very little demographic

growth. i think it's a big problem because what's happening is consumers are living beyond their means because of government handouts and they sort of try to normalize it. if they stop the borrowing as much is going to slow consumer spending. high dollar, there he week residential construction and is going to set the economy. we could so avoid a recession. we are on the edge of something here but it is more like a swamp. tom: this is well said. david kelly, with all the ambiguities that we have, the idea that yes growth may come down yes wage growth may come down but if we disinflation, real incomes could be stable are actually real incomes and inflation-adjusted incomes could increase. is that feasible?

jonathan: yes, it is feasible. at least in terms of wage income but you still don't have, you still have the hangover of government transfers going away and with the personal saving rate of 2.4% right now, remember it was 7% in the second half of the last decade. you can have income growing. even with some income gains we are going to have week consumption. tom: what is your call on housing? homeownership, ocr, etc.? >> i think one of the many nefarious effects of bonanza in terms of government stimulus is it allowed landlords to increase rent so people had temporarily cash to pay them. i think that's already pushing rent down. i think it will push it down further. i think the government data is very lagged on this in terms of

inflation. i think rent will certainly come down. i think single-family home building is going to be slow. multi-families continue to be strong and the housing industry, it was looming so even it is a slump it is not having the same impact on the economy. jonathan: david kelly, thank you so much. we are about 20 minutes away from cpi data. a bit of a lift on equity features. up by a third of 1%. yield looks a little something like this on the bond market, up by three basis points. looking at the 10 year, just a little lower to about 350. tom: we haven't talk about the real yield. as i said the ambiguities which is my economic talk. the bottom line, it's a jungle.

20 minutes away, it's a jungle. jonathan: third year of pandemic economics. why would this year be any different? tom: alexander harris, a real benchmark for the time of tim geithner and secretary paulson. back to 2007, this is a row moment for global wall street. it is supposed to reflect bank funding costs as reserves or falling banks are paying up for funding and i take what she is saying there towards tomorrow after the inflationary report. it will be fascinating. jonathan: on to next week, i think tuesday do you know who is coming up in the next hour? looking forward to catching up with her. tom: on radio or on tv?

jonathan: on tv. coming up on this program after the inflation data we will catch up with vincent reinhart. up next bloomberg's very on joining us in the studio. he's going to drop by the studio. in the playbook on what to look for in the cpi print. tom: will kennedy is like the three stooges, cotton, cotton, cotton. you have no idea what i'm talking about. jonathan: just like you to keep going. tom: moe, larry, curly. jonathan: you want to keep doing that voice? tom: i can do this, are you ready? jonathan: are you done? [laughter]

♪ >> keeping you up-to-date with news from around the world with the first word on lisa mateo. sam bankman-fried says don't claim him for the collapse of his ftx crypto exchange in a blog post bank and freed blamed crushing markets and an attack from a rifle. he wrote i didn't still funds and i certainly didn't stash billions away. bankman-fried has pled not guilty to fraud. investors on the federal reserve will be looking closely at today's u.s. consumer price index. an increase will be well above the fed's goal. the year-over-year price growth would also show moderation. the cpi is out in less than 20 minutes from now. as become more difficult. aides have found a second set of

papers, that is likely to fuel criticism from republicans even though they dismissed more serious accusations against former president trump. american airlines posted profit and revenue that the estimates. the carrier was held by robust travel demand. americans support large claims that the industry will recover from the pandemic. global news 24 hours a day on air and on bloomgerg quicktake. powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo this is bloomberg.

>> we have this combination of slump in the global economy the worst case scenario didn't happen. natural gas prices came down because it was warmer, energy

prices came down. so that lifted some of the growth prospects there. the combination, growth prospects improving but central banks tightening to keep inflation down. jonathan: kathy jones. equity futures look like this on the s&p. up one third of 1%. tom: let's get started here at eight: 16 am here with the inflation report coming up. maybe is it commodities inflation or is copper is just a statement on china reopening? to me that overwhelms any industrial inflation. >> we went into the start of the year with copper looking quite tight, stockpiles very low levels and people thinking about

china reopening investment, we got some news this week they are going to invest many billions in electricity grids and that is a huge demand driver for compost. people see this as a very strong story and of course with copper feeds directly into the economy. tom: does that float over to other things? like aluminum? >> aluminum is driven by, you know, things like investment and electricity. if they are going to boost the economy with spending i think a lot of different metals look tight. it drives huge demand for copper, nickel, new metals like lithium. jonathan: so we drained the spr

aggressively last year. we are told they are going to try and refill it and china starts to reopen and i wonder if we get back to 70. >> i didn't think a lot of people receiving 70. people are feeling quite bullish about oil right now. jonathan: triple digits, yeah. >> always bullish book called 140 last week. there are a lot of optimistic fees about oil, ultimately, it will depend on how far the economy slows here. 70 really isn't the vibe right now. jonathan: could you guide us, at least give us an understanding of how much the chinese built stockpiles over the last year? did you see any difference when they were on lockdown? >> i think they were not buying crude at the pace you expect.

it's a very opaque thing. they clearly bought a lot of oil in the early stages of the pandemic. when we had look -- record low prices. the stockpiles are probably pretty full. yes, there was a dampening in demand to some extent. i think it's reasonable to expect demand gains. tom: when you built this, our hydrocarbon team you encouraged to go downstream to distillates, refining, all that. what is this story, what is the for refinery story could we revisit 100 a barrel? >> refining remains tight. we came out of the pandemic what a less refining capacity.

and that is being added in the middle east. that is being added in china but that means people are moving oil all the way to asia to get refined. and consume to some extent and on top of that you have russian sanctions which are just accentuating those trends. jonathan: this is not the year many people anticipated just a month or so ago. en crude 83.80. we are about 10 minutes away from the cpi report it is just around the corner. it gets real high katie drops by the studio. >> speaking of the way things changed, you never see me on cpi days until the last few years. jonathan: up our core as you say. >> which is not forecast but people expected to continue to go down because the indicators

suggest that rents are falling. you take housing out of the rest of core, hopefully, it is falling. interesting thing is cpi on a headline basis is expected to post its first negative or month rather since may of 2002 because energy prices have gone down. we are expecting a 10th of a percent drop there. the only thing to keep in mind, you can see it on radio obviously, but in august there was a forecast for a -1/10 percent and it did not happen. inflation started to go back up again so there is that risk. maybe not two-sided for the markets but it is there. jonathan: people get frustrated, we start taking out all the stuff that is important for them, food, energy, shelter.

why is it useful? >> it is useful for analysis because they are trying to figure out if inflation is going to come back or keep going down. they are looking at the individual components to see what is happening. the problem is, inflation, especially the court has been pushed by the way the bureau of labor statistics calculates the housing component which is rent and they ask people if you were to write your house, what would it rent for today and that is how they figure out what housing prices are. you don't buy a house every day and people don't sign rental agreements every day so it takes a long time for data to get in and out of the report. then there are people like zillow and apartments.com that show it going down. tom: they don't use actual rental contract statistics or homeownership statistics. they ask you what if you did this?

is that how they do it? >> these rental statistics for the rental part but they use them on an aggregate basis. so if you signed your lease a year ago, uses still in their and that increase is still in there. for homeowners, that is the way they do it. they ask people what they think their house with rent for. the idea, this really came about during the great inflation of the 1970's, 80's because mortgage costs were so high. they wanted to take mortgages out of the calculation. tom: elna, they don't do it this way. jonathan: i don't know if they do it that way in the u.k.. i hope they don't but i don't know for sure. when people find this out everybody scratched their heads. tom: do you trust the statistics that they are guessing? >> you kind of have to. tom: there is no alternative.

>> they have been doing it for so long i assume they have spent it in a -- enough. most of these numbers are supposed to have a confidence level of 90%. jonathan: i see the leak inadvertently, if there was a leak. >> we need to pull bloomberg charts. in the last minute before the last cpi report, trading was three times what it was. right before the normal cpi report for the last two years. so somebody either knew something or thought they knew something. tom: it was grandma's kids. >> maybe that's why she's not here. jonathan: this is a problem? >> the bureau of labor statistics indicated there was no information getting out so how did this happen? we don't know. jonathan: when did the

administration find out about this number? >> council of economic advisers gets it the night before. they can share it with the president, which often they do. you don't want to be the one bringing bad news. other than that, it should not get out. jonathan: the president speaks at 10:00 a.m. eastern time. this is cool, you have to stick with us. the inflation data is about four minutes away. 10 year, 3.4 949. your inflation report, up next. ♪

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jonathan: 20 seconds away from the inflation data. your market with a bit of a pop higher. in the bond market, about two basis points into the print on a 10 year town about four or five basis points. just one away we flee back done again with your inflation report. let's get to mike mckee. >> it looks like we are bang on in terms of the forecast with numbers coming with the headline month over month, down a 10th of a percent as forecast.

core up 3/10 of a percent as forecast and annual rate 6.5%. 7.5% for the cpi. doing the calculation here to see if i can get the housing, haven't got it yet but we will get it for you as soon as we can. the jay powell number, that everybody is looking for. taking a look at the percent changes. if it looks like food was up 3/10 which is a bit of a surprise. it's down from 5/10 the month before but there was a thought that might go down even further. energy down 4.5%. they went down 9.4% in the month of december. if you were driving, you noticed that. natural gas was up 3/10 which is kind of interesting. that is opposite of what we have been seeing.

used cars down 2.5%. apparel prices were up half of a percent which is a bit surprising and the housing numbers in terms of shelter, up 8/10 of a percent which is to tenths higher than it was the month of november. that is an issue for the fed. we are going to have to wait just a second to try to get the updated math done here. tom: oil mckee does the updated math. jonathan: i can tell you how the market is responding responding as if it was looking for a little bit of a surprise, it didn't get one. 22 minutes into this. five basis points on a two year, to about four .27 on a 10 year. we did see briefly going into the print, euro-dollar looking

at 1.08 negative on the data. tom: there was a flight a little bit across equities, bonds, commodities what i call benign statistic and we didn't get gloom but we got spot on statistics. we haven't seen the revisions yet. i also note beneath the radar jobless claims are stunning two weeks in a row. it is important as inflation, this is a low number. fully employed america, he would never say that. but there it is. >> i don't know what counts as fully employed. 205,000 for an initial jobless claims after 206 last week. but these are still holiday adjustments. we are trying to take it with a grain of salt. tom: do you have the key powell

statistics? >> we don't have the accurate one, the one that i want to use it. but we do have the calculation that the bls makes of less food, shelter, and energy. it was down on the month by a tent of a percent. it looks like zero change still going down without housing. the difference is the bls number includes lodging away from home, including hotels and things like that. most economists think that jay powell is not talking about that he is talking about rent in home prices. no reason to think they wouldn't. most of them have been saying we want to get to 5% but they haven't said we need to go as fast as we did before. jonathan: just a little bit of a pat on the back, tom. this number, mike mckee, thank

you. equities down just a tenth of 1%. fields are higher. not a major move. euro-dollar punching back down towards 1.08. .08 at the moment. if you are just tuning it headline you're over years cpi drops to 6.5 from 7.1. a lot of people very focused on month over month. 0.3, estimates on 0.3. tom: might jump in here as he gets more information on the key ratios. long ago and far away we used to worry about what chairman greenspan was carrying into the fed meetings or into the inflation report. mr. rinehart is an expert at that, vincent reinhart and let

all of our research during the greenspan years. perfect to speak to you this morning thank you for joining. this microanalysis of data post-pandemic, have you ever seen anything like it? >> you mentioned alan greenspan and he loved getting into the details of the data. the fact is the federal reserve building is pretty big and it is stopped for of economists. they look into the details of all these reports. i think the fed, chair powell has been extremely transparent about a very specific mechanism about inflation. the super court, the powells power core, really getting down into a third level of detail. tom: i want to make clear, we

have to continue to look at the markets. we are green on the screen with april a real plunge down. we come right back. jonathan: interesting to see the fx moves as well. i think that's what you were looking for. tom: yes, i missed that. stronger yen there and the euro-dollar 1.08. mike mckee dives deeper into the cpi report. vince reinhart, is this inflation completely pandemic induced or would you -- do we have issues going back? >> i think the answer is why is jay powell going into the details? because it's the mechanics of inflation that have been worried . inflation is embedded in the persistent part of the basket

that households consume. services, less shelter, jay powell keeps mentioning it. it shows up in all the speeches in some sense, i guess we have an inflationary report exactly as we expected. we also got a reminder that the labor market is running pretty hot. from the fed's perspective, aggregate demand has momentum. that is putting pressure on resources. that will put pressure on wages. maybe not this month on prices and wages but the mechanics are there, the mechanism that you worry about is there. tom: looking at the launch, we will continue with vincent reinhart looking at the micro short-term as michael mckee, you are diving into the pages of data. what do you see? >> looking at the core services,

as i mentioned you take out the owners equivalent rent and rent of shelter and it is up by 25 basis points. which is a little higher than the bls number we gave earlier. rent of shelter rose 8/10 which is more than last month. owners equivalent rent up 8/10. a tick higher than last month. we are still seeing the impact of higher home prices in the cpi report which is what jay powell is trying to take out so they can get a cleaner read on where core inflation is. jonathan: a day without a doubt, equity features just about unchanged. the model -- bond market ahead of the curve again.

down to 4.17. two-year keeps on rallying. spreads about 66 basis points. the fx market, here is the move for you dolly in briefly breaking through 130. that was a 2% move. it is now a 1.7% move. before and after the print the euro-dollar 1.08. tom: i also look at mexico, six point 7375 strong. vincent reinhart, thrilled you can join this morning. is there an underlying theory at the fed or are they literally making it up as they go? are they flying blind? >> they are doing the best they can't and it's actually pretty conventional. inflation has a number of parts

to it. john williams talks about the inflation onion. we have got the good news on the outer shells, commodity prices, oil prices. next show goods prices are doing better because supply chains have mended, market economies work. they are worried about the core. they are worried about the inertial part of inflation which gets embedded into contracts that are written at different times. it is a slow slog in which inflation has built and they are worried it's going to take a while to come down. so, yes, i think markets got what they expected even though they were hoping for even better news. don't try to get between a rally and reality. reality is looking at the

details and the details are supportive of two of the three planks of the story that they rely on. there is momentum, slack, maybe not so much right now but the other two things, it's the reason you worry about future races -- prices. jonathan: equities down about a tenth of a percent. putting a little more pressure on the u.s. dollar. coming up in the next hour, some of these ms. and what it means for the fed. next up for this market earnings tomorrow morning. tom: it matters. mike wilson nailed this at morgan stanley. this time it really matters. jonathan: mike mckee is going to join us. i will see you in about 20

minutes. tom, that was great. tom: a lot of people message me this morning wanting to know what was in the tank a little earlier. jonathan: from new york, this is bloomberg. >> keeping you up-to-date with news from around the world with the first word. i'm lisa mateo. ukraine fierce fighting is raging in a town ukrainian military for officials say russian attempt to capture solid are are failing. it is located from the -- a strategic city. the u.s. and japan are taking steps to counter the growing challenge posed by china and its ties with russia. they announced plans to strengthen defense cooperation on land, sea, space. they want to reorganize sources to deter and respond better to increasing regional threats.

more than 7000 striking nurses it to new york city hospitals were returned to work today after reaching a tentative deal. union leaders say workers will see pay raises and improved working conditions. the strike began monday morning after performance of contract negotiations fell through. global news 24 hours a day on air and on bloomgerg quicktake. powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo this is , bloomberg.

tom: "bloomberg surveillance", an eventful morning to say the least. lisa on assignment. ferro getting ready for the 9:00

show. michael mckee is with us. one of the people, i really listen to mr. harker of philadelphia. >> pat harker giving it economic outlook this morning up in philadelphia. this was before the cpi came out but he said he sees signs of inflation cooling and he thinks the 25 basis point move is head-on. he is already in that camp in the numbers come out as expected with inflation continuing to fall so no reason to think he would go back on that. he also says he does not expect a recession but i don't think you would ever get a fed official to say we are going to have a procession. tom: 1% gdp is not in the zygote right now. >> it's starting to come up a little bit and you notice some people talking about the soft

landing possibility because the data has come in strong than expected for the most part. the fed forecast half a percent growth this year. tom: an adult like you, are you looking to february 1 or are you already cheating and going out to what i believe is march 22? >> i think we go out to march the major question for the markets going forward. you have harker at 25 basis and we heard from susan collins yesterday, 25 basis points. i think you are looking at a fed that is going to come to a lower rate increase and the question is do they go beyond that? do they continue to raise rates and do they continue the 25 basis point move? that is the market for the markets as we collect data between now and march. tom: much more from mr. mickey through the morning as he dives into the pace of inflation. we are going to look at the

screen now. important statistic on s&p the printed 4000 earlier. a repeat performance with dana till sees chief executive officer. i have to go to the gossip of the moment. i'm going to say this with respect, a guy that took louis vuitton and figured out how to do luxury fashion. how do you address one of the most grizzled veterans of the street when it is about relationships? if it's lbm h with his daughter coming to run do your is that a plus or a minus? >> these are not new people going into those business lines. she has been involved in dior. you have to see the succession planning but look at the depth,

the talent underneath her. what they have with 75 brands, they have the talent to move everyone up the line and that is what they do. tom: they have a lot of convexity. you predicted this with your team. can you acquire shares this morning in these heritage luxury brands? >> you can because the next develop will be the reopening in china. we already heard from others. look at what neiman marcus said about the strength of the holiday season. you are seeing the product innovation driving demand. i think it's going to be a good season but keep in mind we are still having consumers in all areas with the volatility of the market. it's been a step down and terms of what the rate of growth is compared to last year and even any 2021. tom: one more question, can you overweight luxury now as the

market is overweighted? >> i don't think the market is overweighted yet? i think there is more opportunity when the holiday sales come in because also the ability to drive strength out of china. tom: particularly when you look at china, what is the single best buy right now? >> tapestry and the domestic and the other one, ralph lauren. ralph lauren has a significant opportunity. tom: you know how much i hate this. this is coach, right? >> coach, stuart reisman, and kate spade. updating the brands, capturing -- tom: is that where we are going? where the brands come in and get famous celebrities and artists? >> i don't know about that. collaborations drive demand and they go viral on social media everyone sees them and there you

go. tom: does social media helped me cease move forward or the big boxes? >> we just had a dinner with nieces the other night, the personalization that is being allocated to merchandising is really helping them navigate a consumer environment that is a bit more challenging for the income level. tom: how do they manage expansion -- expenses? >> what about the bed dead -- bed bath and beyond stores that may come into play. the off-price is what those boxes, those are good boxes any great locations. tom: for the same concept? >> for macy's itsy different concept. but see what develops with the bed, bath & beyond locations. tom: list be constructive. why did they fill? what is the best practice forward for retail not to do a

bed, bath & beyond? >> you need printed merchandise not just private label brands and also you need to be able to continue to innovate and home goods out there taking share and you didn't play up what made bed, bath & beyond so special go in there and by more than you originally expected. tom: watching carefully. less curve inversion then what we saw of the cpi report. i have to rub up with the guy who is iconic, ralph, does he have nepotism in play? does he have a succession plan? he's a bit ancient. >> look at the team you have there now. they are taking the brand to the next level, modernizing it, it is showing up in the tom: numbers and consumers are reacting. tom:single best buy across like

your team? >> we have a bunch of names. tom: amazon? >> joe likes amazon. but let's look at what some of these off prices are doing. i would say abercrombie & fitch, ralph lauren. tom: did you know that mike mckee was almost a >> model years ago? >>it's different today than it was then. tom: everyone knows this brand. what's the pixie dust? >> the brand has aged up, it is better quality. if it's not the teens. and hollister is showing improvement in their assortment. tom: thank you so much. we are going to agent now and continue with mckee. tell me about the ageless comments and what you see in this historic inflation report. >> pat harker is joining a crowd

that says 25 basis points. 1/10 drop on a month over month basis. this is the headline number to 6.5%. on the path to where the fed wanted to be, interesting but here with dana. i'm looking at apparel costs. everybody thought maybe we would see it discount on that but they are up half a percent because men's close went up. almost all of women's close fell -- women's clothes fell. >> a company i spoke with over the last three days men's is showing improvement in all the retailers, inventory levels are coming down faster than expected. that's going to be a good thing. >> they told tom he needs a new suit. >> a bowtie. tom: this bowtie is over 20 years old. >> that's why. tom: that's the problem.

to wrap this up, dana, i'm so sorry. mike, are we going to have the same inflation frenzy 30 days from now? >> sure. it's all about inflation for the fed and they are going to keep going or hold until they are convinced that inflation is going down to 2%. tom: john emails in from manhattan and said asked dana about when tiffany opens from a couple months. >> second half of 2023. restaurant in the business. it's going to make 57th look very exciting. tom: are you kidding me? the iron rails are nuts. >> take the price up it will create demand. tom: economic report, please stay with us. markets all over the place. futures up 20, good morning.

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jonathon: live from new york city, good morning. yields dropped, stocks pop, inflation data showing some signs of cooling. equity futures up 0.7%. the countdown to the open starts right now. announcer: everything you need to get set for the start of u.s. trading. this is bloomberg "the open," with jonathan ferro. ♪ jonathon: live from new york, we begin with the big issue. no fireworks year. inflation data in america cooling once again, putting even more pressure on the