>> i think the markets have been this pricing the fed for a while now. >> how high does the fed need to go? the confidence it is instilling in the investors and the public. >> things are improving on the round the world. >> may nothing happens. that is my that at this point. >> this is bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. jonathan: a really programming notice. don't forget, get it. tom: how about the acquisition of the roses, what time is that?

jonathan: that's not happening. lisa: that's it. jonathan: the roses are on sale. good morning this is bloomberg surveillance on tv and radio. equity futures up to tenths of 1%. cpi just around the corner. tom: i really want to make this clear and i'm going to go to david rosenberg. rosenberg used to put down page three or page four of his must read, all the partitions of cpi, they summed the numbers they were going to talk about but the adults, at 8:30 before ken rogoff they are going to look at the partitions to try to talk about the vector of the topline number. jonathan: last week was the worst week of the year on the

s&p 500. then we took it all back. lisa: there is a melt up kind of feel and even the fund manager survey that just came out so speed are more neutral or less overly attached but are more overweight than they are historically. a lot of people still by what this market is selling. tom: to me there is a negative sentiment out there. there seems to be, not a froth but not a toxic brew. there is just an of optimism. jonathan: if you read michael harness, it's no longer the u.s. dollar that's been replaced long investment grade credit. tom: the strategist we had the other day was phenomenal on this. everybody is on board the international play. jonathan: let's pick up on the

price action now. a lift yesterday. a lift of more than 1% wiping out the losses of last week. 3.6864, two year, 4.55. the new height of the year. a couple of fridays ago we had 40 basis point plus move. tom: 82 basis points, -82 basis points on the vanilla spread. a grinds but we get a larger conversion and i'm hearing from you who have been right on that that we have further to go. jonathan: a real turnaround over the last couple of weeks. lisa: let's see if we builds on that for the month of january. tom really was laying this out. the underlying components are going to be important to dissect. we are expecting an increase. the month over month is going to

be more important than the year over year. what i'm looking for is when you strip out goods, when you strip out shelter, what do you see? do you see surface is picking up? also curious about the used car price aspect. today we will get the response from a host of fed speakers including tom barkan who is joining you at 9:30 a.m. on bloomberg television. i'm curious to hear how you tease out what the reaction function is. it's going to be a fantastic discussion. lori logan speaking at 11:00 and new york fed president john williams 2:00 p.m. is there a growing consensus? and president biden speaking in washington discussing the chips act. with respect to the ira,

especially in light of some news to others how does he give a nod to the european allies and idea that it is drawing competition to the u.s. and i do think that's going to become a growing tension throughout the gear. jonathan: can we deal with the and more announcement? lisa: it's probably a given and if you want to go there, could be potentially a nod at a 2024 nod. this is sort of the greatest hits of his administration. jonathan: did you see the latest reporting from the team in washington? is the top economic advisor -- tom: why are they teasing this out? i don't understand with the white house is thinking on this. she is coming over from bed, everyone has talked about its

big shoes to fill but i don't get why this is trauma. jonathan: the timing is interesting. tom: i will go back to one theory, not my theory that they are planning her up to make a replacement. lisa: the fact that cpi is coming out, maybe that is the hold up. jonathan: possibly. we talk about it. we had a big move over von feels. christine joins us right now i'm not going to bury the lead or 20 on a u.s. 10 year is what were looking for. what gets us there? >> i think for us to come sound but looking towards the end of the year if we don't forecast a recession we look into 2024 that

is why 15 basis points is absolutely possible. tom: if you have a mandate to be in the market, higher yields, over prices the effect on equities how do you participate in the stock market given a higher rate and more durable inflation? >> inflation is more durable especially like lisa was saying core inflation should take out food, energy, we think it's going to be sticky and stay higher. we look at those companies who are price makers instead of price takers. we are seeing this array that they could stay throughout the year. tom: if active management is more conducive here, we are hearing that from a lot of people including all of the deutsche bank combine. what factors help you choose

what stocks to pick? >> it's been pot of -- bottom up top down. which sixers -- sectors bode well and after you look at this, companies were you have rather those who can deal with high inflation bader and are able to do cross counting those are the areas where we want to go. lisa: we would just hearing from john as he laid out bank of america credit is one of the most crowded trades. how does your treasuries affect that? would you lean heavily against that because of the duration component? >> it's relatively high. if you look out of the curve we don't see massive change there. i think we have seen the

high-heeled side. i think over the next few months i wouldn't be having this call as well because we go for lower growth. from my point of view there could be higher spreads. the end of the year that could look differently. but i do expect some volatility. lisa: do you see the same disconnect we have been talking about from morgan stanley? stocks basically looking past that and continuing the same playbook over the last 10 years. >> you talked about flows, i think that's important. we have been seeing the stock market ready. i think we have seen kind of the squeeze to a certain extent, from that perspective i would rather use the bond side at this point and may be take some gains of course that is still the missing out but i think if you

look what we have achieved so far in performance, it's very nice performance. i think we should -- jonathan: they are lining up to comment on the cpi report at 8:30 this morning. are you going to pay attention to that report? is it important to you? >> i think it's important because the market looking at where the fed wants to go. we have seen the fed has been moving markets. from that perspective, yes, sir, i think it's important. also get the first reaction. tom: help our western audience across the atlantic with how germany is coping. what is it 1.9? this is foreign and harkin is

back to fears of another type . -- time >> if you talk about inflation there is always if you look at history there are some very bad experiences with high inflation. on the other hand it's probably positive that the government is supporting from the fiscal side which has brought on inflation of little bit already. nevertheless, we have unions asking for substantially higher wages. some in the double digits. then, of course, it makes inflation quite sticky. it will probably continue even longer. jonathan: great to catch up. the cpi data coming out in a

couple of hours. after that we will catch up with the federal reserve. mike mckee will be leading a conversation and i will try to ask questions alongside. tom: he gives me questions. jonathan: i just try to work off of mickey's questions. tom: everyone of these guys is different and he's a good conversationalist. jonathan: tom after that report. wells fargo the bear market is over. that's coming up in the next hour. looking forward to that conversation. from new york, this is bloomberg. >> keeping you up-to-date with news from around the world with first word, i'm lisa mateo. nato secretary says russian president is far from talking peace and is preparing for more war.

>> president putin we have seen no sign this preparing for peace we have seen he is preparing for war and new attacks so it makes it just more important that partners provide more support to ukraine. >> nato defense and esters meeting in brussels this week they will discuss spending targets wednesday. the stock exchange suspended trading february 8, two days after a pair of powerful earthquakes jolted turkey and syria. the quake killed more than 37,000 people across the region. ford motor's laying off about of the for in percent of its workers in europe. because by the automotive sector shift some 3800 jobs will be

cut, most of them in germany and the u.k.. the carmaker has reduced ranks by 35% in the last five years. the latest labor challenge for elon musk, tesla workers have launched a campaign to unionize. steph said they want to curb workplace monitoring and metrics. they also want better pay and benefits. global news 24 hours a day on air and on bloomgerg quicktake. powered by more than 2700 journalists and analysts in over 120 countries. lisa mateo, this is bloomberg. ♪ this is ge aerospace, advancing flight for future generations.

♪ welcome to a new era of flight. go. go scientist. go software. go cure. go production. go faster and safer. emerson automation software helps breakthrough medicines get to market at warp speed. go human go. go boldly. emerson.

>> even though we had no indications that any of these three objects was surveilling, we couldn't rule that out. you want to err on the side of safety. i don't think the american people will think it's aliens. i don't think there is any more than needs to be said there area --. jonathan: dialing it back about aliens. if you have not been around the last couple of weeks, that is where we were at. flying objects and the u.s.

military shooting things down over american airspace. tom: first time i ran into david to company was like 2:00 in the morning he was a great gentleman but if you miss the x-files, 30 years ago now is a good time to go back to season one. see a very young scully, the truth is out there. if jonathan: we may or may not go back to that story in just a moment. the cpi of little bit later. futures up by a quarter of 1%, a strong start to the week. monday's session, yields come in a couple of basis points. yields higher over the last couple of fridays. you go back to the morning of payrolls friday, up about 40

basis points since that time. tom: we take a break here from the inflation watch, 21, almost 22 level yesterday. we are going to pause for a moment. we do this with julie norman. i want to step back to what you said he years ago there was a very brave woman who took untold heat as a first visible woman in the vice president and presidential derby. we move on from haley of the carolinas who is going to make some kind, we don't know. tell us the span here of how we become comfortable with women saying they want to be president of the united states. >> obviously, so much has changed from the 80's.

hillary clinton is breaking any kind of ceiling that there was with having a presidential nomination. and now kamala harris is vice president. it was a slow road. i would say that what a lot of assumptions and double standards that women would be held to end were held to for quite a while. i do think that is changing now. we see very different openness to different kinds of women leadership and we see it in the types of candidates. tom: in that he for a republican primary, lisa, help me here. 14 people running here. jonathan: we were thinking about haley, pompeo, pence. lisa: the ironing. tom: how will they be greeted by conservative america i'm not sure we've moved on. i'm asking you. >> i think many in the republican party so it is more of an inclusive party.

so, i think there are many who would be happy to have a woman on the stage in the primaries and to embrace that, it would be a positive thing for the gop moving forward. she wouldn't appeal to all voters. i do think things have shifted in away that we can have a female candidate taken seriously. jonathan: since then, what have we had? tom: light years ahead of us in germany. england is the analog and we are not there. jonathan: i want to pick up on something lisa mentioned in a bit of crosstalk, a packed republican field, does that help the former president donald trump? >> in a lot of ways it does.

it seems like, ok, the party is opening up. there are a lot of places that are counter to trump. but at the same time the wider the field gets, the more it actually give trump a bump. we have seen that in the polls. trump into cindy's head-to-head, desantis is usually leading trump. the more diversified that field becomes the more likely it will be that people will have a majority and there is still very much a factor going into the primaries. lisa: on the democratic side we will get the greatest hits from president biden at 1:15 p.m. eastern time as he gives a sense of the chips act and the inflation reduction act and more. we will discuss that more in a second. does it behoove him to announce earlier rather than later? >> i think it announcement this

it would be a little premature. he doesn't need to announce yet. there is not any likely competition to him i think most democrats assumed he was going to run. he probably won't face a primary challenge and right now he can kind of keep posting what he's doing. obviously the and announcement will give a different dynamic. lisa: we have been talking about how me also announce the next economic council and vice chair position at the federal reserve do you this is a smart move? not only because she's highly qualified but because of questions it raises about the federal reserve and politicize ation for the central bank? >> what it means for the fed on the one hand and is getting a

lot of attention right now but i think it's having to do with bidens on team. not only economic leadership but other conditions. you just have a different time going into these last two years and i think we are seeing a little bit more of a shift going into say a 24 run. i think it's a little bit of both at the moment. jonathan: it's wonderful to get your perspective on these issues as always. lisa, the leadership role perhaps the pfister has been craving it while. lisa: potentially has more influence over policy. up to me it's not a question about her role as the next brian deese. she is in incredibly competent person the issue is what does it do for the federal reserve at a pitiful -- pivotal moment. it's kind of a difficult

position this year. there is stated that is very unclear. jonathan: i'm a little bit more station what it means for the administration. members of the president some party. his top economic adviser might be the pfister for the federal reserve. lisa: does she have a tarnish around her there into a much more hawkish stance? of course she was one of the more dovish members and was sort of on the edge of dissent as tom would say. there is a lisa sense that she was pushing back, do you disagree? jonathan: i can't sit there and say, i don't know what the pushback was. lisa: it was different for her than the rest of the board. tom: can i but in here?

i have the clearest memories of late 90's i didn't know if it was as she or he out of m.i.t. and rainer riker were writing brilliant policy pieces on labor multinationals in jobs that were definitive and she was a kid. he is bringing into the white house if he does this, absolutely our number one academic under micro theory, height economics of labor and featured best international trade. jonathan: highly competent individual. we are about two hours away from inflation data in america. ♪

get help reaching your goals with j.p. morgan wealth plan, a new tool in the chase mobile® app. use it to set and track your goals, big and small... and see how changes you make today... could help put them within reach. from your first big move to retiring poolside and the other goals along the way wealth plan can help get you there. j.p. morgan wealth management.

>> equity features looking a little something like this on the s&p 500. important morning just around the corner. trying to build up the gains of yesterday on the nasdaq up around 4/10 of 1%. the future of the session highly dependent on the data point which comes out little later. the two-year, 10 year, 30 year, something like this. 455 on yesterday's session. that is a new high for 2023. 4.5, two hours away from inflation data.

the banks have bit out there data. jp morgan top. looking for .5 percent alongside sachs tom:. gasoline coming back and everybody is talking about used cars. lisa: it will say it's not just use cars it's also other cars. jonathan: you did say you were having that conversation over dinner. lisa: i think it is an important conversation. jonathan: not saying it's not important just wondering about -- lisa: my conversation capabilities at dinnertime? take it away, tom. tom: we are thrilled to tell you we have another guest after michael mckee and then we move on to kenneth rogoff.

bruce cosman of jp morgan, kenneth rogoff and then on to bruce cosman. bruce, what's so important here about ops failed -- what does u.s. inflation mean for the rest of the jp morgan world? >> we are looking for a reasonably high said number for a five 10 again on the core. i would also like to include the january activity data. i think what it's telling you is this economy is not moving in a straight line down on a growth or inflation. we should understand that these moves we saw at the end of last year were probably overstating the underlying shifts in trend.

we think inflation is moving the work. it will sit somewhere in the 3-4% range. it's not enough for the fed and that becomes a big issue as we go forward from here. tom: what happens to our viewers and listeners economy if we stick at three or 4%. if we get a more sustained, not 2% inflation what does it mean for gdp? >> first of all, we are not leaving the economy sliding through recession right now. we think there is a significant part with -- which we think is a positive. the business sector is still very healthy. this is where we get into what we call, we don't think the fed is trying to kill us. even though inflation is going to be about the comforts on this year we don't think it's going to act in a way that's going to try to drive the economy into a recession. there is a risk we do that over some point in time.

you do get recession but it's later and it's with higher rates than the markets are currently expecting. lisa: let's talk about the nature of that recession. it can cause cuts at the federal reserve and other central banks that fuels the next leg of a rally. if it's not that deep, is it enough to allow the fed to actually cut rates from wherever they end up? >> let's start with the first point. i don't think we are in possession now. i don't think we will be in recession three months from now. the market is looking for rate cuts in the second half of the year i don't think we get that unless the economy is tilting into procession and i think the odds of that are still probably less than 50%. we should start with that because i think there is way too much discussion about recession and thinking it's going to come immediately. i think you want to wait for it and believe it's going to take some time. i do think when the recession

comes, probably the biggest thing to realize is it's not going to be like the gmc, or the pandemic shot. it's the question is whether his went to be synchronized. what determines if it's shallow are not is if europe and the u.s. are in procession at the same time. -- recession at the same time. it does look like that is a likely scenario. lisa: there with me it's kind of nuanced. can the fed cut rates if we don't go into procession? d3-4% inflation rate in the u.s., is that enough for the fed to say neutral is lower, let's go lower and sit there for a wild to see how far we can go down? >> no. if the economy is not in possession you're not getting a fed that's easy frankly i think was going to happen is people's

estimates of neutral are going to be starting to go up because you won't get the damage done to the economy with a high interest rate. you will get the disinflation you hoped for. so this is a dynamic that will keep the fed high for long. it will keep pressure on them to keep moving rates. my point is is going to take time before something breaks. we are not at risk of going down. lisa: in the meantime, if something doesn't break and people are able to get income and there is still plenty of liquidity in the system are some of these high rates inflationary in and of themselves because it gives people more cash to play with? >> i think we have income effects which are positive when the fed raises rates. the dynamics of having the higher cost of capital is a bigger effect. one point that is really important here and you are right to point it out's transmission

on different channels is different at different points in time. the rise in interest rates has been a much bigger negative. if we go through a period now where the fed is raising short rates and the economy is holding up i think you do have less damage being done by higher interest rates and you do have the positive income channel to think about. tom: we went back and forth on this this weekend. this is a different kind of inflation. you write about supply changes. we come out of the pandemic we had supply shocks, so does that mean it's not an eisenhower deflation? does it mean it's not the fears of the 60's and pre-volker inflation and it's something different? >> there is a set of things that damage supply and create a huge dislocation in the economy that is unwinding.

the rate of inflation that we got to the middle of last year is not sustained and it's coming off, and it's coming off pretty quickly. i think we should recognize that we had supply chains that are going to linger. by our estimates would probably leave lost something like 2.5 percentage of the labor force. that is not coming back. also we changed psychology. we probably changed production chains on more permanent basis. in order to get inflation all the way back in the low to mid two's we might get recession. compared to the 60's and 70's, it is not tolerant of high inflation so eventually the fed will do this and will create the dynamic of a recession. i don't think we will have elevated inflation the way we had it then but there are supply damage is being done, as was the case in the 60's and 70's.

it's going to be somewhat painful to bring about down. tom: tell me about potential gdp. i think we have two months and a lifetime of ideas. some 2% potential gdp, do you adjust that given the stimulus? are you just ascend we will meander down to the shocking statistic? >> mike and i have been working with attentional growth rate in the u.s. which has been somewhere around 1.5%. basically for the last decade. i don't see any reason to change those views. there is obviously slowing demographics. we damaged immigration flow. the big wild card is what is happening to productivity. the numbers are hard to read. i would be agnostic here. i don't really feel like i should be sitting here taking a very strong view and may be we

will be surprised. i just wouldn't bank on it. that could help us but again, i'm not sitting here feeling comfortable pushing in that direction. jonathan: thanks for being with us, mate. bruce castor on there. i don't quote summers on the weekend. never quote larry summers on the weekend. tom: was a transitory moment. tell us about this big game. i think for americans this is completely foreign, the talks of london are flying to milan to play jonathan:. champions lake. tom:'s at a bigger deal than premier league? jonathan: for some it is. tom: they play their best players? jonathan: without a doubt. he lay -- you play your best

players because there is huge honey if you advance. tom: work and i watch this? jonathan: paramount. the two teams are not in form, let's put it that way, at all. ac milan used to be a giant port. tom: when do we learn who wins the championship? jonathan: i think in may. usually the end of may. tom: do the players get upset they are playing for three trophies? jonathan: no, you want to play the champions league. if you really have ambition you want to be in the four top teams to go to the championship leg. tom: whoever wins, lisa, gets to go to disneyland paris. jonathan: is that just like tradition? didn't brady used to do that do?

lisa: i am not an expert on disneyland. jonathan: not paris but -- >> it was an endorsement thing. jonathan: they couldn't just celebrate, it's not enough to celebrate the super bowl. tom: they get paid, i don't. jonathan:tang can they offer you for promotional deal? we never hear the end of it. tom: mr. bloomberg said to me, tom, you could get paid if i get paid by she sits. c --heeze-its. jonathan: equity features on the s&p up a quarter of a percent. this is bloomberg.

>> keeping you up-to-date with news from around the world with first word, i'm lisa mateo. supply problems among oil producers could tighten the market next year as demand rises. >> i totally believe that we need more supply in the future. with the increase in demand, the forecast for this year, definitely there will be an increase in next year. >> the energy administer spoke to bloomberg in dubai. indian income tax officials search the new delhi and offices of the bbc today weeks after the documentary about the riots and prime minister alleged role in the violence in his home state. an indian government official with direct knowledge of the matter described the visit as a survey but didn't give any other information. the suppliers of batteries to

volkswagen and bmw could get billions from bidens bill putting policymakers on notice about the allure of u.s. green tech incentives. the tax credits included the law cover about 30% sale of operating costs if the start up a similar sized factory. it would save about a billion dollars by the end of the decade. 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, and this is bloomberg. ♪

this is ge aerospace, advancing flight for future generations. ♪ welcome to a new era of flight. if your business kept on employees through the pandemic, getrefunds.com can see if it may qualify for a payroll tax refund of up to $26,000 per employee. all it takes is eight minutes to get started. then work with professionals to assist your business with its forms and submit the application. go to getrefunds.com to learn more. the first time you connected your website and your store was also the first time you realized... we can do anything. cheesecake cookies? [together] the chookie! manage all your sales from one place with a partner that always puts you first. godaddy. tools and support for every small business first. 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. >> i think what worries us is are we going to have enough supply in the future?

i truly believe we need more supply initiatives. with the increase in demand, the forecast for this year, definitely there will be an increase next year. jonathan: that was the uae energy minister after a big rally last week in the oil market. crude putting back of little bit by a little bit more on wti down by 1.6%. about an hour and 44 minutes away from the cpi report here in america. yields come in a little bit elevated. we are down a basis point. through 4.50 in the last couple of weeks. we break for .5 this morning. equity features trying to build on the gates of yesterday. after delivering a gain of more

than 1% on the s&p 500 and taking out the bosses of last week some tremendous research out there is always. global fund manager survey, there are so many juicy tidbits in here. recession peaked in november 2022 at 77%. we are down 27 percentage points month over month. that is a big change. something they point out when you look at the chart, recession peers coincided with the start of major bull markets. they see on these peaks and recession peers there is one in april 2020 and march 2009. i had a lot of you write to me on twitter and i'm with you. the difference between the two we had actual recessions. in march 2009 and april 20. lisa: it's fair to say i do

wonder with the contours of a new bull market would look like at a time when big tech, does it take off in the same manner? if they are hiking rates what does that mean for bull market? jonathan: and valuations are starting from a high point. tom: i think the ambiguities now are off the chart. we had a 5.02% ask on the six month t-bill this morning. i don't believe we had a 5.02% print but there it was on the bloomberg. that's stunning, lisa. lisa: especially given the fact that it was zero not long ago. tom: is the first time i saw it. joining us now, joe kennedy. will, i want to tighten in your expertise with what the shock is for viewers and listeners. owners equivalent rent i need

the united states is with the pros used to gauge rent. it went from 2% inflation to 7.5% inflation. a gallon of gas, it came down nicely. it's up 10.4% of the aaa regular gas as well. how dominant is hydrocarbons in the inflation picture that you and your team report on everyday worldwide? >> i think the real problem for hydrocarbons is the price. if are most exposed to the ups and downs of prices. you see it every time you go get in your car. i think one prices are up people feel it in a way they don't notice other price changes which is crucial to people.

tom: edge of spring, edge of summer, what do spring and summer look like? is it a mystery? >> obviously, those are the peak seasons for gasoline demand especially the driving season, things tend to pick up the time of year. people are feeling ok about the outlook for supply demand. but there is some concern for the second half of the year. as the market continues to rise. supply remains constrained. russia is going to cut perils by half a million a day. think dropping phone investments across the industry. you put that together, i think a lot of people do still see a lot of tightness in the second half of the year even though after a start to the year prices are up.

lisa: amid this confusion with the sense that perhaps oil prices are going to go even higher what is the purpose right now of the united states releasing more of the strategic reserve when it's supposed to be refilling it. >> one prices were down at the end of last year there was a window under the price guidance to refill and they missed that. now and other 26 million barrels a day is coming to market. those barrels are something that was mandated as far back as 2015. it's not actually related to the decision buster. of course, it keeps leaning back to the oil, it makes it harder to fill a backup and it will need -- lead to concerns that it is not being used strategically. it will be much smaller for years to come. lisa: you said something important, they missed the

window. whether china comes back online and as people continue to fly around the world with airline traffic, raising two new records what is your view on what the new window will be that this administration or will they just not refill the spr at all? >> i think it will behoove them to refill it as we discussed. it will be expensive to do and they have to find the money. ultimately, for the reasons that tom mentioned a inflation. kick kind of probably suits them even though that stores up risks for the future. tom: i don't have the knowledge in front of me but in the blur of the news flow i'm getting a feeling that lng is still challenged after what? 125 years of promises that lng

is going to save the day. what is the state of natural liquefied gas to being a legitimate business? aren't there people saying it's too expensive to do? >> i think lng is very important to the global system. we've seen that this year as the u.s. managed to import into global markets. that's really what sold the european energy crisis is the flow across is that the answer to everything? no. is there enough coming into the market? no, you're right. in fact, we continue to see the mismatch between the u.s. and european prices which are much higher. that was the fact that the u.s. doesn't have as much export capacity as the market could use. what it does mean is it provides

a considerable amount to the united states over the next several years. the united states benefits from very cheap natural gas for the time being. europe doesn't. jonathan: we have to leave it there. will kennedy. we will get to inflation data. crude down 1%. just short of 80. lisa: covering the oil makes me want to tear my hair out. it's incredibly difficult especially given now the uae is saying they are not worried about demand, they are worried about supply. shouldn't that push prices higher? i am missing the plot a little bit. jonathan: tom, are you missing the plot? tom: i'm missing the plot. with the pros are talking about it goes into their meth but the earth looking like everybody

else, what is the fed going to do? our viewers and listeners are like wait a minute it's up 7.5% which sounds about right nationwide. jonathan: was get to the headline. it's official. she is in the race and the first challenger to former president donald trump. the video is out on her twitter account. join nikki haley for president. tom: two days before the british would announce. jonathan: it was supposed to be announced tomorrow. nikki haley on the move already. lisa: all right, who's next? jonathan: this show is going to be very big. lisa: and very competitive. jonathan: that is just ahead. the bear market, what their market? the conversation is coming up as

we count you down to inflation data 34 minutes away. ♪

these days, our households depend on the internet more and more. families grow, houses get smarter, and our demands on the internet increase. that's why we just boosted speeds for over 20 million xfinity customers, on us. so you get more of the speed you need for day and night streaming. more speed you need when you're work from homeing. and more speed you need as your family keeps growing. check in on your current speed through the xfinity app or upgrade to the speed that's right for you today. hi, i'm katie, i've lost 110 pounds on golo in just over a year. i was a diet soda addict, and i needed to have a diet soda every morning as my eye-opener. with the release, the cravings are gone. golo worked for me when i thought nothing would work for me. the first few weeks were really astonishing how quickly and how easily it came off, how much better i felt, what a change it made so fast. i feel like anything is possible

after accomplishing what i've done with golo.

>> i think the markets have been mispricing the fed for a while now. >> we do not think the fed is done. >> the fed cannot go too high because of the confidence it is instilling. >> things are actually improving around the world. >> maybe nothing happens and we have a plain recession. that is my bet at this point. announcer: this is "bloomberg surveillance" with tom keene, jonathan ferro and lisa abramowicz. jonathan: happy valentine's day.

that is enough of that. [laughter] good morning. this is "bloomberg surveillance ." alongside tom keene and lisa abramowicz, i am jonathan ferro. the s&p is up 0.2%. a lot of people expecting this to stay elevated. tom: i think the whispers are elevated. the way the market closed yesterday, i think maybe there is a swing back off a friday where people are saying, it is elevated but we are going to move forward. that was the 2:00 p.m. angst. jonathan: rallied into the cpi report. big gains yesterday but last week, we wipe them all out yesterday. lisa: you said yesterday the fact the biggest weekly loss of 2023 was 1% gives you sense. heading into cpi how much is this market poised for disruption? i say this with services and where that comes in given the

earnings we have seen from consumer facing companies that keep delivering upside surprises, particularly vacation types. jonathan: the chairman of the fed has said the dish larry -- disinflationary process has started. lisa: he clarify the second time. disinflation has started but only in services. we will get a sense of whether we see the good side reinflate at the same time the services side continues to be strong. marriott came out with earnings. they beat expectations. jonathan: coca-cola as well. coca-cola delivering a similar story. tom: i am doing the math right now. the 10-year track record, i'm sorry, i look at it and organic revenue is up but there free cash flow is unacceptable.

you look at the disney focus. bob iger, nobody is doing that with coke. they did not deliver on free cash flow. everybody disagrees with me but on a 10-year basis, pepsi is at 11.8% and coca-cola is 6% something. lisa: i immediately googled who owns tang and it is mondelez. tom: oh, yeah. jonathan: he has a contract that he cannot talk about mondelez. [laughter] equity futures up 0.2%. yields coming in at 3.69. the two-year yield is at 4.50%.

tom: we saw on the acclaimed terminal short paper function 5.02%. jonathan: have we got a countdown clock? tom: to what? jonathan: 87 minutes away. lisa: we are going to dig in. 8:30 am we get u.s. cpi. we are looking at the underlying components, not just the year-over-year, but month over month. how much do we see some dramatic response in markets? how fragile is the rally we have seen year to date to some upside surprise? if we get the countdown clock, what is it? 173 minutes, 153 minutes until

tom barkin comes on. and dallas fed president at 11:00, patrick harker at 1:00 and then john williams at 2:00. we are going to raise 25 and another 25. the market seems an agreement. we are data dependent but do they give some sense of the willingness to go more restrictive? at 1:15 we get president biden speaking of a whole host of issues in washington. chips, the inflation reduction act, especially in light of what we have been seeing with respect to international competition with europe. what is he going to say about lael brainard? how will that inform his run in 2024 but also the strategy for the federal reserve of which she was more dovish? jonathan: one hour and 24

minutes away. thank you. lisa: thank you. jonathan: i will forward that address later. joining us is anna han of wells fargo. your research yesterday, thank you for being with us. why is the bear market over? anna: when you look at the signs in the market you are seeing the credit spreads compress. that is something that is rare in this time when the market is expected to fall into recession. you are also seeing volatility is being pretty contained on the equity side. this is what we .2 everyone loves to point to which is a strong -- we point to which everyone loves to point to which is movement from a bear market. tom: the hope and prayer has

been a short squeeze. when and how do we get beyond a short squeeze? anna: you are absolutely right. what has been leading the market is the stuff that has not performed well. they had a very strong balance to start the year but to see this rally extended we need to see leadership change not just from a bounce in what underperformed, but actual sustainable earnings growth driven leadership. for us, that is not as easy to find in the large cap market. perhaps we would like to look at the mid-caps space and we think we will find better growth opportunities. tom: do we underestimate, particularly if we get persistent inflation, what nominal gdp and revenue growth

is going to be? coca-cola had revenue growth in their fondest dreams they would never admit to. cash flow was not there but is this the great underestimation of your bull market call? anna: absolutely. the inflation and how long the cpi can persist or stay longer than what the market is pricing in and therefore push out future rate cuts. these are things we have to consider when we think about revenue and earnings growth. especially in this environment when we were looking for positive signs. we do not want to fall for the honey pot of a trap. only to find out this was an inflation driven metric rather than volumes increase in sale. these are the signs we are looking for as well as what could possibly turn our scenario

into an extended bull market? lisa: this is a frustrating bull market. it is a bull stuck in traffic. even if you get gains, it is going to be a motley picture in terms of what sector and how much things go up. can you give us a sense of the dispersion you expect this year in terms of sectors outperforming and underperforming? anna: i think last year the dispersion was quite great particularly in the sectors that traditionally have done poorly. think about the traditional defenses. you come this year and i think leadership has changed again. you are not seeing these typical defensives being the leader. but we think that is an opportunity to pick up some defensive exposure, especially in the big pharma space. but we are not ready to pour on the risk so we like something

that can act defensively, have improved valuation, improved technical standpoint, but also has that more defensive earnings growth aspect that can plow through if we see further slowdown in earnings growth later this year if rate cuts get pushed back. if tightening starts to weigh an we see the effects of monetary policy changes. lisa: how do you view what happened with january given unprofitable tech companies performed the best of anything? anna: i think the main thing here is look at the cost of capital. this is what we continue to emphasize with our clients. there are two aspects here. if you look at the cost of capital, the 10-year yields coming in 40 basis points, that has to be reflected in the equity markets. seeing that rally in the most growth oriented sectors that is

the healthy sign to us telling us equities and rates are working in a way like they are supposed to. on the other hand, if people are concerned about the fundamentals having been the main driver of equity returns last year, people continue to be concerned about fundamentals were not convinced by what we have heard in this latest earnings season. that could be a reason why to stay bearish but that is not the base case. jonathan: i appreciate the clarity from you on the team. anna han working alongside chris harvey making the call that the bear market is over. we are about one hour and 20 minutes from inflation data in america. we will hear from the president later and we may hear from the president on lael brainard. our team at bloomberg reporting she is set to be announced as soon as today, maybe later on over the next week, as the

national economic council director replacing brian deese. we also got the first official challenge to the former president donald trump to make a bid to become president. nikki haley, south carolina governor, get excited, it is time for a new generation, on twitter. tom: i think we have to get used to the new generation angle particularly with what president biden does. in her 50's, desantis is 44. jonathan: maybe pompeo. tom: seven? 10? lisa, are you thinking about it? lisa: the fear is, is it going to be a circular firing squad for the republicans? the question of whether people -- tom: is that what happened eight years ago? lisa: this is the question. jonathan: the support for the former president is going to be

sticky. tom: yes. lisa: it will make it difficult. jonathan: david bailin in the next hour, global head of investments at citigroup. inflation data coming up at 8:30 eastern. ♪ lisa m.: keeping you up-to-date with news from around the world with the first word, i and lisa mateo. russian president vladimir putin is far from talking peace and is preparing for more war. >> we see no signs the president putin is preparing for peace. what we see is the opposite. he is preparing for more war, new offensives and new attacks. it makes it more important the nato allies and partners provide more support to ukraine. lisa m.: nato defense ministers are meeting in brussels this week. they will discuss spending targets wednesday. bloomberg learned turkiye will

resume stock trading thursday. it was suspended two days after earthquakes jolted 10 provinces across turkiye. it killed more than 37,000 people across the region. ford motors is laying off 11% of its workforce in europe. it is the latest sign of industrial disruption caused by the automotive sector shift to electric vehicles. some 3800 jobs will be cut, most of them in germany and the u.k. the carmaker has reduced ranks in the region by 35% in the last five years. global news 24 hours a day on air and on quicktake by bloomberg. powered by more than 2700 journalists and analysts in over 120 countries. i and lisa mateo. this is bloomberg.

lomita feed is 101 years old this year and counting. i'm bill lockwood, current caretaker and owner. when covid hit, we had some challenges like a lot of businesses did. i heard about the payroll tax refund, it allowed us to keep the amount of people that we needed and the people that have been here taking care of us. see if your business may qualify. go to getrefunds.com. get help reaching your goals with j.p. morgan wealth plan, a new tool in the chase mobile® app. use it to set and track your goals, big and small... and see how changes you make today... could help put them within reach. from your first big move to retiring poolside

and the other goals along the way wealth plan can help get you there. j.p. morgan wealth management.

>> we are still far from achieving price stability and i expect it will be necessary to further tighten monetary policy to bring down inflation toward our goal. doing so will likely lead to subdued growth in economic activity and some softening in labor market conditions. jonathan: still waiting for that softening based on the official data. that blowout payroll report from a couple of weeks ago. tons more fed speak coming up later. equity futures are up 0.2%. one hour and 12 minutes, 47

seconds away. [laughter] yields coming in 3.69. it comes down a little bit today and dollar weakness comes through. we are positive about 0.25%. tom: what we do is we have a wonderful team and they are working sometimes on the 10 minute or one hour basis, but sometimes they are three or four days ahead of dragging onto the show competent people. with this announcement of lael brainard moving to the white house pending, it is perfect to speak to heidi crebo-rediker. somebody with a beltway understanding on her path from dartmouth and lse to different services forever government. thank you so much for joining us. i was talking with jon an lisa

about the lael brainard i first knew. the effect of american multinationals. what a perfect time to have the gentlelady from wesleyan joined the white house team because of china. what will brainerd say to the president about china? heidi: thank you for having me on the show and lael brainard is a huge win for the white house. she is experienced. there is no steep learning curve. she has incredible experience on domestic and international, white house, treasury, academia, and she knows the people around her. she has worked closely with jake sullivan. she has worked closely with janet yellen and on china, i think she has great depth of experience. it is important because this has

emerged with the national security council in how it is looking at national economic policy. jonathan: what does that mean for the treasury and the policy? heidi: i think if lael is announced, and she is likely to be later today, she and janet yellen go way back. any bumps in the relationship with treasury i think she could easily smooth over. this is a big position. stepping into be the head of the economic council, it is a very powerful role and a convening role. she will be advising the president on both domestic and international economic policy. i think it is a good move for treasury, good move for the white house. lisa: some people are looking back to 2021 where there was political interference alleged as to why the fed did not raise

rates sooner. perhaps if the fed chair had been renominated, he would've had the conviction to go forth more quickly. do you think the disruption in leadership may cause some ongoing hindrance to the federal reserve if someone is not nominated to replace her in the near term? heidi: i think they are going to have to find a good replacement and a heavyweight. this vice chair position is not just lael, it is not just any governorship. we have had stan fischer, janet yellen in the past. i think they will go centrist. not someone necessarily from the far left. lisa: we are talking about lael brainard but we also talked about nikki haley announcing her run. i and curious whether you see this as an incredibly crowded field that makes it more likely former president trump actually has a more legitimate chance at

being the republican candidate in 2024. heidi: i was a little surprised she announced with a video a few moments ago, nikki haley, but it is a very crowded republican field, as you noted. we will have to see. i think the big concern is, does the field divide itself it enables former president trump to have a clear path to be the nominee? i don't know but the tendency in the republican party is to say, that's not going to happen. but we have seen it happen before. tom: do you want to talk about the generational shift? a guy named richard haass has a new book out. he said, shut up and read it. [laughter] there is a copy behind you.

he is talking of the social construct of the nation and returning to foundational civics. great. we are in the process of a generational shift in our politics, in our economics, dare i say our banking. are we ready for the generational shift? heidi: i think we are planting the seeds for that shift. one of the greatest things we have done for enabling a generational shift is with the president is going to be touching on later today which is a generational investment in our own economy, r&d, advanced manufacturing, in setting the groundwork for the next great wave of innovation coming out of the u.s. that is certainly one of the bigger stories today and for the

next year. what we are doing in our investment in our country. jonathan: do you think they are doing it in sufficient size? china was very brazen about the made in china wave. i wonder, from the plans you have seen the last couple of years from this administration and the former one, have they been bold enough to counter what china is trying to achieve? heidi: i think it is hard to underscore how important not just the $52 billion going into chips but the $280 billion into r&d, the $370 billion into the inflation reduction act. that catalytic capital is a huge opportunity meant to bring in private sector funds, meant to bring in investment across the spectrum from startups to

helping reshore technology in the u.s. i think we are doing enough if we use those catalytic funds to take advantage of capital markets, which are, in addition to innovation, we have deep capital markets that can play into this massive wave of federal funding. jonathan: this was super smart and i hope we get to do it again. heidi crebo-rediker on the council of foreign relations. the merging of the nec is pretty fascinating to see how the vice chair will transition from focusing on monetary policy to going at balloons being shot out of the sky. tom: well said and what it speaks to is a generational shift in these institutions. crebo-rediker is totally wired into the beltway structure of

it. what she said about brainerd numbing everybody in the room i think is absolutely critical. jonathan: so true. a big leadership role. tom: a different role than what jean sperling had a long time ago. i would let him speak for himself but there is something new going on. jonathan: equity futures up one third of 1%. inflation data in america one hour away with yields 3.6864. next up will be so now this i of franklin -- sonal desai of franklin templeton. ♪ ♪when the day that lies ahead of me♪ ♪♪ ♪seems impossible to face♪

♪a lovely day (lovely day)♪ ♪(lovely day) (lovely day)♪ ♪(lovely day)♪ a bank that knows your business grows your business. bmo. the morgan stanley client experience? listening more than talking, and a personalized plan ♪ to guide you through a changing world. ♪ this is ge aerospace, advancing flight for future generations. ♪ welcome to a new era of flight.

- [announcer] imagine having fuller, thicker, more voluminous hair instantly. all it takes is just one session at hairclub. introducing xtrands. xtrands adds hundreds or even thousands of hair strands to your existing hair at the root. they're personalized to match your own natural hair color and texture, so they'll blend right in for a natural, effortless look. call in the next five minutes and when you buy 500 strands, you get 500 strands free. call right now. (upbeat music)

jonathan: one hour and 22 seconds away from the inflation report. tom: what will you look for when the report comes out? jonathan: month over month initially and then we will work from there and look at super court. mike mckee is going to guide us through that. tom: is the super core an official number? jonathan: very specific stuff. equity futures look like this. i will do my best. it is a team effort. futures up 0.25%. happy valentine's day. lisa: you are scaring me. [laughter] jonathan: is that too nice?

let's get to the future board now. lisa: that's better. [laughter] jonathan: a new high on the two-year. 40 basis point move off the lower friday. the equity market has not budged much. we were down 1% last week and took it all back in yesterday's session and then some. if you finish on the euro-dollar, it looks like this. that is positive one third of 1% as yields retreat. would you like some estimates? tom: please. im on the edge of my seat. jonathan: month over month or call strip out energy and 0.4% is the estimate. the headline you probably see in

the newspaper is headline year-over-year and we are looking at 6.2%, down from 6.5%. those of the estimates. tom: it frames it out nicely and we will get to the cpi in an hour. i guess we can crack open a coca-cola. jonathan: nice transition. tom: when was the last time you had one? jonathan: a coca-cola? i could not tell you. tom: i would guess five years. jonathan: it has been that long? it is probably in the years. tom: we were not allowed his children to have it. jonathan: we were not either. it was bottled water because my dad was italian so he did not drink tap water. tom: did you have the italian orange thing? jonathan: which was that? tom: orngina. jonathan: peach iced tea is great. lisa: my father would get a two

liter and a bag of pretzels anytime some but he was sick. [laughter] [crosstalk] jonathan: speaking to our childhoods this is. lisa: happy valentine's day, dad. coca-cola beat expectations at the upper edge of the forecast. it is up about 0.8% but speaks to the ability to outperform and perhaps the ability of continuing to look past the potential weakness crossing a low bar and getting enthusiasm in equity markets. marriott is interesting because we have seen the consumer spend in terms of services continue to be strong. business travelers are returning and we hear this from everyone. people are getting on planes and going to visit clients and marriott is benefiting because they pay a higher rate when they get some of their hotel rooms.

shopify also up about 40% this year, 1.6% in premarket trading. they were among the first that cut workers. people were not expecting them to benefit the most from those cuts. this is where the rubber meets the road. have tech giants cut enough to become a justifiable size? are they getting the tailwind from those cuts? jonathan: will it show up in claims? we get claims on thursday morning. we are looking for 200,000. if we get that number, it would be the second we wear claims have lifted but claims it to hundred thousand is ridiculous. tom: it is ridiculous. jonathan: that is not even population adjusted. it is a bonkers low number. tom: and mckee told me years ago to look at the jolts to overlay.

in one hour and 52 seconds -- lisa: you guys are on a roll. [laughter] tom: retail sales, like coke revenue, is nominal. mckee told me that. jonathan: lisa mentioned yesterday we get some credit card data from various firms, card spending data from bank of america. mike even put out the research. total card spending per household up 5.1% in january. that is why they forecast a spike in retail sales. that number is an important input into gdp. tom: let's bring in mike mckee. we are going to speak to him at 8:00 but also right here. there is a media frenzy over what we are going to see in 54 minutes and 59 seconds. for guys like you, is that

another report? mike: a little more than just another report given the situation with the fed. unfortunately, or fortunately depending on how you look at it, there will be oddities in this number. it becomes less important, because of the seasonal adjustments and awaiting adjustments and the fact that energy prices rose, we will be looking beyond this report more than they do in a normal situation like this where it could be critical. they have another cpi coming up before the next meeting. it is going to be interesting but the markets of it for the most part unless we get some huge surprise. the fed is going to be waiting for additional data. it makes a great story for us. [laughter] not sure it makes a long-term difference. jonathan: we are going to catch up with sonal desai in a couple of minutes. i talked about headline year-over-year, core month

over month. what is it called, super core? [laughter] mike: it is core services taking out energy and food and that housing. you are left with most of what people spend money on. because housing is uniquely calculated into the cpi it is a distortion to what the inflation rate is. you see what is happening with services and most of that is driven by wages. the fed is keeping an eye on what is happening with wages and whether that is pushing up inflation. that is the measure that will tell them that. jonathan: people go nuts about this. it is stripping out all the stuff we need. tom: this is really important. this is the heritage of bloomberg surveillance. we are going to do this without hysteria. jonathan: of course. tom: if you are not part of the market, trust me, it is

inflation tuesday. jonathan: inflation tuesday. has that replaced payroll friday? tom: it hasn't but roses go on sale tomorrow. [laughter] this is very important. tomorrow, roses on sale, february 15. there is your bloomberg reporting for this morning. lisa: how is everything going at home? [laughter] tom: oh. you have to martini you just throw in the olive. [laughter] we are going to go to someone -- this is well done. franklin templeton, amy, thank you for making this work. sonal desai of franklin templeton. everybody has international on the brain and the guy from tennessee out in the bahamas and in toronto with the templeton

growth fund and the templeton world fund. sonal, thank you for joining us. is 2023 a year that sir john would enjoy? is it a year for value? sonal: probably? i m not going to commit too much because i am not any expert but i would have thought last year would have been his year. lisa: what i and struck by is financials easing. what you make of this at a time when you see banks tightening lending conditions? can you frame out how problematic this is for the fed? sonal: this is something after

chair powell's last press conference i noted. he did not address what i thought was the elephant in the room which was financial conditions. we had already unwound close to 425 basis points of rate hikes. fed chair powell said they tightened only in comparison to where they were in the extremely easy period of covid. i think it is pretty problematic. mortgage rates are off their highs. we have seen the type of rally in the first month of the year 8% to 10% and equities and fixed income close to the same. and the dollar added up together is a problem for the fed. jonathan: you were so good last year on saying this upside risk to the fed's hiking cycle. you were good the year before

talking about inflation not being transitory. based on market pricing alongside fed projections, do you still see the upside risk to the terminal rate? sonal: significant, no. i think we are going to go to 5.55% at least. i think the fed will pause. what there might be upside risk to his year and expectations. again, it is nuanced. at the end of the year we will be closer to 4% than 2% and that will be high. we really need to price out those rates fully from the second half of this year and those need to remain priced out. jonathan: thank you for jumping on the phone for us and a

fantastic year ahead. sonal desai of franklin templeton. she has been right the last few years and now may be that stickiness will push out the rate cut calls. tom: you see it in the tea leaves across the curve. this is historic coming off the pandemic and getting back to where we were in 2006. it is printed 5.013%. jonathan: how much time on the clock? tom: 48 minutes, 10 seconds. jonathan: nice. lisa: my god. tom: inflation central. [laughter] ♪ lisa m.: keeping you up-to-date with news from around the world with the first word, i and lisa mateo. police say a gunman killed three people and injured five others at michigan state monday night. the suspect was later found dead

after apparently taking his own life. police say the 43-year-old shooter was not affiliated with msu. the investigation is ongoing. the u.s. environmental protection agency says norfolk southern may be liable for cleanup costs related to the derailment of a train carrying hazardous material. it started a massive fire in ohio earlier this month. a spokesperson says it will continue to perform or finance environmental monitoring and remediation. bloomberg learned a former credit suisse employee copied and took personal data from other staff members, including details of the compensation and bank account information. the company warned of the breach which took place years ago in a le ploys. the staff member had legitimate access at the time and transferred it onto a personal device in breach of credit suisse policies. the supplier of batteries to

volkswagen could reap billions from the electric vehicle bill. northvolt put a notice out about the green tax credit. it covers 30% of operating costs. if they built a factory in north america, it would save $8 billion in tax credits by the end of the decade. global news 24 hours a day on air and on quicktake by bloomberg. powered by more than 2700 journalists and analysts in over 120 countries. i am lisa mateo and this is bloomberg. ♪ we all have a purpose in life - a “why.” no matter your purpose, at pnc private bank we will work with you every step of the way to help you achieve it. so let us focus on the how. just tell us - what's your why? for businesses of all sizes, so let us focus on the how. there are a lot of choices when it comes to your internet and technology needs.

when you choose comcast business internet, you choose the largest, fastest reliable network. you choose advanced security for total peace of mind. and you choose a next generation 10g network that's always improving, getting faster; more reliable; and more intelligent to keep you ready for today and tomorrow. the choice is clear: make your business future ready with the network from the most innovative company. comcast business. powering possibilities™.

>> the fact the consumer has so much accumulated savings, that has widened the lag for the

consumer to cut back on spending. i think they are starting to cut back but the labor market is strong and they still have accumulated savings. when those run out, and i say that will be the second half of the year, that is when the consumer starts to cut back. jonathan: priya misra at td securities. [laughter] why would you ask that? tom: i did not know how to pronounce it. jonathan: futures on the s&p, we will get to that. yields coming in at 3.6845. super core -- mike mckee left the building. tom: help us with that. jonathan: if you have a bloomberg terminal and many of you listening to, the ticker for super core is csxhpcmindex on

the bloomberg terminal. is that helpful? they probably want that number instantly and we do our best to get that out. tom: tomorrow the retail control group. jonathan: the input into gdp which mike gave us a punchy number. lisa: these are all new ways of stripping out the disposable income people have. how much disposable income to people have and are they spending? this is the cleaner way to say it is a way to strip out the base costs. how much people have left over and how much they are willing to put out. tom: i wonder which number of americans think this is baloney. jonathan: it is nuts. people are highly dependent on food, energy and shelter. it is insanity. tom: today it is. 41 minutes, 52 seconds away. we are going to digress to the

emotion that someday you too could have a ford or chevrolet -- and i interrupted jon. was it a vauxhall? david welch and keith naughton kill this for bloomberg. new cars and some used cars are only for the rich. craig trudell is joining us now. what percent of americans, or worldwide, can afford a new car? craig: they are awfully out of reach for more and more americans. my old oldsmobile i started out with, obviously, they are not around at all. but the existence of an affordable new vehicle is really

sparse. even on the used side we are in a situation where the amount of supply because of the crazy circumstances of the last couple of years of the pandemic where the car was the ultimate social distancing device. we saw a lot of sopping up of the used car supply and have not been able to replenish dealerships because of the chip shortage. that has continued to hamper them on the production side. even when they are able to produce more they say they will not go back to their old ways of overproducing, putting incentives on those cars and selling them at losses or thin margins. jonathan: many manufacturers introducing ev's. and you tell me how that has started to influence the number? craig: very simply, it is more

costly to build an electric vehicle with a battery-powered train than a combustion engine powertrain. i think the expectation is that there will be a crossover in the next few years depending on the segment and there are a lot of ways to slice and dice that data. but for the time being it is more expensive for manufacturers to make electric vehicles then combustion vehicles. we are in a situation where we talk about supply and demand dynamics being very off balance for the market in general. in electric vehicles, it is more extreme. you have some people waiting months or more than a year for their ev they want to buy. they cannot take delivery because manufacturers are having trouble keeping up with demand. jonathan: how do you think the proliferation of ev's will change the used car market? some of those cars without warranties, the replacement costs are expensive.

what could this mean for the used car market? craig: it is a fascinating question. there are a lot of takes. bloomberg has done interesting work on this recently. folks who are subscribed to bloomberg nef ought to look at the recent report on this. in broad strokes, there were a lot of concerns in the early days of ev's about residual values and whether ev's would hold value because of those concerns about how costly it is to replace a battery. you saw a lot of lease deals that these were compliance cars that were not attractive, did not have range. there was not a lot of demand for them. he saw manufacturers put highly incentivized deals on them to move the metal and that obliterated the resale value. we are now in a situation where there is a lot of question about how much they can hold their value.

i think the naysayers who dispute whether ev's will ever hold up as well as combustion cars, you look at what toyota has done with the prius or tesla has done with its ev's. maybe with the exception of recently when they slashed knew car prices, before that they had a strong resale value and that was standing out when you crunched the numbers and took a look at how ev residuals were trending. lisa: there is another aspect of the higher prices and that is by strategy. auto manufacturers are being more selective about which cars they put out. at what point will this become a political issue? or you will get the pushback, make more cars for the common american individual across the world rather than sticking with high-margin products. craig: great question. i particularly hear it more in

europe. i would attribute that to the fact there is real concern about creeping relevance of chinese manufacturers. you are seeing more and more chinese automakers start to export. more of them taking a look at europe and real concern on the part of executives of, the owner of jeep and ram has talked about bringing the cost structure of european manufacturers down, or we need to take a good hard look at whether we need to put up trade barriers. it is all reminiscent of decades ago when we were talking about the japanese and korean manufacturers looking abroad and looking at markets in europe and the u.s. real concerns about cost structures in china leading to a mini built in the u.k. not as

cost-effective as one built in china. jonathan: some of these chinese manufacturers becoming more and more popular on the mainland. the huge effort we have seen from the more established brands out of europe and the u.s. to make inroads into china. i wonder how much they will be crowded out? tom: it has been there forever. this is the conversation from 50 years ago. it is the labor arbitrage. it is not so much china, which i do not get, but china manufacturing to japan or other places. lisa: the perverse irony of this is that right now, the reason why germany may not turn against china is because they depend on selling their cars to china. if they become less competitive with respect to selling their autos in china, does that increase the tensions? tom: should i make this granular? i do not even look at the car names.

it is a $47,000 kevin bacon. [laughter] when it comes down to is $931 a month auto payment for four years which is $11,200 per year to buy a kevin bacon. take the other cars as well. jonathan: have you rented that car? tom: how much of america can afford a kevin bacon? jonathan: are we seriously say a hummer is good for the environment because it is electric? is that what we are going to say? tom: i never bought it. where'd you get that charged in manhattan? lisa: there are charging stations. i don't have any. tom: are they off chelsea pi er? [laughter] jonathan: i think the issue is how environmentally friendly they actually are. some of these are massive.

tom: incoming hate mail. jonathan: cpi data, up next. ♪

this is ge vernova, helping generate and move the energy that our world needs. ♪♪ welcome to a new era of energy. i screwed up. mhm. ♪♪ i got us t-mobile home internet. now cell phone users have priority over us. and your marriage survived that? you can almost feel the drag when people walk by with their phones. oh i can't hear you... you're froze-- ladies, please! you put it on airplane mode when you pass our house. i was trying to work. we're workin' it too. yeah! work it girl! woo! i want to hear you say it out loud. well, i could switch us to xfinity. those smiles. that's why i do what i do. that and the paycheck.

the eagle has landed. that's one small step for man... hey, what's up? uh... houston... we have a situation. how did you get here? you're characters in our video game! video game? yeah, it's what we do with xfinity 10g. it's like, you know, the best network imaginable. what the heck is that? those are the bad guys. are they friendly? the 10g network, only from xfinity. one giant leap for mankind.

>> i think the january data in the u.s. will come in strong. >> there is the possibility inflation goes back up >> when the dust settles inflation may

be higher than before the pandemic. >> if core services remains strong, the fed is not stopping yet. >> we have the fed doing the job to end the period of free money and put us on a more realistic course. announcer: this is "bloomberg surveillance" with jonathan tom keene, jonathan ferro and lisa abramowicz. tom: a most important valentine's day outshone by cpi. futures up 14%. jonathan: retail sales tomorrow. we are looking for cpi to come in without the deceleration. retail sales, people looking for a punchy number.

what changed the story was that blowout payroll report and a lot of people starting to push out recession calls, bring back in getting to 5% and we will see whether the data in the coming weeks changes that. tom: kenneth rogoff will be joining us. stephen stanley, magical on the data. where are we in one day, today, three days? jonathan: bank of america put out there data this morning. what are we in? the 20's or 30's? you get the start of a bull

market. the pushback to that report as we have not actually had a recession yet in america. lisa: and what kind of bull markets is going to be? it is a bull market stuck in traffic or maybe it is no animal. the year end forecast is 4200. it is not a screaming bull market. jonathan: it is about the journey, not the destination. lisa: dear lord. [laughter] tom: is that your valentine's? jonathan: that is what i wrote in the car this morning. [laughter] tom: it is a sensitive ferro this morning. we are going to try to make it through 10:00 and then have a wonderful valentine's day breakfast. lisa, there is an historic moment. it is without question the tea leaves of this morning.

0.51% on the t bills. lisa: bonds and stocks are voting for different things. bonds are preparing for a higher rate future and bringing forward the forecast for how much the fed can raise rates. when does this have an effect? cash looks great, you are getting paid to wait, at what point does that fundamentally shift the risk-reward proposition in a way that has not? been felt tom: 26 minutes, eight seconds away from the inflation report. jonathan: the euro-dollar has some weakness. tom: he can go across assets. david bailin at citi global

wealth. how close are you from amending the 2023 outlook? david: not very close. i think the markets ahead of us are optimistic we are going to avoid a real slowdown in the u.s. and that seems unlikely to us. jonathan: let's talk about the cpi data and what it could mean for higher terminal rates. a lot of people think there is upside risks. people like sonal desai saying we are going to get to 5.5%. what do you think? david: they are looking at everything with great urgency and this month we could see a surprise on the upside because you have higher energy prices that will be imminent. i think you have to think about what the trend is an the trend

on inflation is down. if we look month-to-month, that is one thing, but we can imagine inflation running at a 3.5% to 4% rate by the end of the year. that is the trend that is upon us. if that is upon us, that is a good thing for the economy. what the bond market is doing is the opposite. rates are going to stay higher for longer and that assumes there is no slowdown in the economy. that is unlikely to us. lisa: you think the divergence between bonds and stocks airs more on the side of stocks being right and bonds being wrong. is that what you are saying? david: stocks are optimistic. they're looking through an earnings trough and do not understand it could be substantial. we are predicting earnings in the u.s. could go down 10%. we already see disappointing prints in many industries over the last several weeks. if that is the case, stocks have a leg downward. take a look at the short

position in the market relative to 2008 and 2009. we had a huge short position than and we have a bigger one now. lisa: right now, what do you think the fragility is of this market to whatever the print is we get in 30 minutes? david: i think the market -- you look at the movements that have taken place on the 10-year. all of those changes are happening within a month or two. that tells you how volatile the market is. but to your point, one of these markets is going to be right and we think it is the bond market. if you look at its ability to predict recessions with 90% accuracy, when you have the inverted yield curve, the strongest we have seen, it is hard to ignore that. the answer is we expect the bond market to be right. tom: i don't want you to comment on an individual stock,

coca-cola, but it's organic revenue growth to dream of, let's call that the nominal gdp proxy, and cash flow is not there. that is the dovetail. sustained organic revenue growth versus margin challenges. when you dovetail your security analysts into all of your work what you say about those conflicting forces? great revenue and margins that are not all that great. david: you would imagine in a market like this exactly that problem for most companies. their ability to maintain pricing power, which they had during the pandemic, was clear. that is fading. that is happening in many other industries. any place there is a lot of inventory. retail sales can go up and down by the weather and this was a better month for weather. but the amount of actual consumer spending is heading down and with that margins will

had down. that is another example of why earnings for the next three to six months are on a downward trajectory. jonathan: if that is the case, where is the haven within the equity market? where do you find safety? david: safety is important and the way to find that is in stocks that do not have that problem. let's take the pharmaceutical industry. you have high and growing cash flow, the ability to maintain margins and high dividends. there are so many stocks that have done well this year that are the real laggards that have done poorly the last three months of 2022. those stocks that are tried-and-true that beat the market last year will beat the market this year. the only time we want to be heavily invested in the high beta parts of the market are where we see the trough of those earnings looking into 2024 and expectations are higher. we have not gotten there yet, and people are impatient. jonathan: people are coming on

programs like this and saying, buy t bills. could you explain that a little bit more? what works best? david: the first and most important thing is they should be investing their cash. lots of clients have way too much cash. but there are some of the opportunities to lock in yields. lots of the bond market is rich and i do nothing think we are going to be at these rates a year and a half from now. bonds are back, we want full allocation to them and we do not have to take a lot of credit risk. if i were advising a family, it would be to be out on the five or 10 year range. you can always trade that in for other bonds are equities but you cannot get these yields a year from now. jonathan: david bailin of

citigroup. fomo. fear of missing out. tom: we get jaded because we are grinding this out every day. [laughter] jonathan: i think the point david is trying to make is, let's say you take a 12 month t-bill. he does not think these will be around for longer 12 months from now you will not have the opportunity to take 5% again. that depends whether you think this is real rate change or not. lisa: that is what people say on the short-term it is a clear buy. people are giving you a victory lap. but at the same time they are saying longer-term we don't know, because we do not know what the new regime is as well as with the inflation rate will end. that is the vague aspect and

then have others saying 420 on the 10-year. tom: i just got an announcement. jonathan: drumroll. tom: we got the triple leverage all cash gpt etf in registration. jonathan: nice. [laughter] tom: it is gpt with cash. i have to make two and 20. [laughter] jonathan: i did not realize stephen stanley had gone to santander. we will do that in 18 minutes. inflation data 17 minutes and 55 seconds away. [laughter] futures are up. this is bloomberg. lisa m.: keeping you up-to-date with news from around the world with the first word, i and lisa

matteo. president zelensky's i aimed at cooling accusation of cooling corruption in the government. -- zelenskyy has signaled support for the top aide as the country braces for a possible russian offensive. russia's nuclear exports have surged since the invasion of ukraine, cementing influence over a new generation of global buyers. exclusive trade data compiled by the u.k.'s royal united services institute shows russian nuclear fuel and technology sales abroad rose more than 20% in 2022. purchases by european union members climbed to the highest in three years. turkiye is throwing its full weight behind stocks before it's

stockmarket reopening tomorrow. bloomberg learned the government is channeling billions from pension funds and state lenders into the stock market. that is part of a plan to contain the market fallout from the february 6 earthquakes that hit the country's southeast, killing more than 37,000 people in turkiye and syria. global news 24 hours a day on air and on quicktake by bloomberg. powered by more than 2700 journalists and analysts in over 120 countries. i am lisa mateo and this is bloomberg. ♪ get help reaching your goals with j.p. morgan wealth plan, a new tool in the chase mobile® app. use it to set and track your goals, big and small... and see how changes you make today... could help put them within reach. from your first big move to retiring poolside

and the other goals along the way wealth plan can help get you there. j.p. morgan wealth management. go. go brain. no, not that one. go this one. go optimizing data. go efficiency. go results. emerson's plantweb digital ecosystem is the brain for smarter, safer and more sustainable performance. go plant go. go boldly. emerson. 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.

>> it is about the labor market. the fed is very concerned that the price increases are going to be sustained unless we really see a step down in the growth of the labor market. and that most recent jobs report suggests anything but that. jonathan: former fed governor and current university of chicago booth school professor of economics. that payroll report shaking up things big time. you thought one thing and then the market rallied and it is ok, i need to restart 2023. lisa: and then people in the equity market were like, never mind.

the san francisco fed said it was due to the weather. jonathan: ok. mike mckee can tell us about that in a moment. equity futures up 0.25%. looking forward to the january cpi report around the corner. yields coming in a little against the grain, 3.68 right now, but moving 20 basis points for the two-year. tom: really exciting. there is no other way to put it. it is really interesting the gyrations. i m going to go back to the equity market yesterday. we lifted. jonathan: i and not going to explain every tick. tom: really important point. that is how stupid it has gotten. jonathan: it has gotten stupid. tom: to clear us of the stupidness, stephen stanley at

santander. thank you for joining us with the brief. you and i remember the idiocy where the world would stop. how silly are we being right now 11 minutes, 28 seconds away? stephen: i think there is a lot of seasonal noise in the data with the january employment report. i think we will see it again tomorrow and to some degree with the cpi. you had three very low readings to end last year and people got excited inflation was under control. and then last friday we got new seasonal adjustments and they revised up november, october and december. all of a sudden, that downward momentum has dissipated and i think we will see more of that today. i and looking for a 0.4% reading with upside risk. jonathan: this conversation about super core, can you shine

a light on the conversation you have had with clients? do they expect an estimate from you? what do you say? stephen: people are definitely starting to focus on that. the key is the housing piece. we are taking that out. it is over 40% of the core. when you take that out you are taking out a big chunk. but the presumption is housing expenses are going up fast right now but they will come off later in the year because of the lags involved. people are wanting to focus on the other pieces in the core but the broadpoint is services prices tend to be sticky. they have accelerated and i think it is going to take quite a bit of time for them to come back off. lisa: with all of these seasonal adjustments and as we watch the upward revisions even on the prior month's cpi heading into this current report, are we

going to look back and say, there was not much disinflation. that was a head fake at a time when services were re-accelerating? stephen: if you look at what happened late last year, it was a handful of very volatile categories pushing things down. gasoline was one but used car prices were falling rapidly, air prices were falling rapidly. it was the reversal of the big spike we saw in energy costs after the russian invasion of ukraine. you can see at the time it was not sustainable, that the low core readings, the low headline readings. now we are getting back to something more in line with where the fundamentals are. lisa: we are going to get a fed parade including john barkin, coming up. what are they going to say if this is a hotter than expected print? stephen: the fed has been leaning against the market

enthusiasm and saying, this is going to be a tough task ahead of us. it is going to take time. it is not going to be i told you so but i think it is going to be more steady as she goes for the fed that it will be for the markets. it feels to me the fed has really almost locked in a game plan. they want to get rates above 5%, which means two more 25 hikes, and then give it a pause and see what happens per it and think the bar is relatively high for divergence on either side. tom: excuse me. [laughter] this idiocy of now casting the beloved geniuses at cleveland who i adore for their work on inflation for 20 and 30 years, even they have dived into the value of now casting.

is there any statistical value to navelgazing now casting? stephen: as economists, we have all been doing that to a degree. i do not like to advertise my number on a day-to-day basis but the one price we can track his gasoline prices. that is responsible for a good part of the high-frequency noise in the data. otherwise it is pretty tough. how do we know there is not going to be surprise on medical care? there are certain things we can track and others we cannot. jonathan: you keep that a secret? stephen: that's right. [laughter] i cannot show you everything. jonathan: stay close. stephen stanley of santander. mike mckee is our now castor. tom: road trip to stanley to spain.

[laughter] jonathan: so predictable. tom: high speed rail. the three of us. jonathan: that works great. lisa: happy valentine's day. tom: let's go to mike mckee. is there any value to this madness as we are six minutes and 25 seconds away? mike: not really. some investors making an investment decision might think so but to follow up to what stephen was saying, they teach you in economics school that you give a date or number but you do not combine the two. [laughter] tom: but these revisions are serious. we have great respect for what you are doing and the rest of it. not casting is like betting on the super bowl. the chiefs, do they have a chance? mike: any political poll is a snapshot of the day people were asked. it does not tell you what they are going to think down the road.

we look at the atlanta fed gdp number all the time. given the data they have, in january, we don't have any data but they still put out a now cast. jonathan: what will you look for immediately? mike: we will look to see what energy prices did because that was probably something that did drive things up. and then housing prices. we will look for that super core and see what is happening because that is the most important to the fed. a lot of other categories will go up and down and we will see what contributed to it. overall, let's see what the fed wants to see and see what that tells us. jonathan: lisa wants super core straightaway. [laughter] lisa: i cannot take it seriously. jonathan: do you remember when chairman powell said there isfor nuance another is? lisa: strip out housing and everything but services, you strip out energy -- jonathan: we did that when

people said it was transitory. lisa: the bottom-line is inflation has come down but it has not come down that much. i think that is the take away. now the issue is does the fed have to be more aggressive in the pushback? tom: i m looking at year-over-year super core and it tells the story. 0.9% to 6.43%. it is dramatic. jonathan: equity futures up one third of 1%. your inflation report is four minutes and 13 seconds away. futures up any yields in. cpi data, coming up next. ♪

lomita feed is 101 years old. when covid hit, we had some challenges. i heard about the payroll tax refund that allowed us to keep the people that have been here taking care of us. learn more at getrefunds.com. (jennifer) the reason why golo customers have such long term success is because we focus on real foods in the right balance to keep the people that have been here taking care of us.

so you get the results you want. when i tell people how easy it was for me to lose weight on golo, they don't believe me. they don't believe i can eat real food and lose this much weight. the release supplement makes losing weight easy. release sets you up for successful weight loss because it supports your blood sugar levels between meals so you aren't hungry or fatigued. after i started taking release, the weight just started falling off. since starting golo and taking release, i've gone from a size 12 to a 4. before golo, i was hungry all the time and constantly thinking about food. after taking release, that stopped. with release, i didn't feel that hunger that comes with dieting. which made the golo plan really easy to stick to. since starting golo and release, i have dropped seven pant sizes and i've kept it off. golo is real, our customers are real, and our success stories are real. why not give it a try?

jonathan: inflation data in america around the corner and seconds away. equity futures a positive by point -- by one third of the percent. yields going down into the print on a 10 year. 3.6712. sub 450, we are at 449. with your cpi data is mike mckee. mike: while we are waiting for the data to drop and in my computer it comes in right now. we are pretty much bang on as expected. a .5 gain for -- after a .1%

gain in december. low core comes in at .4 and the same as the december number. that puts us year-over-year on a headline basis at 6.4%, higher than the 6.2 expected. 5.6 for the poor: -- on a year-over-year -- core on a year-by-year basis. we are seeing a little bit of improvement, not as much as some people would like, but we are seeing some statistical changes that might have affected it. we will go through the numbers and see what the actual changes are. the one thing i can tell you is gasoline was up 2.4% in the month of january. so energy prices did make a difference, natural gas prices were up 6.7%. that had been a weaker area and with the cold area -- with the

cold weather came up a bit. jonathan: price action was positive now we are negative on the s&p 500. the yields were lower and then they flipped positive about two basis points. we are now up two or three. 455 -- 4.55 was the height of the session. up to or three basis points pending on the 10 year and up about a single basis point. 3.72. these are not major moves. but at least the data is something that we can continue to chew over. lisa: this is significant, however the revisions that were upward pushed the year-over-year comparison to really not declining all that much. how much does a edify what stephen stanley is saying, we have inflation but it is much lower than previously thought and the stickiness is what we are feeling. tom: my take is that bloomberg

has really good at the median person of this and a lot of trends will continue off of this. we will hear that it is another data point and they will be more of it. we get up to the fed meetings and make sure that i quote this. march of 2020 two with another inflation report before the meeting. i would make a three-month moving average and anil -- annualize that. jonathan: the federal reserve chair said the disinflationary process has started. does this support or conflict it? mike: it seems to support it, because he was looking at goods versus services and it does look like we had a decline in goods prices to a year-over-year break from 2.15%. a change with service prices continuing to go up 7.16%. in december that was 7.05.

we have disinflation but we do not have services disinflation. a couple of notes of what has come in in terms of changes, rent up .8 the same as december and owners equivalent down to .7%. that is still a high number for housing which is why the fed wants to take that out and we will see what is happening with other aspects. tom: we will talk to stephen stanley and talking about liz. we are talking about an annualized basis. back to october, mike mckee, 6.9% owners equivalent rent. 7.1%, 7.5% in the latest print which is 7.8%. those are big numbers and that is what we are feeling. mike: they are still big but it is the way that the cpi is constructed takes into account rent for the whole year. it takes a year for new rent

prices to get into the components and we have seen that the most recent numbers according to other aggregators are coming down. tom: the now cast is something. jonathan: it is something else. yields are up after the print and they were down by nine basis points. they are down by three basis points now. things are all over the place. lisa: the yields are yo-yoing. this looks like a kid trying to play with a yo-yo. stock markets and a rally is going to rally. that is where people will take this. you are seeing inflation that by some metrics -- tom: is this a job interview? jonathan: rallies are going to rally. i love that. lisa: that is the momentum trade rogan down for the millennial. jonathan: you find somebody who

wants to explain this. i will catch up with mohammed and we are looking forward to that conversation. mohammed will probably not say rally is going to rally after we talk about what this means. mike mckee and i will catch up with the richmond fed president. that will be the first fed speaker back on this data. mike: you will see, i suspect given the market reaction and his reaction, it could be good or bad. you know, what it looks like is that it came in as expected and some people were leaning one way and it is always a roulette wheel in the markets after the data comes out. probably not a huge thing. a couple of notes, new cars were up three -- .3 and used cars were down 1.9%. that continues the trend down 2% in december. still getting some benefit,

although that is likely to turn around and we did the services shelter, apparel prices up .8%. you would think clothing would go on sale after the holiday period. tom: mike mckee will dive into the data. he has columns and rows of david rosenberg like data. we have the privilege of continuing with stephen stanley of harvard university. mr. stanley you have had time to dive into a first look at this industry -- at this interesting data. what is the adult take? stephen: largely as expected but could have been worse. we saw a decline in used car prices again and in airfares. those things are not likely to continue for much longer. medicare service prices were down 1.7, and that is probably

an exaggeration of what we are seeing. and then there were upside surprises. my point is being that some of these volatile categories have been driving down the readings in late 2022 and continue to january and we still got .4. that speaks to what we were discussing before, as long as shelter costs continue going up as rapidly as they have been it will be tough to get inflation down. tom: this is critical, there is no other way to put it. we see it from an equity strategist and economists like mr. stanley, the idea of housing is being overwhelming. how overwhelming is it. give us a percentage of lives that is based off the set of housing data you have. stephen: sure. pi might exaggerate -- cpi might be exaggerated. rent and owners equivalent rent account for 40% of core cpi.

when we talk about the super core idea, you're taking out a big chunk of the numbers. it is a little bit smaller in the pce deflator, which is the inflation indicator that the fed focuses on. within the cpi, housing is the story. tom: we will talk with stephen and michael is digging into the deity -- into the data and we are thrilled to bring you an expert from harvard. lisa: as we watch the yo-yo action this builds on what we have seen so far. it is like a child's toy what is going on and i am wondering whether you are looking at the inclination to rally, which is something that we have seen. how much of a challenge does that present to a fed reserve that on the margins is seeing the addition -- disinflationary process that is too slow for comfort. stephen: the markets in the fed

have not been on the same page for a while. the markets have embraced slower inflation last year and the markets want a quick fed up a bit later this year and the fed has been trying to push back against that. i thought chairman powell had a nice chance to push back at the fomc meeting when he was asked about financial conditions, and he did not. the fed has taken the tack of we will let the data how -- determine how the markets will react and it will play out in a way that gets things closer to where we think it should be. it is always a dangerous game when the fed tries to influence asset prices. jonathan: it is a danger -- lisa: it is a dangerous game but it is one of their main monetary policy mechanisms. how much further away do they get from their goal as financial conditions ease substantially to some of the lowest levels going back to early 2022?

stephen: no doubt. the minute markets sniff that the fed might not have to go quite as much financial conditions ease, in some ways it is a self equivalent in process. from the fed's perspective, even if you get somewhat weak economic data inflation might prove stickier stubborn and that is a scenario that the market has been reeling -- willing to contemplate much. tom: thank you so much. we are diving into the data, michael mckee, is this time it is different? mike: i will give you a good reason to be optimistic so we can go home and forget about the fed. the super number comes in at .27, so .3 percent gain during january compared to a .37 to the month of december.

take out housing and as stephen says you have 40% that you are whacking out of the cpi in terms of the core and you have progress. we are still seeing some gains. lisa: isn't this too cute, especially if you look at the assets? you strip out everything and you get what you get. on one level i understand and on the other label -- level you have seen re-inflation areas including a whole host of different metrics. so how do you parse out? mike: the key is that you can strip out stuff and get what you want to get. the fed is not trying to get anything, they are trying to use it as a measure of what inflation is doing. because housing is such a big part of cpi it distorts the rest of the price movements. so if you want to see what is going on you take that out and it does not mean that inflation is gone, but it means that there

is progress in things other than housing which is going down and it has not worked into the system. tom: much more on this. jon ferro will be with us on radio. 4.53% in an elevated two year yield. lisa will tell me when we jump up and down a substantial amount. lisa: no. tom: this is a joy on a busy inflation day. he has a professor at harvard university and his work for the nation at the international monetary fund defies a description but this time it is different. a seminal book that is must-read and must own. "the curse of cash" which was out a number of years ago on this inflation day. there are things to talk about, but we will talk about crypto in a moment with the professor. thank you so much for joining us this morning. there are some people making news on inflation, one is a guy

named summers which you have a nodding acquaintance with at cambridge. is the character of this inflation the shock disinflation pre-eisenhower and through the 50's? is it like the 60's, or is this a different inflation? >> i think the fed is clearly more alert than at an earlier time, on the other hand, i thanks as lisa and others have been saying, inflation is still here and the economy is still strong. they have to decide how to play it. one thing that people are not paying enough attention to is that when inflation comes down do not be sure that interest rates will come down as much as people got used to before 2022. i think the next decade we will land at a higher real interest rates than before. it is not just the fed does not

have to just figure out how much is inflation. they have to figure out where do we put the interest rate long-term so we do not have inflation. tom: my book of the summer is just out which is absolutely brilliant on something academic r-g. the heart of the thesis is that there are other things going on that we are really not observing which is not as cool -- cookie-cutter and simple as all of the analysis that goes on day today. what is a thing going on post-pandemic that changes our finance, and particularly as olivia talks about, changes the debt analysis? kenneth: i think there are two things. i think inflation-adjusted interest rates will land higher than olivia does. you look at history, yes there is a slight downward trend and the inflation-adjusted interest rate was tiny compared to how

much it fell and i think there will be more agreeable version that perhaps he does. but who knows and the second point is that china will not be the same in the next decade as they were in the last decade. they are rebounding off of the covid lockdown and those are two big changes and trends that we will see after the pandemic that we did not have before. lisa: why is there important for it to be tighter financial conditions as it implies it is just not an inflation story. kenneth: we had lower financial conditions because people were scared after the financial crisis and saving was high. now we have measured in era where data has, quite a bit which leads to some adjustment and defense spending will go up. spending on green transition is going to go up.

more populous governments from latin america to the united states to europe, a lot of factors will lead to more of a normalization. lisa: people are thinking is that good or bad for stocks in the markets because that is sort of how people have viewed all of the fed actions, tighter financial conditions and effective tightening has allowed markets to rally. can you see the sustained momentum of financial markets even in the face of tighter monetary conditions of higher real rates? kenneth: higher real rates mean lower asset prices. what is going on is the economy is stronger than we would have guessed if the numbers were right on the last labor market. that was incredible and eye-popping. in the economy is doing well and that is good news so the interest rates are tighter which is good for markets.

tom: if you are just joining us welcome to "bloomberg surveillance" and lisa's monitoring can i say green on the screen? futures up three and there is some serious gyration going on before we get to the opening. the vix 19.4 on the two year yield and we are thrilled to have a substantial conversation with the professor from harvard university. you exited the imf and then post gse they looked at 4% inflation and what an uproar that ensued. i would suggest that peterson talked 3% is the new appropriate level. are we going to get away from an anchor at 2% verbiage? are we going to reset? are we going to reset this morning higher than a 2% level? kenneth: i am not going to be able to help you.

that is extraordinarily likely and not a good idea. probably back in the day they should've said 3% instead of 2% and they did not. they have really made commitments. if you change it it means that you might change it again. what i think on fact will happen we will not have a soft landing. i think we are going to be soft but not the landing. i think inflation will be elevated for longer and they will say it gets back to 2% it is just taking longer and i think that will be the rhetoric. tom: i want to shift to china as you mentioned. i mentioned there is a guy who wrote a textbook a few years ago, i think it is 9000 pages like the game of thrones when they take it off-the-shelf. kenneth: it just feels like it. tom: what is so important as we go to this textbook to the work that was done 20 years ago on trade and labor.

some in international economics with the challenge with this evil thing out there. she is the expert on trade and labor multinational dynamics. where are we heading on that with china? kenneth: let me say i have the utmost respect for that. i worked under her at brookings when i was a visiting scholar in her section and i have known her for a long time. i think trade economists are looking at the data so far and saying what deglobalization. everyone is talking about it but it is not the data. if you look at tensions with china and particularly if someone goes on in ukraine say with russia really escalating with nuclear neutron bomb or something and china continuing to trade, we will have to talk about secondary sanctions which we had done with the rounded north korea but absolutely not

done with russia. you want to trade with russia that is your business and it is fine. and then that really will be something. a lot of the effects that we saw in the later -- in the labor market could be reversed. short of that it is modest, the changes we are likely to see. lisa: the shift from vice chair to the head of the economic council also highlights the political nature of making some of the decisions that you talk about. the kind of take on it that the fed will allow inflation to remain higher for longer. how much of that is a response to the deglobalization policy that is hoped for, the admission that you do not want to kill the economy. how political is that decision allowing this to run hot into later this year? kenneth: i have personally said it is the right decision because we do not know what is going on. the labor market has all of

these distortions coming off, the economy has all of these distortions, and you do not want to race ahead like you know what you are doing. i would not be surprised if interest rates end up at six to bring down inflation, but why do you want to get there right away or rush to that judgment. maybe they are going to end up lower. i think, i do not think -- it is clearly very political at some level because growth is strong but inflation is high. which way do we choose? that is a political decision. the fed tries to approach it in a technocratic way. lisa: what you said the rates could get to 6% but why rush it? this is an important point. is it appropriate to do 25 basis point increments or sit on their hands and wait for a number of months to really get underway since it is not a rush? kenneth: honestly speaking

either strategy would be reasonable at this point but they are kind of committed to do two quarter-point hikes given the labor market and inflation data. and i do not think it would matter one way. it would matter more of suddenly we do not know what they are doing. i think the real message is who knew what would happen with the labor market report? there is a lot of uncertainty and that means moving slower and cautiously you cannot predict too far ahead. tom: i want to do this without first order difference equations or else they would all drive off the road. i remembered post -- post volker ended essay written in 1981 and they were taken to task at higher rates can be not crucial for worrying about that sustainability. so many of listeners and viewers are scared that if we get higher rates for the 6% that you talk of that we are not going to be

able to fund the debt and deficit. are they linked or are they separate? can we be comfortable with a higher rate regime given the debt of the nation? kenneth: first of all the united states is a global currency. the question is how much it costs us in the real outcome if we have too much get -- debt is that we get more inflation. that is what happened, we had a partial default on debt. inflation was higher than anyone was expecting and that put money in the government's pockets. it is a soft partial default and we are not talking about not paying the bills unless some crazy people in congress decide to do that. tom: there is a more important question, there is a vacancy in the fed, would you consider being vice-chairman? kenneth: i do not think i am likely to be a candidate. lisa: it is his to offer the

job. i disagree, i think that there was a lot. this was a really important point because this was edifying this view where why is there a push to get back to 2% inflation. are we going to get that kind of you if we see disinflation. is it enough disinflation to be ok. this is enough in the time that you wanted to be a political decision. tom: the common feature even if they disagree and you mentioned at the beginning that he disagrees and with the real rate staying down, but the answer is that these people have a hard earned humility by noted -- by noting the history of inflation. there is a humility here that i do not hear in the noise of twitter or the rest of it. lisa: or the noise of markets

where they are flip-flopping trying to get a sense of what to do. we do not know where we are coming from or going in terms of what inflationary shock and what labor market disruption. tom: we will have to see the 4.5% of the two year yield. this is harkening towards professor's point, a 5% print. certainly in the next six months. it has been an extraordinary show, thank you for making this interesting. we will drive forward the next conversation in the next hour. thomas barkin of the richmond fed, there is a culture of fabric that is so different. barkin of richmond stay with us. this is bloomberg. good morning. ♪

girls... the chess club has gained an edge on our bake sales. we need more ways of connecting with customers, fast. i know some consultants with great ideas. can they help us improve our digital experience? absolutely. they've invested over $2 billion in tech. that could really help us manage inventory. and save us a ton of dough. then let's take back our market share. checkmate, chess heads. girls, i said “bedtime”! this is ge aerospace, advancing flight for future generations. ♪ welcome to a new era of flight. as a business owner, your bottom line is always top of mind. ♪ so start saving by switching to the mobile service

designed for small business: comcast business mobile. flexible data plans mean you can get unlimited data or pay by the gig. all on the most reliable 5g network. with no line activation fees or term contracts. saving you up to 60% a year. and it's only available to comcast business internet customers. so boost your bottom line by switching today. comcast business. powering possibilities.

jonathan: live from new york city, good morning and a beautiful morning i am sure truck -- i am trying to figure out what the inflation report means. the countdown to the open starts right now. >> everything you need to get set for the start of u.s. trading. this is bloomberg "the open" with jonathan ferro. tom: live -- jonathan: live from new york the cpi before -- report keeping the pressure on the fed to keep hiking as the white house euros in