>> we believe the u.s. economy is going to stall even before these banking events happen. >> we are not done yet on the hiking cycles. >> the fed will be thinking about how much credit tightening will be happening as a result inside the banks. >> you have to pay attention to the fed on the third guardrail which is fed supervision. >> we don't think the suggestion there is a recent crisis is brewing. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. jonathan: decision time for

chairman powell. good morning from our audience worldwide this is bloomberg surveillance on tv and radio. equity futures right now on the s&p down about 18th of 1%. we've done a full round trip. >> in other words did anything happen. yesterday was the first time we had two consecutive days in decent trading since the first silicon valley bank collapse. there is a feeling stability, does that mean all things go for the fed and they can ignore the roundtrips we got in the meantime. jonathan: decision, a statement, forecast, oppressor. what are you focused on now? lisa: it's good to be the press conference even though his had a real record of not necessarily sticking to a script that has any relevance five days later. the issue here what he indicates going forward. jonathan: tell us what you really think.

lisa: do you disagree? jonathan: we are going to get to julie a minute. do i disagree about chairman powell if he goes off script she struggles. i don't think today is a day to go off script. lisa: is he going to just read a statement? jonathan: we will see. there's been time after time where he struggles in the news conference when he goes off script. lisa: do you think it will give people comfort if he just takes a sheet of paper. jonathan: it depends what the message is on the sheet of paper. pretty punchy stuff from lagarde today. we will not entertain trade-offs on our primary objective. tom: which is inflation -- lisa: which is inflation and saying we have the tools so we will focus on inflation. inflation keeps surprising to the upside. we look at the u.k. this morning. this is the conundrum and it's

not that different for jay powell. jonathan: look at them now. talking about another hike tomorrow off the back of elevated inflation. it's brutal stuff. a taste of the flavor of the price action. there's no real drama here. bond market yields are lower. 4.1% on a two year. worth saying again. the two year yield is where it was at the close on the day the fed last met. it certainly has not found that. we've been all over the place. your 10-year, 3.5733. lisa: i really enjoy looking at this. this is what a lot of people are watching with today's gpm fed rate decision. it's the main -- you asked me what i was looking for in the segments of this

afternoon. jonathan: the projections aren't about whether there forecasting writes about what they choose to signal. i will be interested to see with they choose to signal. if the draw a conclusion about of the last two weeks mean for the outlook. the median. for 23 was 5.1%. it's an option but can you imagine if they just came out and said we've got no idea we are getting rid of them. it was obvious in the pandemic or -- what the direction of policy was paid that was pretty obvious for us all. lisa: it's a little disingenuous to give a projection you know is wrong. because no one can predict anything. 2:30 p.m. we get the treasury testifying to the senate financial services panel.

she seems to have garnered or stability in the regional banks. we are seeing an ongoing rally in first republic bank. though shares up. we are talking about this rally when you look at the stocks so far off the highs we have a long way to clawback the feeling of stability we had earlier. citigroup ceo will be take -- speaking at the economic club of washington dc followed by an event for peer to peer with david rubenstein. i want to hear what she has to say about their role in supporting regional banks, of their role in terms of what they are doing with the deposits. how does that create the conundrum for them. jonathan: do you think that's a language she will use later? julie joins us now. -- julian joins us now. great to have you with us around the table. a man that you know came out this morning and told our colleagues in london we've not seen the lows in equities this

cycle. why. >> history tells you and again this is dependent on your view of whether there is a recession. i think it's easy to make an argument the invents of the last couple of weeks have increased the probability of recession. at a minimum it's taken this idea of the no landing scenario off the table thankfully. i was tired of that talk anyway but there has never been a bear market that's bottomed before the recession has started. there of been recessions without the markets. jonathan: this assumes we are past the point of no return. is there a solution out there to the banking problems that could mean in another two weeks we are talking about the same things we've been talking about. a cycle that continues. the fed has to do more. is there a solution out there? >> i think the change in

psychology, the fact that two weeks ago we were doubting whether the laws of finance had been revealed -- repealed. and now here we are. that is a sort of rubicon you cannot undo without a degree of further development of the issues. as forceful as the policy response has been and we applaud that, there is likely to be more to be unveiled. lisa: what's worse for risk assets, between five basis point hike or no rate hike? >> we don't believe the no rate hike scenario implies the fed knows something that we don't. i think to think that is probably misguided given the fact chair powell teased the potential for basis points two

days before one of the biggest runs on the bank of all time. i think that's risk management. it's an acknowledgment of data dependency. frankly 25 or a pause doesn't mean much either. it's what he says. lisa: i want to stick on the risk management idea. there is a question of whether it's risk management for the banks or for inflation. this is something andrew at citi keeps raising the issue. saying inflation is the big boogie man. it's not a financial stability crisis. do you agree? >> we are much more optimistic on the path of inflation. to be fair the forecast is your to have a recession and the second half of this year leading into early next is part of the reason we are good at be more optimistic about inflation but a lot of proprietary surveys,

rents are starting to turn down where his owners equivalent rent is still on the flagpole. we think that's a data mismatch. wages are starting to pull. we think you can get to somewhere in a two handle by next year. jonathan: is that including the standards are expecting off of these issues. >> it absolutely has to. from that perspective again we would like to see the fed stepped back and acknowledge that there's been an extraordinary tightening in the system and by the way if you think about it if your charitable in postulating that policy works on a six to nine month lag as we've seen several fed governors suggest in recent weeks. you still have a ton of tightening that's about to hit over the next six months. >> the problem i've had in the last couple of weeks in terms of the way this is been discussed is it's been framed as a

boundary choice. focusing on price stability. a lot of comparisons they were able to handle all at the same time. kind of ignores where the underlying policy risk is. all financial stability problems are not created equally. the underlying policy risk came from the fiscal authorities. it was inflationary. it almost complemented the policy on the monetary policy side of things. the issues we have now in the united states and the banking system are arguably disinflationary because it will lead to tighter financial conditions. are we really seeing a policy conflict for chairman powell in this committee? >> that's the intellectual problem. in getting our hands around this entirety is you really should not separate the two. and frankly part of the

challenge again goes back to the idea of the second part of the dual mandate which we've all conveniently set aside full employment and recognizing the fact that instability in terms of financial conditions because that unemployment -- will cause that unemployment rate to rise. jonathan: how quickly this has moved into weeks. two weeks ago chairman powell's wrapping up day to of testimony. we are having a conversation today 25 or 50. now it's 25 or zero and zero may even be done, cycle finished. lisa: something we heard from tiffany over at pimco. the question is is is the end of the rate hiking cycle and when do they talk about cuts. i think you raise an important point,'s -- financial stability issues here than just versus what was in the united kingdom.

how they signal its material addition to what they've done. acceleration in a way they don't need to do much more. how do they do that well? >> to julian's point i get it. if they knew something what was he doing two days before teeing up 50. it doesn't matter what i think. and there is a belief that but a lot of people more dovish they are today, the worse they believe the situation is. >> there's a believe crowds our collective wisdom and the collective wisdom has been a little bit having issues. >> it's changed about five times. we've not gone through q1 yet. down a 10th of 1%. julian will stick with us. catching up with stuart kaiser this morning.

>> keeping up to date with news around the world with the first word on lisa mateo. the federal reserve caught between inflation and a sudden banking crisis. we will learn how the fed chair and his colleagues respond later today. most economists expect the fed to increase interest rates by quarter-point but some say policymakers should hold off. the decision comes out at 2:00 p.m. new york time. inflation in the u.k. rose unexpectedly for the first time in four months. the consumer price index rose 10.4% from a year earlier. that followed a 10.1% jump in january. food and drink prices were among the culprits rising at the fastest pace in 45 years. all that may boost argument the bank of england should raise interest rates and soon as tomorrow. xi jinping used his visit to moscow to firmly align with russia against the u.s.. the chinese president did not give vladimir putin something else he wanted, a commitment to

buy more natural gas. it showed china may be hesitant about appearing too close to russia. it was the first trip to russia since putin invaded ukraine. a move certain to anger north korea. the u.s. and south korea plan to hold their largest ever live fire drills in june. the exercise will involve mobilizing high-tech military equipment. the two allies are winding down training drills this week. north korea has responded by threatening to turn the pacific ocean into a firing range. global news powered by 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪ it's easy to get lost in investment research. introducing j.p. morgan personal advisors. hey david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management.

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>> i have made clear there is no trade-off between price stability and financial stability. we have plenty of tools to provide liquidity support to the financial support if needed. and to preserve the smooth transmission of our monetary policy. >> hawkish stuff from president lagarde of the ecb. euro-dollar very close to 108 this morning. welcome to the program. euro-dollar looks like this. positive 2/10 of 1%.

equity futures down going to chairman powell's news conference later and fed decision. in this statement in the early part of the statement there is this phrase ongoing increases. i wonder if that gets dropped today. >> no forward guidance if they say it and this time it means. >> everything will be parsed and interpreted through a lens people want to interpret it through. what does the market want to see and that's what we will find out later. >> i wonder if we even are member what they did in this statement. >> i don't know how relevant the 25 basis point rate hike or not really is at this point. it's the ongoing guide. are we seeing the end of the rate hiking cycle. that could be potentially more supportive or more dovish than even not hiking 25 basis points. >> this is up in the premarket. let's call it 2.7%.

i would rather say $.40 at this point because once you get down to these levels it's not really worth reading the percentage point change day-to-day. they are just monster moves. lisa: everything's a monster move off of a low basis. the fall is what's the path forward. dow jones reporting first republic is -- has hired to potentially review options using a cap well infusion, a sale, this according to people who spoke with dow jones. how much do we see this being supportive of some sort of future recovery. how long shall often do you see a company say we are examining our strategic options and say we are good. >> it's because you don't have many options and it's a problem. that's often the case. ubs is examining its strategic options with credit suisse through most of the weekend. ubs down for tenths of 1%.

tuesday was up by 12%. let's get over to zurich and catch up with marian who joins us now. what's the latest on this integration between ubs and credit suisse. >> there are still pieces coming out of this. the latest we saw this morning is you had an announcement with ubs buying back their bonds actually in the sense we are getting is in the sense of the credit spreads widening after their purchase of credit suisse so we see a little bit of risk associated prior to the merger panning out and infiltrating ubs. it sort of makes sense to give an opportunity to the holders of that debt to reevaluate whether or not they want to hold that debt post this merger. lisa: one of the implications has been for the contingent capital bonds. they underpin a certain sense of stability. have we reached a stability in terms of european regulators

pushing back against swiss regulators and saying equity has to get wiped out first. >> that's been a huge source of questions this weekend. there's a little bit of a debate as to whether or not this was how things were supposed to go. but from their point of view and the regulators in switzerland they always have this option and so it's up to them whether to trigger this in the way they want to trigger that. there are some parties in that who are holders of the bond who are asking bigger questions and wondering whether there's a legal case to be had. jonathan: are -- what are we day three? lisa: it will all change tomorrow. there has to be next to risk premium with these bonds given the uncertainty and the fact they could get wiped out before some equityholders. >> great to catch up, a fantastic work over the last weekend as well.

emmanuel alongside us today, a great to have you with us. this came from goldman sachs. they said evaluation for banks in absolute terms in europe, some people might say for good reason. other people might say it's a buying opportunity. >> we lean towards it being a buying opportunity. going back to a global tightening cycle the lacks likes of which we haven't seen in 40 plus years to think there would be things that you wouldn't have things break was naive. the bigger picture and this was one of the times to parsed between the long run being volatile short runs as it frequently has been not just the last year but the last three plus years. having purged the concept of negative interest rates from the psychology of european investors i think actually lays the groundwork for a better future for the financials.

>> on a broader level there's a question of it's not a bailout kind of behavior is longer-term for the profitability of these banks. what the utility of them is and whether they're treated as such unless its profit engines. how do you bake that into the assumptions given the likelihood of more regulation. >> again that's a difficult concept and it's something that took a lot of people a number of years coming out of the financial crisis to really wrap their arms around and frankly when you think about the concept of deposit insurance for all, it really does hearken the idea of a more utility like return for the group and actually frankly i don't think this has been discussed the concept of deposit insurance for all is actually a reasonably inflationary concept in the final analysis. you'll have to create money if

you're going to plug holes where there is money in liquidity issues. >> regulators have argued the banks will ultimate leave bear the cost of this not the taxpayer. there's a question of whether this impedes profitability on a broader level because if there's any distress the banks would be able to deal with that. his -- does that basically means u.s. banks are less valuable long term to you and even european banks. >> i think it's a shift between the two. you saw valuations in u.s. financials just orders of magnitude above those of european counterparts. that's convergent. it's not in a converge totally. there are a lot of systemic issues. one of which being the fact that inflation in europe is a much more intractable issue, not permanently but certainly now then it is in the u.s. because of structural rigidities and all

of that leads in. going back to this idea of negative interest rates, that's a reason to think that valuations will level off probably a little bit more in favor of european. >> you've got another cycle call. thanks up against the cycle. >> we are equal weight in banks right now and frankly it's one of those times where we've been proponents of the value trade for a long time. when we started getting convictions behind ed's call for a recession late last year we came off the overweight. it's probably a bit early, but i would suggest that you've seen several she was dropped, there probably several more shoes drop and the next about will probably dip. >> this was great.

a conclusion for sony people. if we get more deposits insured it's you paying the insurance premium at home. you'll be paying a monthly fee. >> the banks are saying it's actually us and we are saying they end up paying for it. started laughing. i would agree because honestly if it's not profitable for the banks what they want to hold your money. paying $15 a month. take your pick. to the extent that banking is free. won't be anymore after that. lisa: is it really free? jonathan: have you heard about how the bank works? duration mismatch. this is bad. it's terrible. ♪

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jonathan: two days of gains on his 500. if we had another two days, we would be talking about 50 basis point hikes. futures on the s&p, -.1%. chairman powell doesn't have two more days, he is going to make that call later today with his committee at 2:00 p.m.. i the bond market, to year, 4.1552. this has been one heck of a trip since the fed last met. below is 3.62 a feud ago on a

u.s. two-year. the high was 5.08% a few weeks ago on a u.s. two-year. the sub two-year has been trading like a meme stock. it has been remarkable what this has done. lisa: i wonder what the implications are. we are talking about the benchmark rates. and it starts whipping around, what are the broader consequences? how do you lend with any certainty if you can't make them production out of two days of bank stop returns? jonathan: last year, if you couldn't price the risk-free rate, how could you price of risk? without thought this story would resolve itself and we are struggling to keep up with this. lisa: people say it is a short-term noise. longer-term, there is much more stability. if you look at credit markets, they are starting to whip around in tandem with volatility. the long-lasting lags, is that the credit tightening we are talking about?

jonathan: this market was screaming that the fed is done. this market was screaming that the boe was not you want times. euro-dollar and sterling, sterling 1.2286. u.k. inflation coming in at double digits, 10.4%. we were looking for a 9.9% handle, something like that. big upside surprise going into the boe. euro-dollar, 1.0783. notre dame between price and the financial stability. we will not entertain any trade-offs on our primary objective. she could not have been more clear. lisa: she said the ecb has plenty of tools to address stability. there is evidence of underlying inflation that is having an issue. she is talking about that. this is a problem for them, this is the preeminent problem.

is it is in for the fed? jonathan: the ecb is further behind. i was told the inflation story was different in the u.s. and that meant the federal reserve had to stay at it because things were tighter in the labor market, there was this wage pressure. lisa: -- what do you do when the collective wisdom of crowds is not that wise. jonathan: this is the second time you sent this. lisa: you have fish you cannot get -- you cannot get a signal. jonathan: you are saying the people that price the market aren't wise. lisa: no, i am just saying they don't have additional wisdom on a system that is not opaque. jonathan: you are offending a lot of people. they are waking up and getting smacked in the face by you. lisa: i am offending a lot of algorithms and showstopping. jonathan: good comeback. the fed decision later. some people say hike, other people say pause.

sarah houses is this, in the pause camp. we look for the committee to hike rates by 25 points at its may 3 meeting. another 25 basis points on june 14. a pause today, but perhaps we resume hiking any future meetings. that is not that crazy. if we had two more days on isn't peak, we would be talking about 50 again. lisa: i want to amend what i was saying earlier. i don't want to insult traders, what i want to say is how do you have wisdom when effect change day-to-day. that is what sarah's comments speak to. effects are changing. what matters is changing. jonathan: summerhouse joins us now -- sarah house joins us now. if the market stabilizes, even after a pause today, you think

they might resume tightening. if they pause today, how do they stop us from pressing in even more cuts? let alone a more hikes. sarah: they can do that in couple of ways. one is in the statement. if financial situations ease after volatility, they expect ongoing increases on the table, keeping that ongoing increases language even with a pause today. love them or hate them, the dots are an important tool. the dots signal the most likely outcome of policy. we could see those should hire. i think that would indicate that even with a pause today, the fed is notched on tightening. there is more -- is not done tightening. there is more to be done on inflation and the fed is committed to that. lisa: there are people who look at what the fed is deciding today and say they don't care. inflation is going to guided the course, as will banking distress. i was interested in what andrew

said. he said relative to 2008 or anytime in the last 40 years of history, inflation is more of a constraint on fred on that policy -- on fed policy. do you agree? sarah: i think that has been a gardening -- a guiding principle for the. i don't think you can have prices ability -- price sustainability without -- that is what warren is taking a breath at today but then taking a title look on policy as the dust settles and remaining focused on the present stability side of the mandate. there are major inflation challenges we are seeing in the u.s.. lisa: putting aside the financial distress for one minute, i'm curious going forward with the inflationary ash whether the inflationary outlook in the u.s. is different than the european sector -- whether the inflationary outlook

in the u.s. is different than the european sector? sarah: the fed is further along in the tightening cycle. there is still a lag effect from tightening monetary policy. they labor market remains the biggest challenge to getting patient down to 2%. we had a hint of improvement on the breakfront in the last employment report. it is a pretty volatile series so you're looking at costs running over 4% annualized. the nonsupervisory size -- side of those numbers showed closer to 5% annualized on the wage front. there is still advice to be done on that aspect. you are still looking at a very tight labor market. that remains a huge challenge to the inflation outlook as you look over the course of this year and into 2024. jonathan: chairman powell has this phrase, the totality of the data. when they talk about the totality of the data, does that take on a new meaning in the

last few weeks? does that include bank stocks. sarah: i don't think it includes bank stocks per se but i think it includes the overall tightening any financial conditions and it has been rapid over the last two weeks. considering that is the channel fed policy works through, they have to take that into consideration. inflation is too high but they are aware it does tend to lag economic activity. they are taking in those conditions and in addition to the strong labor market data, the still high level of inflation we are seeing, as well as what has been resident consumer spending. jonathan: the other phrase they have used is sufficiently restrictive. re: getting closer to that point? matt from deutsche bank suggests the difficulties push towards being sufficiently restrictive. do you agree with that? sarah: i think so. we are getting closer to where policy will ultimately settle. we are looking at a higher

terminal rate relative to what was being guided out of the february 1 meeting, giving the ongoing momentum in the data. the recent tightening in financial conditions and distress we are seeing at any financial system not that down a little bit -- not that down -- knocked that down a little bit. the terminal rate is not as high as a few weeks ago. the events to get us closer to what will be that sufficiently restrictive stance on policy. lisa: it seems like you are not alone with that. the events over the past couple of weeks signify perhaps this economy is not as resilient as people thought and the strains are more significant. therefore the end inflation rate will be lower and so with the terminal rate. do you agree on the inflation rate point that inflation will come down to a lower point than people imagined a couple of weeks ago? sarah: i don't think it will

come down lower to where we ultimately land. i think we are seeing the channels of which inflation will come down and through that title -- through tighter financial conditions. perhaps it is happening quicker that we were thinking three weeks ago as it seemed like the economy could not be slowed down. now we are seeing more material tightening in the financial conditions which is going to pass on through credit growth in the economy and contribute to that slowdown. jonathan: wonderful to hear from you. looking for a pause from the federal reserve later. looking for a pause, but ultimately the team at goldman saying if they positively come who says they are committed to the end of the cycle. why is it the end of the hiking cycle if they positively? lisa: it matters less of their committing to it or if the market implies that. we saw homebuilder activity and the number of homes sold yesterday in that data come in

higher than expected. the revival of the housing market left for dead because mortgage rates are lower. the unintended consequence of an easing in financial conditions before the job is tom. i don't mean an easing of all financial conditions. with respect to the lending rate, does that reignite sector most affected by the policy? jonathan: the totality of the data, you have to talk about the totality of the decision. hike no hike is not the story. you have the decision, the statement, the projections, the news conference. that is a lot of different mediums to tackle this decision today. lisa: what is worse, a hawkish pause or a dovish hike? my head is spinning. jonathan: julian said something in the last hour and julian is right. there are people waking up this morning who agree. the fed does not know things we don't know. that is the take on the economy.

when it comes to financial stability, you think there are some -- there is some information. what is chairman powell doing up with a 50 basis point hike before banks failed? it does not matter what i think about this, there are enough people who believe the fed things -- believe the fed knows thanks we don't know and believe the more devilishly fed is today, the more they are concerned about the financial system and if they are concerned, you should be too. lisa: if your head is spinning with the game to be on top of game three, you are not alone. these are people trying to get a handle on things that are difficult. jonathan: the ecb based on our reporting, this is the way they thought about that decision must week. they were concerned about the signal it would sent if they did not hike after pre-committing to going 50. lisa: if the fed is falling -- following the ecb as we heard from rich clarida, that why wouldn't they raise 50 basis points? jonathan: the fed decides in a

brilliant lineup which includes the former fed vice chair, priya misra, diane swonk, and bill dudley, the former new york fed president. ♪ lisa m: keeping you up-to-date with news around the world. first republic bank may rely on u.s. backing to encourage a deal to short the lender. bloomberg has learned that wall street leaders and u.s. officials have floated a variety of measures to make first republic more attractive to a buyer or investors. there has lost 89% of its market value this year. it is decision day for the federal reserve. policymakers announce -- will positives and as a .25 hike or a's? or a pause? the decision will be released at 2:00 p.m.. shares of gamestop are soaring.

the videogame retailer reported a surprise fourth-quarter profit, its first in two years. gamestop has struggled with profitability as the industry has moved away from discs to online downloads. one bright spot has been its sales of collectibles. japan beat the u.s. 3-2 to win the world baseball classic in miami. it came down to trujillo, when he struck out mike trout, his teammate on the angels. shapiro, was voted the wbc m.v.p. global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo and this is bloomberg. ♪ hey david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management.

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it's easy to get lost in investment research. introducing j.p. morgan personal advisors. hey david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management. >> we will have a significant number of banks that will not exist 12 to 24 months ago --

months from now that exist today. which ones will be taken over and which ones will have a shotgun marriage? central banks and regulators are trying to stop the disappearing of their own accord. the shotgun wedding is already with us. jonathan: luke speaking to the bloomberg investor conference earlier today. that is quite a statement to make. i think we will have a significant number of banks that want exist after 24 months. lisa: there are a lot of people who agree with that, that there will be a roll up in the small and medium-sized bank because of the deposits that can go anytime with longer-term liabilities. i wonder if bigger banks get along for this is just isolated to smaller banks. jonathan: the conversation is the big banks get together to do something about first republic.

first republic is higher in the premarket. there was a story about a deal. what would that look like? lisa: we are trying to find out the details and we have early reporting. the ultimate problem is a lot of these banks hold mortgage debt, other liquid assets. if they were to sell it, it is really devalued relative to where they held it. how do they make additional loans while also getting with outflows from deposits without capitalizing and crystallizing these losses? maybe they could have some in-kind deal where they park it there at they get the money and don't have to sale fish don't have to sell. -- don't have to sell. jonathan: let's get to terry heinz. there was a politician once asked what went wrong and it presents at events. events are hitting this white house hard.

want to do think the next steps are? terry: politically or for the banks? jonathan: in terms of policy for the banks. what can they do? terry: i think it is the farthest thing from inevitable. the lens that he will see the politicians look through and act through is is this systemic or not? today the indications have been this is not systemic. what you will end up seeing is some rise for the federal reserve. you will see people like janet yellen continued to say -- continue to say we will interview -- we will intervene where necessary. you will see politicians talking about things that were not likely to happen, like universal deposit insurance.

in the meanwhile, what will end up happening is the core problem want to be addressed. the core problem is that we have a banking regulation crisis causing a banking sector crisis which is the idea that you have supervision and examination shaking markets confidence in the center. lisa: can you explain that and where the balance of decision-making is? are there more politicians inclined to increase regulation on banks or not, who do not want to impede the profitability of banks? a couple of years ago, they lifted by virtue some of the watering down of dodd-frank. terry: the answer to your question is yes. politicians on both sides. to me, that is noise. the signal is what you see from that is that there is any

understanding that there is not a systemic problem. they are retreating to their corners. both sides politicizing the issue. republicans by talking about banks took their eyes of the ball because they're worried about bsg. democrats are talking about what needs to happen is more support. in the middle, you have outreach and somewhat justified which resulted in legislation about clawbacks and for like. --and the like. what it signals is there's not enough attention being paid to the simple fact that the bank regulators both in the state as well as the federal government -- and let's remember that svb and the implant worst

interrelated -- and the like were state regulated. they have fallen on their jobs and they need to correct that in order to help foster stability. lisa: you have mentioned this is not systemically important problem or a systemic banking issue. some of the provisions they triggered to step in came under the systemically important marker. there is this issue that smaller regional banks have dominance in specific sectors and to have broader relevance -- and do have broader relevance. how do you compare when you talk about policy? terry: my view has been all along and continues to be based on the facts that the body language and the verbal descriptions by all the policymakers have been that this is not systemic. they used some systemic tools,

yes. when i saw a couple of descriptions in press releases of systemic this under section that, i winced because i thought, you are giving a bad impression. they used a couple of emergency tools that are within their ability to use. at the same time, booked and broadly -- looked at broadly. clearly what they think is it is not systemic. i will take that up to what secretary ellen said yesterday -- secretary janet yellen said yesterday. jonathan: when there is a crisis of any kind, we take our attention off of everything else. that is what has happened the past couple of weeks. we have not been talking about xi jinping and tiktok. we have seen the chinese theater broker conversations between saudi arabia and iran. then go over to russia.

what have you taken away by the actions of the chinese leader over the last two weeks? terry: my view the last two years is that russia exists as a client state of china. you see the formalization of that. i think american foreign policy has been making a lot of bad mistakes over the past decade. the lesson xi jinping draws from what was going on in the middle east, for example, going back almost a decade where the u.s. let russia have a sphere of influence in syria and then promptly leveled half the country, is that it can continue to play with impunity there. what you have is a lot of states not only in the middle east but what is now called the global self who are wearing their bets and trying to figure out where the wind is blowing.

this is a difficult time for american foreign-policy. they need to get more energetic a lot more quickly if they're going to turn the tide. jonathan: i have no doubt we will be talking more about this in the weeks and months to come, maybe even the years and decades. thank use or -- thank you, sir. tiktok is one way this is playing out. the tiktok ceo testifying before the house committee tomorrow. lisa: they will be a focus on what provisions they have taken to insulate the data, to protect children from a host of woes. this is job protection, how do we keep the business under our own rubric and not offloaded to meta or snap. jonathan: we have these hearings and you get a feeling the people on the other side of the ceo have already made up their mind.

is this a genuine hearing where it is a fact-finding mission and you work out what you are going to do next? is there anything this guy can say that would change the mind of the lawmakers? lisa: you said that so diplomatically and you expect me to say of course not. the question is going to be how much meat is there behind the questioning in order to say we are going toba -- two so we are going to ban it one minute some sort of sale. how far are they willing to go given the base of users where three quarters of teenagers on tiktok? jonathan: don't you get a feeling that a sale is more likely? lisa: 100%. but what kind of retaliation do you get from china. jonathan: they will retaliate against the tech firms not in china. they can't, can they? that is another issue we have not discussed, reciprocity.

lisa: where does it go? this is perhaps the xi jinping and putin meeting. jonathan: futures on the s&p are about positive. ♪

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>> we believe the u.s. economy would stall even before these banking events. >> both in europe and the u.s., they are not done hiking. >> they will be thinking about how much credit tightening will be happening as a result of problems at the banks. >> you have to pay attention to the fed on the third guardrail. >> we don't think the suggestion

there is that there is a crisis we -- crisis looming. jon: from an beautiful new york city, good morning. i thought you were a serious person. lisa: we are laughing. jon: i am. equity futures positive on the s&p. the fed decides in about seven hours. lisa: you are looking at the clock. today will be an interesting decision. how much will it matter? do we have a sense of how the market will respond? jon: it is hard to call. it is not just about 25 or pause. it is what you put in the statement. do you get rid of the phrase about ongoing increases? what you want to signal and the

language the chair uses in the news conference. where does he want to lean? lisa: how much credibility does the fed have at this point given the change in the approach and the important mandates over the past couple months? tom: it took a hit. to go in front of the committee, the house and senate, and talk about increasing the pace, potentially opening the door to that on the back of the data we have had, then to see bank failures, the biggest since 2008, that's a credibility hit for the chairman. lisa: it raised a point earlier that i thought was important, which was that the tightening we are seeing in the financial system, stress in the u.s., is different from the u.k. you were talking about how it runs in tandem. it is complementary to what the fed is trying to do. how much do they lean into that and try to quantify how much of a rate hike that is equivalent to? lisa: i don't think they know.

can you draw the conclusion about the direction? i think you could but it's too difficult and too soon to start talking about this equating to 25 basis points, 50 basis points. i don't think you can go there. it is a valid point especially since you had two days of stability. now it is risk on. maybe in another 2, 50 basis points is back on the table. >> let's go through the price action. looking for a 25 basis point hike but some are looking for a pause, wells fargo, goldman. i don't know what needs to happen to get that cut, but who knows? euro-dollar 1.0789. i will keep mentioning the comments we got from president lagarde. president lagarde was punchy. no trade-off between price and financial stability. she said we will not entertain

any trade-offs from our primary objective. >> we have to ask the question, is the inflation picture that different, actually hotter in europe? we were talking about the opposite six months ago. so are they going to send a signal to the fed or not? today at 2 p.m., we get the fed rate decision. this is the first time in the past year that we have not had at least one full rate hike baked into the pricing in markets ahead of the meeting. to me, this is an interesting conundrum. 2:30 p.m., that press conference will be interesting. does he stick to the script? if he does, does that mean there is some sort of consensus on the fomc? 2:30 p.m., janet yellen should be testifying before the senate. how many questions will we get about first republic bank? what the type of insurance is to all deposits, what is the willingness of politicians to back that? we have heard some reluctance on

both sides with even democrats feeling a little skittish about packing some of these banks more at this moment. >> you get the feeling they have spoken to each other. >> yeah. you think this is counter programming? >> that is not what i am suggesting. i would have just thought they have to be speaking from the same sheet. >> they have to basically be complementarity. 5:45 p.m., we hear from one of the big bank ceos, of citigroup, speaking at the economic club of washington, d.c., then in conversation of david -- conversation with david rubenstein. there is some conversation of how much they will support the medium-sized banks given this could be systemic, but also a great pr move. we are part of the solution. that is there talking point. >> is that actually what you think this is, a pr move? >> i don't know why they are

backing all the smaller regional banks. >> our next guest is from citi. i'm trying to keep you out of trouble. we will isolate that concern and talk about something else. >> what tools are you going to use to isolate that? >> the head of trading strategy at citi. it is a different network. let's start here. we stay tactically positive. what is that? >> about 48 hours. seriously, from our perspective, until you get some real private capital going into u.s. regional banks, it is hard to feel more structurally positive about the market, but if you take the ecb last week as a script, they tried to discuss the banking support stuff pretty meeting and have the meeting focus on policy. if the fed is able to accomplish

that, you can get equities modestly higher. will there be a lot of follow-through into next week? hard to say. very tactically, next couple days, we think the market will continue to move higher. >> you think chairman powell has the same hint sheet as president lagarde? >> i don't know if he will say the same things but the construct of let's try to discussed banking support the day before the meeting will allow the central bank to focus on policy so that his press conference is not dominated by financial stability concerns. if they are able to engineer that that's probably a net positive for the markets. it is hard to see exactly how much follow-through we would get but that is the tactical script. >> one thing that's been notable is the interpretation of the fed's comments and their actions has been, at least on where people want to see it and what they want to understand, and it seems like this market wants to rally. do you think there's a signal in

that, that people want to look past this and still get on the trade? >> that has been the case all year. the market has been very resilient. i am not of the buy the dip mentality but the dips we have gotten have been fairly shallow. there is a fundamental aspect as well. there is risk in the system but you have to argue the risk this year, before the banking issue, was better understood and less extreme than last year. our view was the risk-reward of the market was better this year. people do want the market to go higher. when you start thinking about 2008, it hurts sentiment. >> well said. and if we do get the stability we have seen, i wonder if some sort of dovish hike or hike with some indication that they are not baking and further hikes in the near future would be constructive for equities looking at the moment and have seen in the data, potentially

softer rate hikes, risk on. >> our view on the fed is they want to be hiking 25 basis points for the next couple meetings. anything that takes them off that path is negative. if they are forced to pause because of financial stability concerns, that's bad for markets. if inflation is accelerating, that's bad for markets. so you are in a situation where, if they can guide to staying in 25 basis points, almost impossible to do, but if they can hike, not being knocked off the path by exhaustion's issues, markets rally. the markets did not like when he started going back to 50. we are in a situation where the market feels like we are getting to a level where financial stability concerns are starting to into the equation. if the fed can be at 25, that's good. if they get knocked off, that's a negative for risk.

>> let's talk tech outperformance. only two weeks ago, had people coming on the program saying there's a cyclical component to the story, it is the end of tech hegemony, two weeks later, tech reps again -- rips again. if there's a secular component, it cannot change in two weeks, can it? >> our view on tech is i understand the logic but this -- i feel like this is a 2022 discussion when valuation was extremely high. when you attack valuation aggressively through the rates channel, our view is that changes risk-reward considerably and it can continue to work. if i told you we are in a period of instability both from a policy and economic perspective, owning large-cap cap tech with big balance sheets, high cash flow generation, strong buybacks, at a valuation that was not a high hurdle, that sets

up good risk-reward for tech. >> when you say positive, you mean overweight tech in the short-term? >> we are overweight tech more medium-term. our view is that if the markets are rising, tech would be the outperformer. that is what we saw in january. surprisingly, that is what we saw in february. we feel like money will continue to flow into tech and that will lead you to the upside. does that mean, over the next week -- i need to fade these really sharp moves, but if you are telling me, you know, two to four weeks out, i think tech is leading that. >> how much does the money in index funds matter? >> they are a large weighting. structurally speaking, we think tech will become a smaller overall weight of the equity market over the next couple

years, but from my perspective, i am much more tactical, fortunately or unfortunately, and i think in the next one to six months, tech can continue to lead. one bank sold a lot of tech. we have gotten some pushback, well, they have started buying tech. they only rebought half of what they sold last year. our feeling is there's still room to add to tech and that should be positive for the sector. >> great work. stuart kaiser of citi. positive by .1% on the s&p. coming up, a former fed governor. from new york, this is bloomberg. ♪ >> i am lisa mateo. the federal reserve is caught between inflation and a sudden banking crisis. we will learn how fed chair jerome powell and his colleagues

respond later today. most expect a fed to increase interest rates by .25%, but some say policymakers should hold off. the decision comes out at 2 p.m. new york time. inflation in the u.k. rose unexpectedly for the first time in four months. the consumer prices index rose 10.4% from your earlier. that followed a 10.1% jump in january. food and drink prices were among the culprits, rising at the fastest pace in 45 years. all that may boost arguments that the bank of england should raise interest rates as soon as tomorrow. jean jinping used his visit to moscow to firmly align with russia against the u.s. the chinese president did not give vladimir putin something else he wanted, a commitment to buy more natural gas. that showed a china may be hesitant about appearing too close to russia. it was his first trip to russia since putin invaded ukraine. it is a move that's certain to anger north korea.

the u.s. and south korea plan to hold their largest ever live fire drills in june. the exercise will involve mobilizing high-tech military equipment. the allies are winding down training drills. unionized workers at starbucks will look on their new ceo today with strikes at about 100 stores across the u.s. the breese toes are demanding the company drop its alleged -- the coffeemakers are demanding the company drop its alleged antiunion coercion. global news powered by more than 2700 journalists and analysts in over 120 countries. i am lisa mateo. this is bloomberg. ♪ it's easy to get lost in investment research. introducing j.p. morgan personal advisors. hey david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management.

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>> i have made clear there's no trade-off between price and financial stability. we have plenty of resources to

provide liquidity support. >> the response would be if you go to an arcade indigos game over -- arcade and it goes game over. >> he turned around and said no trade-off between price and financial stability. we will not entertain trade-offs. that's crunchy stuff from president lagarde -- that is punchy stuff from president lagarde. >> i do not want to game out with the market does because that is always a peerless game -- a perilous game but that would lead to repricing dramatically on a two year yield and fed funds. >> there are four different ways to look at this, the decision, statement, projections and news conference. on the projections, is it still 5.1%?

someone from deutsche bank says maybe you get the .25 today but ultimately we are closer to that moment of being sufficiently restrictive and maybe it does stay the same. i have said i don't think it does today. it is tremendously difficult to deliver a forecast that's accurate in the best of times. this is about signaling today, signaling your intentions around what you understand to be the trade-off between two different things if you even believe there's a trade-off between what has happened in the last two weeks and your monetary policy objectives. >> a number of economists have talked about the fed as a risk mitigate or, ultimately -- mitigator, ultimately an agency that wants to do the least risky option. in this case, hiking rates, keeping things steady, saying we are on the path without acknowledging the whipsaw action we have seen the last couple months. >> let's start with equity

futures on the s&p, positive by .1%. equity futures higher this morning by .1%. if we can turn to the bond market and get twos, 10 and 30 up. 4.2% on the two year, as high as 5.08% in the last week. the two year has been all over the place. the curve has been all over the place. 2-10 was at one point negative 1.1%. getting a little bit of steepness delivered from the front end. i will turn to foreign-exchange, euro-dollar, and sterling. higher than out of the u.k. back with a 10 handle.

we can head over to frankfurt. there's an ecb conference. what did you make of that? >> you had a nice name for it. what was it? >> no. i forget. that's what you called it. that's not nice. maria, we heard from president lagarde. what did she say? i am pretty sure she cannot hear us based on that face, although sometimes she pulls that face at tom, even if she cannot hear him. can you hear me now? let's talk about president lagarde. >> i can hear you. first, this is the third time, which is very unusual, that we hear from the head of the ecb in a week. we had decision day thursday,

then madame lagarde in brussels monday and today at this water's conference in frankfurt -- this watcher's conference in frankfurt, the message, no trade-off between price and financial stability. that means the mission to bring down inflation, she said, is nonnegotiable. this is a single mandate, central bank -- single mandate central bank. there has been turmoil in the banking sector, but that will not be a trade-off. now, the other important thing is, when it comes to the forward guidance, we had grown used to this idea that every meeting we already knew what would happen. the question was, what comes next? can you calibrate two basis points. she has given herself some flexibility to the extent that there is still forward guidance and we know they will continue to hike.

can you calibrate specifically how big going into may at this point? not really. >> we heard from the head of the german central bank, some pretty hawkish language. how much does christine lagarde represent the collective wisdom of the ecb? how much dissonances there at a time when there are divergent fates within the separate countries and yet inflation is at the forefront for all? >> this has always been the perennial issue for the european central bank. by the way, you do have to set monetary policy that are very different. we talked about 19 countries, now 20. croatia just joined. the thing i always hear about christine lagarde, which maybe is worth mentioning, is that obviously she is not mario draghi to the extent this is a person with a great reputation as an economist, but what people say behind the scenes while she

may not be as good on the technical side, she's good at building consensus and wringing everyone together, making -- and bringing everyone together, making sure everyone feels heard. when you talk about the hawkishness of this german central bank, the language of christine lagarde reflects that too. she repeated that the mandate to bring inflation down to 2% has not gone away. she repeated they do not see this as a trade-off. it is not one or the other. they can handle both. >> after her last press conference, people said christine lagarde did a tremendous job parsing through both the issues and delivering a message that was clear with an applause from marquez. now that the whole credit suisse issue has occurred, do people still feel the same way? >> that's a good point.

on thursday, a lot of my contacts actually told me that was one of her best press conferences to date, clear, simple language. the market was able to digest this and they were able to do it at a moment in which there was turbulence, meaning not as big as over the weekend, but a tricky week to make that kind of decision. the market was able to take it. beyond that, what they are now trying to do is repeat that european banks are well-capitalized, well-regulated, that some of the issues that happened are specific to switzerland, and another message she is repeated many times this week is that, when you look out at the wipeout, that reflects a decision done by the swiss regulators, so it does not set a precedent for european banks and this is a different situation. another point, just briefly, just to show the difference, we also had comments yesterday from

the leader of the supervisory board of the ecb and he said, given the situation, the ecb is confident buybacks and dividends can go ahead as planned. >> great work. maria tadeo. the ecb and its waters conference. i have been. it is good. you hear from the president of the ecb. it was mario draghi at the time. you get to catch up with economists and officials. it is productive. >> i would love to be there. i am not just asking for a road trip but it would be fascinating to see what they are saying on the ground. ♪ what do you see on the horizon?

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>> equity futures on the s&p positive by .1%. seven hours away from a fed decision, looking for a 25 basis point hike. there are some banks looking for a pause, including goldman sachs and wells fargo. we caught up with sarah house earlier, who suggested that they can restart hiking even if they pause today. in the bond market, a round-trip on the two-year. now, 4.2%, a lift again of three

or four basis points. we have been north of five, south of four, now 4.2%. on the 10 year, 3.6132. in the fx market, foreign-exchange, let's wrap things up. euro-dollar 1.0795, positive .25%. the pound stronger, up .5%, ultimately off the back of this inflation story in the u.k. upside surprise. >> which is not exactly what they want. we have been talking about banks for the past couple weeks and that's been the entirety of the movers and there have yet been other stories that are relevant because they speak to the question of how long we can remain in this inflationary environment before profit margins get cramped. i want to take it other companies inside the banking sector. nike came out and be quarterly

earnings in a robust way. they have been doing well, getting rid of some of their inventory, but profitability is the problem. freight and material costs are high and they expect that to weigh on profitability. it is interesting that even after that big beat those shares are lower more than 1% because of the longer-term outlook. gamestop shares, one of the meme stocks, up almost 50% after beating expectations, a surprise fourth-quarter adjusted profit. basically talking about some progress, perhaps, because of all the money they have been getting. a.m. -- amc shares up more than 10%. maybe the silly money is not done. not to say that it is silly. i will not talk about anyone's trade like that, but this question of the shares that move the most on a risk on feel have not changed that much and i think that is relevant because it speaks to the moment we are in and where some of the

movement wants to go. >> first republic about unchanged. on that note specifically, because i want to avoid meme stocks, we will talk about the banks. that has been all over the place. collection banks, $30 billion on deposit does not get it done. now they are talking about doing more. this is conversation about a government backstop, government support. what is the government's role? >> that's a great question, especially because you also have banks involved. what are they looking for from the government? how much is it to stem some of the potential illiquidity in their asset pools that were underwritten during a time of lower interest rates? there's also a bigger point, which is the banking industry is built on trust. if you have a bank that's talking about strategic options going forward, that, in and of itself, was not the greatest thing to shore up confidence. how do you get some sort of

stability with that strategic option? if it continues, what does that mean for monetary policy? i love that. >> ridiculous. if we find a banking solution, are we back to where we were two weeks ago or have things really changed? >> i would argue no. this has materially changed the outlook not because there is some systemic crisis but because the cost of capital has gone up for some of these banks. the deposit outflows are coming to the fore and there's a restriction on the amount of capital that some of these smaller regional banks that account for so much of the credit creation have to lend out and generate growth. >> majority of the people -- we get to catch up with paul michele twice this week. good morning. mike mckee messaged me earlier and he wanted to know why you

are on today and what does he want me to ask in the news conference? what is it today? >> i think he has to ask. the fed was set up to prevent a run on banks, so they must have seen this. they must have seen the depositor outflows. are they seeing anything else that worries them and what is that and i think there are things in the commercial property market, things in the bank loan market, where the resets have doubled and tripled what borrowers are paying, so there's still a lot out there. >> how do they parse a message that goes from we want credit conditions to tighten to, my goodness, it is not a financial crisis but things are tightening too quickly. how do they parse that line to a market that does not like nuance? >> they do not need to. they have told us they are data dependent. look at the data. they have won. they don't need to pile on. look at inflation.

if you look at month to date 10 year tips, they are down to 2.1%. inflation expectations are coming down. look at the university of michigan consumer sentiment. they are down the most in two years. that is before when they started to hike rates. and if you go back to the charter, they were set up to prevent a run on banks. they pushed it to the point where they had to step in and stop a run on banks, so they have achieved the maximum pressure they needed to to bring inflation down. it is happening, it is in the data, you pause and you wait. >> you probably saw the outflows from depositors from some of these banks before that speech, that testimony from jay powell, where he opened the door to a 50 basis point hike. how do they signal that this scenario has changed so dramatically given that a lot of what you are talking about, the winning of their war, would have

been won before what we saw with silicon valley bank? >> honestly, it really does not matter. these are the long invariable impacts. they are already catching up to the economy. they are starting to bite hard. what would happen over the next three to six months? let's wait and see. we have looked at every time the fed has stopped hiking rates. on average, it's been about 13 months to recession. so they could stop here and then let's see what happens. we think with tightening, it pulls that forward into the end of this year. >> at the start of the year, when credit was ripping, high yield was doing well, you resisted the urge to pile on. i'm interested to know what you have been doing over the last couple weeks as things have started to go the other way and you are not on the wrong side of the trade, so to speak. what did you do? >> i'm holding onto our conservative position where we have had hedges in the cdx market.

you will have to pry them out for my dying hands. this is just the start. this is not the end. >> spreads right now is at 4.8% and was as tight as 3.9 percent. the basic argument goes like this. it is a high-quality index and won't gap wider the way it has done previously in recessions and you have pushed back against that notion. why? >> i have lived through every other cycle in the high-yield market. this market is just over 30 years old. you hear that same story all the time. this time, it is different, but the problem is that fear always replaces greed. people are scrambling for up in quality. we have seen you don't know where the problems are going to happen so you tried to de-risk. every single time, high yield

goes to a minimum credit spread of 800 basis points over, and we are on track for that. you talked about nonbank lenders, which is us. we are hearing from our clients that they want to know what we hold. they are asking all their managers. we are going to start tightening credit conditions ourselves just because our clients don't want us to take the kind of risk they were comfortable with a year or so ago. that is not just us. it is every manager. it is in the public markets and the private markets. lisa: how much has that accelerated over the past two weeks? even if this issue with some of the medium size businesses is resolved and we get some sort of backstop that staves off some contagion risk or other concerns, how much have conditions tightened anyway that will be persistent?

>> they have tightened everywhere. we have talked about the central banks waiting for those cumulative, long, variable lags to catch up, so they are going to catch up. so, unless they start cutting rates or ending qt, that's going to be progressive. central banks are still tightening credit conditions. when you look at senior loan officer surveys, banks have been tightening credit conditions, and i think with what's happened over the last couple weeks, there's no going back on that. then i talk about nonbank lenders. we are all doing the work for the fed anyway. they can hit the pause button. the banks are still tightening credit conditions and nonbank lenders are as well. lisa: i hate these analogies but you mentioned commercial real estate as well. are we at the beginning, the middle of the devaluation? how much further does it have to go?

>> it depends where you are in the snake. i think for sure that property companies are already having problems with offices in central business districts and you are starting to see that in some commercial mortgage-backed securitizations, but there's the reit market, the whole regional bank market, where a lot of their loans are in the commercial property market, so these things don't just tend to happen and go away. they tend to build and they are with us for a while. jon: just a final question. you have said to me, the whole curve, we have seen that. are you saying ride the way down to 3%? >> yes. 3%. jon: there we go. >> 3.00% minimum. jon: wow. thanks for that and for the

correction, because it's an important one. there's a difference between a three handle and 3.00. lisa: his point is a provocative one especially since people used to think we would be in a higher inflationary environment and see higher real yields for longer. that leaves a lot of people to pile into duration and you wonder if that's creating some instability on the long end -- some stability on the long end. jon: it is back to three, not back to zero. bob's point is that every cycle, the low gets higher and the high gets higher. higher lows and higher highs. that makes sense i hope. 3.61% on the tenure, the two year 4.22%. bessie duke joins us next. ♪ >> keeping you up-to-date with news from around the world, i am lisa mateo.

a rescue of first republic bank may rely on u.s. backing to encourage a deal to shore up the lender. bloomberg has learned wall street leaders and u.s. officials have floated a variety of measures to make first republic more attractive to buyers or investors. the bank has lost 89% of its market value this year. it is decision day for the federal reserve. will policymakers announce a quarter-point hike or pause to shore up financial stability? it is a difficult balance placed on fed chairman jerome powell. the decision will be released at 2 p.m. in washington. and germany, chancellor olaf scholz and his advisors predict there will be a contraction this year. they estimate gdp will rise .2% but the situation remains tense and inflation will continue. version orbit is resuming some operations on thursday. the satellite firm temporarily halted activities last week.

a failed launch a few want to go through the program off course. japan beat the u.s. 3-2 to win the world baseball classic in miami. it came down to the final moment, when show hey otani struck out mike trout, his longtime teammate on the los angeles angels. global news powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo and this is bloomberg. ♪ it's easy to get lost in investment research. introducing j.p. morgan personal advisors. hey david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management.

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if they do a dovish hike, if you get comfortable they will be done hiking in the next six to 12 weeks at the most. >> marvin loh of state street going into this fed decision later this afternoon. equity futures. the s&p 500 almost unchanged. yields going nowhere. this is what you would expect going into a pivotal move from the fed. 25 or pause is now the conversation, the consensus leaning to 25. lisa: you expect stasis as people try to wait and see what they do. their reaction will be interesting. how much will people be reacting to the actual move versus the statement, projection of estimates? jon: the news conference. lisa: how will he handle that? jon: this is the hardest fed decision in the last year with ease. just the hardest. i'm not sure anything comes

close to this. lisa: especially because there will be questions not only about monetary policy but also oversight and how much they have their handle on potential risks building and regional banks. jon: imagine turning up to the federal reserve in august 2008? that was betsy duke. can you describe what that was like, starting on the fed in august 2008? >> it was august 2008. i was sworn in about 30 minutes before my first fomc meeting, which was the last normal fomc meeting there ever was. after my second fomc meeting, we went into the chairman's office and voted to lend 85 billion dollars to aig. that is how i started my career. jon: can you tell me how different this moment is relative to what you went through those years ago? >> you know, it is different but it's the same. you know, the fed's job stays

the fed's job regardless of what the current events are, the crisis of the day. the fed has to keep it so i on what his job actually is. lisa: let's talk about what the job is. there are dual mandates. one is inflation. that is first and foremost but there's also oversight. >> supervision has been a complicating factor and i think it is supervision not regulation. those terms are often used interchangeably but regulation applies to the rules of the road. supervision is being in the banks, paying attention to what's happening at each individual bank. that is where it seems to me that the problem lies. lisa: this raises a question about how much signal there is from a fed where the chair went before congress and opened the door to a 50 basis point rate hike just days before a collapse of one of the biggest banks

going back to the financial crisis. i'm curious what you make of that and how much signal there will be in terms of visibility and other problems in the banking sector today. >> the role of monetary policy is not to protect the balance sheet of the banks. the tools that the fed has to deal with the financial system are very different than the tools that the fed uses in monetary policy, so the primary tool of the financial system is the fed's ability to lend. that is why the fed was established, to lend in liquidity crises, which this is. so the facility that they established the weekend after s vb failed is in their wheelhouse. that is their primary tool. they will separate it from the monetary policy decision. lisa: a lot of people argue this is not quantitative easing. this is not a reversal of tightening.

it is a different mechanism, not buying. it is lending. it is a different stability effect. do you draw the same distinction or do you think this is the end of tightening? >> actually, they would have to offset the increase coming from the loans with further sale of securities on the balance sheet to offset the quantitative easing, if you will, that will result from the balance sheet growing because of the loans they are making. if you go back to 2008, the whole qe1 did not change the size of the fed's balance sheet at all. it simply replaced the lending the bank had done during the crisis with securities. it kept the fed's balance sheet from contracting but did not expand the balance sheet. it was not until qe2 that it started to expand. jon: a lot of the postcrisis

apparatus the fed came up with was designed to communicate low for longer. the dot plot showed, out for years, that they were not looking to raise rates for a long time.how do you think they will be used today for signaling? >> at the last press conference, chairman pal was clear he expected the projections to come out in the sep to be higher and i don't see any way that doesn't happen. the decision in the room needs to match what his projections are, so i would focus not just on what the decision is today, but what are those -- but what do those projections say about what the terminal rate is. lisa: you think they are going

to increase those dots, increase the projection of where fed funds rates will ultimately end up despite some of the turmoil recently. what is going to be the justification for that? will they double down on this idea of inflation and we still have not gotten restrictive enough despite signs of credit tightening that have accelerated over the past few weeks? >> the way i interpreted the comments was the expectation was that inflation would come down more slowly than they expected. and the dots come from expectations of inflation. if you remember, there was a lot of discussion in that press conference. at one point, chairman powell said my forecast is different than yours. if your forecast is right, your rate projection will be right, but if mine is right, your forecast will be wrong..it would be a mistake to not pay attention to that. jon: one thing we have talked about over the last couple weeks is whether the fed knows things we do not know when it comes to financial stability. when you watch the news conference later, are we watching a chairman that knows things we do not know about the financial system? >> i think you will find -- he

certainly knows things that we do not know, but whether they are things he's trying to hide it, i don't think that's necessarily true. again, his credibility is his most important asset, so he will not be trying to hide anything, but when they talk about the strength of the banking industry, right now, the banks are strong. capital is strong, asset quality is extremely good. this is an interest rate risk issue, a liquidity issue, and it goes back to the basics of banking. this is more like the savings-and-loan crisis in 2008. jon: one of the flows of information we don't -- what are the flows of information we don't have access to in real time, that see -- time, betsy? >> i don't know that it is that different. you get a bunch of information and they have a staff that

compiles that and reports it on a regular basis. the banking information will be coming through the supervisory activities in the reserve banks. my guess is, right now, the supervisors are, and every bank, looking to see what the liquidity risk management looks like, what the interest rate management looks like, and what does the capital look like? you can plug a temporary liquidity hole with borrowing, which the fed is doing, and that will keep banks from having to sell the securities they own, but if those deposits are gone forever, if there's a shift in the industry from the smaller banks to the larger banks and it remains permanent, that is a problem for the smaller bank portion of the industry. jon: this was wonderful. i would love to do this again ahead of the next decision. betsy duke, former fed governor joining us this morning, looking back to 2008, may be some differences, similarities. lisa: i thought she was

brilliant and it was interesting to hear her insight. what she said, that the biggest surprise might be in the projections of where the terminal rate ends up, and they might stick to their earlier comments, to me, that's significant. jon: we will catch up with the former fed vice chair a little later. looking forward to getting rich clear -- richard calrida's view. first republic down about 8% this morning. ♪ >> complete the sunshine double after lifting the trophy in indian wells. the spaniard faces a tricky path to the final. he could renew his rivalry with janik center.

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>> we are not going to be in a 2% inflation reading by the end of the year. >> the markets warrant that we

reached a point where banks are constrained to hike. >> for us to go to 252 but essentially nothing, a cut is based on systemic risks. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. jonathan: good morning for our audience worldwide, this is bloomberg surveillance alongside lisa. equity futures unchanged on the s&p 500. it sounds like a simple decision, it is so much more complicated. lisa: we just heard that it is not going to happen 25 or pause. it is going to matter is where they see the terminal reach. if they increase that, what kind

of message will that's into the market if they have already been in turmoil? jonathan: we are going to get the press conference. the tone of it. i think a lot of people out there at the moment, even if they are at a hike or a pause they think it will be unchanged. lisa: that will be a change within itself. we were dealing with inflation that was harder than people thought. if they take that back, they will have to explain that. jonathan: alicia levine is alongside us today. powell has no good choices today. i will be for the price action and we will get her box on it. equity futures unchanged.

we talked about the journey of the two-year since the fed last met. lisa: i feel bad for the two-year. the journey has been long and tumultuous. jonathan: you feel bad for eight end of the year curve. lisa: we all been up since the past week and examining this. we are dealing with head spinning realities. then try to give a market response to that, which is always wrong initially. what is the point? let's go back to bed. jonathan: the head of equities and capital market at bmr wealth management. great to catch up with you. no good choices today? alicia: no good choices today.

we do 25 because the market's giving 25 in the pricing. in the sense, it is the easier decision. i am not sure they should do 25 because what happens in the last couple of weeks was possibly the beginning of a credit issue asked smaller and medium banks started to withdraw on credit provisions. it is all in the messaging. sometimes the messaging can become located. i look to the -- complicated. i looked to the u.k. asked to signals on why we are going to do 25 today. christine lagarde managed to message very well that they are keeping the two separate and can keep it separate. i think the fed will do that

today. jonathan: there is no trade-off between price trade-off instability. what does that look like if chairman powell repeat those same words? alicia: if he keeps to that -- we are going to keep the two separate, in your mind we needs to keep the thing separate, i do not think the dogs change, but -- dots change, but you do keep the open increases. those two things will be separate. inflation on the way down has not been linear. opening up the dovishness that the market may want to see risks that other piece of it. lagarde showed the way to having captured this right here. i would suspect he is going to

separated as well. did something happen in the real world two weeks ago with the banks? the answer is, yes. the real world, credit contraction has likely accelerated. lisa: let's talk game theory. we are trying to came out with a are signaling versus what they're going to do, versus what they know, versus what you believe. you think that jay powell has less credibility not only in having the authority on where they are going to do, but having any visibility into the path of a market that has been highly and determined? alicia: jay powell's credibility is intact. he has single -- been single-minded on the inflation issue. there was some talk earlier, ultimately the pivot was real. the privet is still there --

privet is still there appear to be fed does have the tools to understand the financial issues and what is happening with the banks is a real and true thing. if they hike today, it is a signal. lisa: if you say there has been something material happening in the economy, what is your investing change as a result? alicia: we talked about the economy but we have to use our clients money. our thinking on this, the recession seemed to be pushed out at the end of 2023 and 22 and 4, 2 weeks ago when all of the inflation reads came in really hot. the economy seemed to be on fire. this event actually changes that. the recession comes back into 2023, earnings likely go lower. we are pretty low anyway. we are neutrally waiting on equities. we never really went for the full disinflation is here,

climbed back in, get greedy. we do not think it would be so easy to get out of. this is going to be the hiking cycle, the fastest in 40 years. today, 475 basis points in 12 months. how do you get out of this without a recession? something did crack. that tends to be not one thing. if there's issue in regional banks, they pulled back on lending. more than 50% of the lifting to the economy comes from these -- lending to the economy comes from these banks. jonathan: thank liquidity issues, credit issues, recession gets rocked forward. we can agree, the wednesday night into thursday, wednesday, the eighth of march alicia: we are above that now. why? alicia: the regulatory

authorities have prevented further deterioration in the system in the banking system. had there been doubt, you would have seen deterioration. the equity market is saying, the fed and of the fdic, regulatory authorities have done the right thing and done it well. the stragglers left will be dealt with. lisa: is a slower pace of rate hikes, fewer of them, which is what people have been pricing in, stimulative for risk assets? alicia: it will be taken as such. it should not be. but it will be taken as such. if you think about starting last july, it was the pivot and we went back to the pivot.

they will keep on hiking. jonathan: we are missing the point. alicia: we want the trade after the trade. there has been a different trade in the last couple of weeks. the market wants a trade after the trade because it is happening so fast. think about how quickly the deposits left the bank. people on apps. the system has moved quicker, trading has moved quicker, the market wants to price it in before we get to the recession. jonathan: i think we had three different regimes in the first quarter. we came into this year it was all rate cuts and recessions. now it is financial instability. alicia: it is march 22.

the market keeps on pricing in the privet. we keep on coming back to it, we hold 3800, hold that level and bounce around in the range between 3800 and 4200. let us turn to be a unsatisfying year because there will be a sign that there will be credit contraction. our portfolios are prepared for that. we never believed that there was no landing. lisa: what do you tell clients? alicia: we were underweight bonds last year i'm a we went to neutral on bonds. we are conservative. we are telling clients it is going to be volatile. we think you end of the year higher than you ended 2022. it is just not quick to fill good. with our higher ratings on bombs

and neutral on equities, we can pipit --bonds and neutral on equities, we can pivot on that. it is what the market does with that, which is always the hard bit. the table pounding on bonds is the right call. better to be lucky. jonathan: alicia levine. nothing about the last two weeks have felt good. the market is higher based on where we closed march 8. euro dollar reclaims 108. will chairman powell did the same thing? lisa: federal reserve is caught

between inflation and a banking crisis. we will learn how jerome powell and his colleagues responded today. economists expect the fed to increase interest rates by a quarter-point. some say they should hold off two sure off financial stability. the decision comes out at 2 p.m. new york time. mortgage rates have fallen to a five-point low. a 30 year mortgage drop 30 basis points to 6.4 percent. meanwhile, applications to buy a home rose. inflation in the u.k. rose. food and drink prices were among the culprits rising at the fastest pace in 45 years. the bank of england should raise interest rates as soon as tomorrow. the first visit to moscow to

align with russia against the u.s. the chinese president didn't give vladimir putin something else he wanted, a commitment for natural gas. and move to anger north korea, usm south korea planned to hold their largest ever drills in doom appeared to are widening down training this week. north korea has responded to threatened to turn the pacific ocean to a firing range. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. i am lisa mateo. this is bloomberg. hey david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management.

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>> we do not believe that the no rate hike scenario implies the fed knows something that we do not. i think to think that is probably misguided. 25 or apause does not mean that much anyway, it is what he says. jonathan: the fed is petrified. i can watch a promo all day. we are looking for 25 basis point hike. that is the consensus view. some people are looking for a pause.

other people say a cut to 450. lisa: that is a call. basically, how many others out there are dealing with the same kind of liquidity mismatch on a larger since, doesn't matter? -- does it matter? jonathan: there were some language that jp morgan used this week. pastor the point of no return, have we done that now? -- past the point of no return come have we done that now? -- return, have we done that now? we know the consensus is. this is basically what she said. you get liquidity issues, they turn into tighter lending standards and credit standards. lisa: the same sentiment from

bob michele at jp morgan. even they are tightening credit conditions and increasing the risk aversion. with headlines like what came of this morning, mortgage rates fell to its lowest level in five weeks. when people start pricing out rate hikes and pricing in cuts, how much does that ease on the margins and areas that were most affected by the rate hikes? these are the dueling narratives and crosswinds. everybody has a different take on the emphasis. jonathan: i think that is going to be the interesting part. i'm other association between the prices and the supply. lisa: a great point, especially because recently there was a federal reserve survey that

showed that the number of auto loan applications were rejected rose to the highest levels going back to 2016. more than 9%. even if rates come down, peoples are still going to take them because what bank is going to want to extend that longwood has more constrained capital? -- extend that capital when it has more constrained. jonathan: let's see how it plays out. no drama at all in the equity market. futures just about unchanged now the s&p. the nasdaq, we are down 2/10 of 1%. the nasdaq is absolutely ripped. in the bond market we have covered this extensively. the two-year has been everywhere. it is up seven basis points this

morning. if we cannot finish on foreign exchange, the lesson this morning from europe in the u.k., the ecb president, christine lagarde. i can't imagine what the market would look like if chairman powell adopts that language in the news conference later. the euro-dollar did just 108 -- did kiss 108. inflation is at double digits. 10.4% i would use the point to frame the difference between what the u.k. and europe has gone through. there are probably something like six months behind. the federal reserve and its efforts around attacking inflation and the inflation story in europe is different. lisa: that is why people are drawing a distinction on what

christine lagarde can do. i will say, a lot of people are looking at the end tandem. it is only six months ago that the inflation in the u.s. was stickier than europe. think about what has happened. jonathan: credit squeeze, let's call it what it is, essentially failed over the weekend -- credit suisse, let's call it what it is, essentially failed over the weekend. we went 50. the bank filled later. the fact that we are sitting here a week later to say that was a great decision to 50 basis points. lisa: didlisa: you see german to year yield yesterday, they ripped price down europe. a lot of volatility along this great decision. it is not that it is a clear message in europe either. jonathan: we will spend time with michael mckee. what is the focus for you?

there are so many different things to focus on. it is not just about time if i were nothing, it is about the statement, news conference, projections. what are you focused on when this one comes out? michael: what they're going to do to if i basis points order pause. what jay powell has to say will matter more. there will be in combination with the survey of economic projections when we see what is meant to happen with interest rates towards the end of the year. they have to incorporate the idea of the bank issues we have into their thinking. do we really know what the big issues are going to be? there's a theory out there that we will see a tightening of credit. this is not a bad loan situation, if you're running the

first national bank of pharaoh, and you think you're doing the good job, do you have to cut back on your lending? do you have a bad loan portfolio or mismatched? it is not clear yet exactly how this will play out. it will be interesting to see how wall street reacts to the different threads. it is not just we don't nowhere they're going to do, but we do not know what it is that matters to people today. lisa: when facts change quickly, they are signaling in places like publications through certain reporters that can give you a sense of where they can go if they were going to change what they are going to do. do you give any credence to that? michael: that is to be a practice of the federal reserve. they did it once before in this hiking cycle -- first time in

many years. we were laughing this morning that governor of the wall street journal on what his views are going to be coming which could mean the fed does not think it is important to let wall street know somebody or the fed does not have enough -- to let wall street know something. i do not think that you're going to do that on a regular basis. jonathan: either he hasn't a phenomenal job of covering the federal reserve. i did that i think he has done a phenomenal job of covering the federal reserve. there is somehow signaling from a publication around rates in the quietperiod. i do not think that is a good development at all. lisa: people purse through anything he writes. maybe this is the white smoke

coming off the chimney. lisa: is there a signal in their not being a signal? that is how much people are trying to twist their heads around. jonathan: liquidity is fine. lisa: is that correct? thank you. jonathan: i learned from the best. it's my to be soon after this. -- it might be soon after this. about 30 minutes away.

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lisa: jonathan ferro off to his next property. we look at a fading after two constructive days in the market, the biggest today pop since we saw the problems emerge from silicon valley bank. people trying to understand what the fed can do, even more so, what the reaction from markets will be to what the fed has to do. you are seeing the s&p higher than what it was before the silicon valley bank collapsed. you are seeing the euro gain after some hawkish comments.

they are full swing ahead. the roundtrips we have seen again and again really head spinning for people trying to get their head around where we are in terms of a disinflationary course or not. chief u.s. economy at ubs joins us now. can you give us a sense of how much has changed for you over the past two weeks? jonathan: getting the magnitude right now is going to be impossible. jonathan: this is one of those things we can sign the effect. if you thought about the first national bank of pharaoh, maybe they are double checking their liquidity, capital levels. they will be wondering what the bank examiners are looking for next. on the margin, this is likely to apply tighter credit going

forward when credit was already tightening in the u.s. we will be watching the same thing you all watching. it is a negative in our expectations for the u.s. economy. lisa: i heard that the bank of pharaoh as state unlimited credit. i am curious from your vantage point, we heard from a former fed governor this morning, the there is not the same degree of credit tightening that people were describing the recent turmoil to the market. there is still a big inflation problem. on the ground, what data are you looking at for your compass? jonathan: we are getting real time weekly data on everything from lending, mortgage obligations, initial claims, we are getting regular price signals from big data sources, whether it is airfares, used cars, there still a lot of data coming in everyday that is going to allow us to assess what is

unfolding. pretty close to real-time. that was one of the things we really learned during the pandemic, the availability of a lot of the new data sources. we are watching all of that, particularly the price data. if we were already starting to get bearish about the u.s. economic outlook considering there was some tentative signs that the rebound data we saw in january really wasn't much of a rebound. if you put yourself in a position of a bank officer these days, we do not look at it as a giant capital hold for a sudden stop. this does seem more likely to apply less of credit than more and less credit imposed for the economy is not good for growth. lisa: whether jay powell recognizes this today in the press conference.

we heard from -- chairman powell was clear, you projected the projections to come out in the s&p to be higher. i do not see any way that does not happen. she thinks that it's going to be the big surprise of today's press conference. can you give us a sense of how much you agree with that and what that would mean for your estimates of how quickly recession would take hold? lisa: we do think they will raise rates 25 basis points like today's meeting. jonathan: the median. was going to revise up by 25 basis points. that might sound hawkish and my to be a surprise, but we also think this comes with very data-dependent language. right in the statement something along the lines of any additional or any further increases from target range, will be dependent on economic data implications.

i think one chair powell frames the s&p, he has done this in the past. we are expecting him to acknowledge that base case for the committee. they do need to fight inflation. we do expect him to admit that this does depend upon how events unfold going forward. going to the credit imposed, we think he is going to make a strong case that the banking system is resilient and well-capitalized. while he is going to deliver this message of monitoring, considering credit conditions, he is going to unequivocally sound a confident tone about the banks. lisa: his conversation in tandem which we will be hearing from secretary janet yellen as she testifies. they have to feel the same

program and they will probably speak to the same issue. we are looking at a market that has repriced in rate hikes and rate cuts. it has been a ping-pong match for a while between that. right now it is pricing in cuts before the end of this year. do you think that is premature based on the rhetoric and economic dates are seeing coming out? jonathan: economic data would not imply the fed should be touching later this year. our forecast for core pce inflation for a week from now is that it is still going to be hung up at 4.7%. we are forecasting that the fed is going to be cutting rates later this year. we do expect a certain amount of disinflation to be setting in as we rolled through the middle of the year we have low claims. elevated inflation.

our expectation, what has been put to trained with the rate hikes already, what we are seeing with credit conditions is going to lead to a meaningful slowdown this year. lisa: how many times this year have you changed your forecast? jonathan: medical lot since last november. -- not a whole lot since november. taking on the surprise of the january employee report. the incoming january and february dates appeared the contour of gdp slowdown expected in the second half of the year has been pretty much the same since we made it overhaul in the projections were we switched from expecting a soft landing to a hard landing. lisa: how many times have you turn up your hands in the narrative changes in wall street?

jonathan: you go from times when you look like you're doing well to the heaps of criticism being cleared upon you. the data is not going to go in a linear direction. seann 517 falling out of my chair -- seeing 517 falling out of my chair. i have been doing this a long time. there are surprises along the way. i do think if we think about the starting points of the u.s. economy with a level of activities will push up. we have undergone a rapid monetary policy -- rapid monetary policy cycle. we are getting to the point where there are more and more signs were -- just caught up with the activity. the ongoing impact to the monetary policy tightening.

i think it all points to a weaker second half. lisa: thank you so much for being with us. joining us ahead of this federal reserve meeting decision press conference statement of economic projections. michael mckee back with us. i am wondering, as we hash out all of the potential features of the statements in the aftermath, what economic data coming up could matter related way that the data we have gotten over the past two weeks just has not? >> nothing in the near term. we do not get the inflation numbers until the end of the month. that is meant to be the next time of economic data to see where the fed's measure of inflation is. sorry about having to work on good friday, guys. beyond that, it is going to be a

matter of waiting to see. one of the interesting things that everybody is going to be looking at that nobody looks at, remember yesterday we did that philadelphia fed manufacturing survey? we have all of those -- almost never reported on the senior officer loan survey. it is not a major indicator. now it is going to come out quarterly. we will get it sometime during the end of april. that will give us an idea of where the banks are tightening credit standards in the wake of all of this. i do think we will have to wait a few weeks. the survey is not taking place right now. if there is a big tightening, that could make a difference to the fed going forward. if we do not see that, they will be looking into the same way they would prefer -- they were before the whole baking thing before it started. lisa: how much do you expect to

hear decent from the fed today? michael: there is a issue out there whether the fed things it is enough to pause or not. i think they want to show that we are in this together and we worked out with our views are. that raises questions about where their people who see something that we do not. what is going on with the depictions -- divisions of the fed. it is going to be a question i've bank safety, financial stability. i do nothing they wanted any divisions over that. thank you so much ahead of the decision from the federal reserve at 2:30. we are seeing some stability. we have been covering first

republic bank for quite a while and the ups and downs. we are looking at a more downward trajectory, $14 and $.90 down more than 5%. this raises questions, what will it take to shore up confidence in the bank that reportedly has higher -- to explore strategic options and is looking for backing from the u.s. government. we will be hearing from janet yellen at 2 p.m. about what steps the u.s. can take it we could hear from some of the senators in terms of opposition to making more measures in supporting some of these financial institutes. coming up, world bank president. this is bloomberg. lisa: a recipe i first republic bank may rely on u.s. banking to

shore up the lender. wall street leaders and u.s. officials have looked at a variety of measures to make first republic more attractive to a buyer. the bank has lost 89% of its market value this year. it's decision day for the federal reserve. a policy quarter-point interest rate or pause. that decision will be released at 2 p.m. in washington. the u.k.'s antitrust watchdog will conduct a in-depth review. 61 billion cloud takeover vmware. regulators say the deal would likely lead to a substantial lessening of competition. shares of gamestop are storing in green market trading. a surprise court -- fourth quarter profit, its first in two

years. gamestop has struggled from a profitability. one bright spot for the company has been its sale of physical electable's. -- collectible's. lisa: -- was voted the most valuable player. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. i am lisa mateo. this is bloomberg. it's easy to get lost in investment research. introducing j.p. morgan personal advisors. hey david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management.

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was also the first time you heard of a town named dinosaur, colorado. we just got an order from dinosaur, colorado. start an easy to build, powerful website for free with a partner that always puts you first. start for free at godaddy.com it's easy to get lost in investment research. introducing j.p. morgan personal advisors. hey david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management. >> it is too soon to expect that the fed will throw in the towel

so to speak on their inflation finding a complete pause. intimate not -- it may not only be vented point for the media terms, but it could also send a signal that they know something worse that the markets are get to learn. lisa: on the psychology of the federal reserve and the signaling. this really has been one of the key discussions, not only what will the rate decision be, what will the projections be and signaling the? the next guest is someone with the tremendous experience from the treasury department, world bank and in the banking industry. joining us here in our studio. a lot of people who drop parallels to 2008. are there parallels to that

moment and in the one we are in now? >> i think there are parallels and differences. are was a maturity mix-and-match at some of the --. david: some big differences -- this time the discount window is available to be major institutions. that was not the case then. you are seeing it really play out. another big difference is the fed itself is buying huge amounts of duration and central banks are as well. the bank of japan are holders of giant amounts of duration, which was not the case in 2008. central banks only owed central bills.

today, i think their biggest issue is where its growth going to come from into the future? lisa: i may want to believe that into the rest of the world, which is a important one. i want to talk the similarities and liquidity's mismatch? liquidity mismatch is not a credit crisis or credit crunch. back in 2008, the liquidity mismatch led to a credit crunch, how close is that sort of direct lead over into credit conditions? david: our interest rates were down, which were the case in 05 and 06. that causes asset prices to go up. there is a workoutper after that. i think that is what we are in nowiod. that is the challenge facing the

market. how do you allocate your losses? i am hoping they do not go to the poor, developing countries and average taxpayers. if you created all of the asset price boom, can the losses be allocated back into the same markets. lisa: can you elaborate on the disproportionate holding of the burden you see in some of the developing nations that may affect the growth profile of the world? david: over the last 10 years or so the was this big concentration of wealth in the advanced economy filled by fiscal deficit also the central banks themselves buying duration that supports asset prices long-term goes up or there's a constant buyer of those assets.

that leaves not enough capital elsewhere in the world. there is not good access to global capital markets. going forward, the challenge is a lot of the world's capital is going to be used by the advanced economy to keep rolling over the debt. a big challenge for billions of people around the world. they have this big population growth in many countries. the capitol goes to countries that have declining populations. lisa: how much does that lower your projection for global glows and how much is it lowered the past couple of months? we have lowered it a year and a half ago, recognizing inflation was a challenge. the central banks will be raising. the latest, what we have seen is advanced economy growth,

expectations have gone up late last year. that is u.s. and china in particular as china lifted the lockdown. as we are looking at it now, the growth is slow but positive in a advanced economy. in developed countries, not much taking place. the importance of private capital enabling. what are the tools and techniques in the world banks in the middle of a trying to get countries to be more attractive to capital investments. lisa: we do get the fed decision later today. how does that connect to the stripping out of capital lately l in the developing world. what kind of a magnified effect could that have?

david: there will be sending signals of what the prospect is. i think important for the u.s. and at the advanced economy is to think about how do we encourage more supply. that brings down the inflation rate so central banks can be more involved or recognized? they are affecting the lending that goes to small businesses. are there ways with regulatory policy or with the duration purchasing that the central banks do. one central banks via duration, that ends up slowing growth on average -- buy duration, that end sub slowing growth on average. they end up buying huge bombs , your --bonds, you're not growing from that. lisa: given all things being

equal, a lot of central banks are turning to the same playbook and you are seeing the balance sheet became expanded in the u.s. how slow could global growth get? david: it can be a recession. you could have a global recession. we do find that when the growth rate is not equivalent to the population growth rate. you have people moving backward on average. that depends a lot on the advanced -- for u.s. is by far the biggest economy, so its growth rate matters. people are watching what is going on in the loan officer survey, there was just a reference to that. that is an important one. our banks are lending giving that they see these difficulties. . lisa: all things being equal qamar the chances of a global recession more greater

today. david: there was a recognition of individual big problems strongly dealt with by regulators. the bigger issue, rather than looking at the near-term impact, i think we have to just take with the idea of what is going to be gone for the next three year growth rate of the world. how do you get out of this trap with higher interest rates. i think the solution has to be more output. how do you get more services and goods into the global markets in order to stop the inflation trip. lisa: what do you hope jay powell does today? david: he is the policymaker. i am sure he will send a very strong signals. why lisa: lisa: are you in new york? there is a conference today. clean water for people, it helps children go to their full height

and agriculture be able to produce. i am also doing other bids in new york. lisa: the president of the world bank. really interesting idea with respect to some of the central banks holding duration and how that slows growth effectively in the rest of the world by reserving some assets that would go to other places. coming up at 1:30, bloomberg surveillance special, the fed decides, jonathan and myself will be back here parsing through all of the smoke signals as we hear from jerome powell. we have some incredible commentators, including rich clarida among many others. markets are turning trying to understand what exactly to be looking for. still want to get you the market response to your yields. from new york, this is

bloomberg. ♪ [office sounds] ♪upbeat music♪ ♪♪ ♪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.

jonathan: it is almost decision time for chairman powell. equity futures unchanged on the s&p. the countdown to the open starts right now. announcer: everything you need to get set for the start of u.s. trading. this is bloomberg, the open -- "bloomberg: the open" with jonathan ferro. jonathan: list from new york. equities change. it is the calm