dani: good morning. this is

bloomberg daybreak: europe. i am dani burger in london. these are stories that set your agenda. >> we need to raise rates higher -- if we do need to raise rates higher we well. for now, we see the likelihood of credit tightening. dani: jerome powell reiterates fighting inflation remains the fed's top authority less than two weeks after the second bank failure in u.s. history. markets are baffled, conflicting messages about deposit insurance from powell and treasury secretary janet yellen says -- sense of the stocks into a tizzy with the s&p whipsawed it before the end of the day sharply lower. with inflation concerns continuing to swirl, policy decisions are on tap. rate hikes are expected across the board. it really was that powell counter programming from yellen that impacted market yesterday.

that there would be no blanket insurance for all those deposits, but let's be honest, that muddled message comes in part because policymakers want to send the message that he has, deposits are safe, but confirming so might give them a legal headache. you get the confused message. how much of the confused message sticks? confidence collapse playing to the dollar that is weaker. we had a 50 basis point hike from the ecb last week and surprised inflation readings still in the double digits of the u.k.. both the euro and sterling gaining across versus the dollar. meanwhile, the buyer -- buying the 2-year yields sticks down another five basis points as bond markets are voting that there will be more cuts to come despite powell saying they will not be any cuts this year, at least that is his base case. when it comes to risk markets, oil continues to sell off. wti down 1%. usi futures place -- u.s. futures place catch up.

nearly 5% decline in banks after janet yellen spoke. msci asia pacific and s&p 500 futures clawback some gains. let's get to our top stories. the fed hiking by 25 basis points and jerome powell signaled more tightening may be in-store. >> if we need to raise rates higher, we will. i think for now though, as i've mentioned, we see the likelihood of credit tightening. we know that that can have an effect on the macro economy, on demand, the labor market, inflation, and we are going to be watching to see what that is. dani: but in what was a pretty morning testimony from powell, what made sparks fly was the senate hearing that happened at the same time. treasury secretary janet yellen said regulators are not looking to provide blanket deposit insurance for u.s. savers. >> that is not considered or

discussed anything having to do with blanket insurance or guarantees for deposits. dani: this, let's get to bloomberg market reporter valerie tytel. valerie, messages that had different reactions and markets. what were your main takeaway? valerie: it clearly was a dovish hike. they have rallied 30 basis points since the decision was released and markets are saying that could be the last hike from the fed. powell was especially candid. his tone really shifts to the uncertainty and the unknown. there are two forces here at play, one keeping inflation high and another clearly slowing the economy down. we don't know which one will dominate for how long. there were key adjustments to the opening statement one being this line that recent developments are likely to result in a credit tightening condition, which will weigh on economic activity, hiring

inflation and importantly, the extent of these effects is uncertain. the line about ongoing rate increases was also taken out and substituted with the line that some additional policy firming may be appropriate. he goes into candid detail on the banking turmoil, that a pause was considered, and that a significant number of fomc participants anticipate tighter credit conditions. it could be modest, it could be significant. we just don't know yet but it could substitute for rate hikes in the future. he did say one positive thing on the deposit outflow. he said it had stabilized in the past week and we get them of deposit data from the fed later tomorrow. the markets will have their keen eye on that. dani: they considered a pause but they discussed at a time when nfp's are printing above 300000 and when core inflation is about 5%. how i is the bar for another rate hike? valerie: they need to have the

next six weeks complete confidence that the banking system problems are behind us and contained. and some believe that whatever credit contraction it could entail does not lead to growth falling below trend. they still need to be confident that growth will be above trend regardless of the tightening credit conditions from the banking turmoil. the market sees the likelihood that this could be the last one. we are showing you the screen here pricing about 10 basis points for the next decision in terms of a hike. the big question is we are uncertain how many banks were affected by this turmoil and how strongly will those banks react? would they really tighten lending standards and how long will this go on? markets might shift their focus from inflation data to any data we get about tightening of credit conditions. we do get some surveys with next week's pmi. dani: valerie, thank you so much

for the roundup. joining us now as frederique carrier, head of investment strategy at rbc wealth management. i want to talk about the board that she was showing us with the rate cut priced in at least 50 basis points worth or so despite powell saying they are not looking at cuts and they are not the base case. what will it take for this market to price out those cuts? frederique: look, we think the market is a little bit too optimistic in terms of cuts coming, particularly in june. we expect inflation to continue to be way above target and not to show enough progress for the fed to start cutting. if you look at all the hiking cycles that we've had since the 1970's, only a third of them does the fed start cutting rates by two or three months.

it be very unusual for a cut to happen as early as june. dani: how do you want to position then for this change? what would that look like? how sharp will a selloff in bonds be for example if we need to readjust? frederique: we think rates had to come down a little bit too much during the crisis, and we took the opportunity to reduce our positions in rates. we think over the medium term, you are going to make some positive returns, but to minimize volatility in portfolios and maximize returns, we think it was appropriate to start to dial down and later on dial backup our positions in rates. we expect rates to go back up in sequence but of course, with the weight of potential cuts, there is going to be a lot more

volatility. dani: can we talk about this scenario in which the bond market is right and fed does need to cut? how ugly does the american economy need to be for that to be the reality, and if that is the reality, our stocks singing the wrong tone? do stocks need to sell off more? frederique: usually when there is a banking crisis, financial conditions do tighten. hiking rate at this stage would probably increase the likelihood of a hard landing. we think stocks would likely react poorly to a hard landing. a lot of the decisions are being made at the moment in terms of pricing. we think that the market was very negative over the last few weeks. we increased our position believing that the market would land on the view that increased

liquidity would be seen as positive, that the fed would focus on providing liquidity and separating the role between fighting for inflation and providing financial stability. in the case of a hard landing, we would expect earnings to decrease, confidence decrease, and and underweight that she would be more appropriate. dani: are you still underweight? you said you increase your positioning a bit, but overall you are still underweight? frederique: yes we increased our position and reduce her underweight position in equities. dani: why hold onto the underweight if you think maybe the selloff has run its course of it? frederique: we are holding to her underweight because over the next six months , we think that economic conditions are going to be more difficult and that earnings are likely to disappoint. the valuation levels are not yet discounting a really difficult

economic scenario, and we think it is going to be very difficult for the market grind much higher. dani: frederique, what catches my attention is a concern here about growth. are you concerned about more panic when it comes to bank runs? powell wants to cut that tail risk of a loss of confidence in the banking system. for you, is that tail risk gone? frederique: not entirely. we are optimistic that these cases of svb, credit suisse, these are isolated cases. when the tide goes, it usually tends to expose the weakest banks. this is what we have seen both banks had some real structural issues. we are looking for signs at this is indeed isolated. it is perhaps too early to say the banking system is based on

confidence, so this is something we have to monitor very closely. in our view, the tail risk is not entirely gone. we hope and it looks at the moment like it is contained. dani: the banking index has lost about 1/5 of its value so far this year. the bulk of those losses coming over the past week. what do you think it will take to add more exposure to banking stocks? do any valuations of more attractive? the big banks if anything benefit from deposits leaving the regional once into big players. frederique: as part of a global diversified portfolio there is room for good quality banks. we have more than a benchmark position however because life will become more difficult for the banks. we think there cost of capital is likely to go up and cost of funding is also going to inch up. they are likely going to have to pay a bit more to attract deposit.

the case of european banks, the capital distribution is uncertain. if they buy back shares, pay dividends, they have to ask authorization to the authorities , and they might choose or prefer also to build up further their capital position. thanks as you mentioned are now very cheap. we are looking at multiples of six times value probably a more appropriate value of .7 times. they have fallen a lot. perhaps some opportunities, but we would be very cautious in terms of the quality of the banks we would put in the portfolio. dani: all right, great to speak with you this morning. frederique carrier, head of investment strategy at rbc wealth minute -- management. coming up, a lot of bank decisions on the docket today including the boe after scorching inflation reading and swiss national bank in the wake of the credit suisse follow-up. we are live from zürich.

that is next. this is bloomberg. ♪

dani: if you did not getting up from the fed yesterday, it is another big day of central banks across europe monetary policy day. we have with us bloomberg's francine lacqua in zürich and lizzy burden here in london covering two of the big

decisions. first let's focus on switzerland where the swiss national bank has to decide whether to deliver a long-awaited interest rate hike for an economy at the epicenter of the recent global banking turmoil. she is back in zürich another day, it's francine lacqua. i know you are basically making yourself a home there, a second home in zürich. let's talk about that snb. how do they balance this? the right path with the recent global banking turmoil? francine: this is the same dilemma as the fed had yesterday. it is widely expected that they will hike in this has been in the cards for a couple of months. the snb meets every quarter so this is the first meeting of 2023. they are at the epicenter of this financial turmoil so it is like the fed. do they hike less than expected at the moment when they are expecting an 50 basis point hike? that would bring it to 1.5%. that is well below what the ecb has done in terms of hiking.

inflation is well below what we are seeing in a lack eurozone countries. inflation is only at 3.4%. this is something the snb has in the past that they are still worried about because the trend so far will be an increase in inflation. they want to get ahead of its, but when we saw the setting -- incredible seven days we just live through i don't know how easy it will be for them to navigate this. if they hike less, markets will ask what are they saying that we don't know? if they hike just as much, you have to be sure that the financial system is strong enough to hold it. what's interesting and this is for me the quote of the day from someone here in zürich is the swiss are boring until they are not. the implosion really of credit suisse in the last five days is something that we need to keep on the back of our mind at all times. they used to have a press conference with 25 people at the snb. it today they move location because there is worldwide interest with many reporters are

flying in from all over the world. they moved it to a hotel. it gives you a sense of the pressure that they have. dani: i can only imagine the president will get question after question about the stability of the banking sector. where do we stand there now anyway? francine: you will probably get three questions. one of them on at1's and was a mistake given how the markets took it? a couple of our after they announced the deal, christine lagarde and regulators all around the world in various jurisdictions opt in and said that is a swiss model and we don't have the same model. we guarantee at1 bondholders in equity. he will field questions on that. the other question is the dollar swaps they have been offering. there was one buyer that asked for one million the first day and 5,000,002nd day or 5 million the first day and one million the second day. anything he sees in terms of stress and financial markets. the other thing we want to get to the bottom up because they regulate a lot of the banks is

what kind of outflows have they seen from credit suisse and other banks? this is switzerland, a small country. they pride themselves on financial stability in are known for their solid banks. you want to try to figure out whether this was national bank resident is shocked -- swiss national bank president is shocked about what happened. dani: looking forward to your coverage throughout the day. that is bloomberg's francine lacqua in zürich. let's turn to the u.k. for a preview of the boe's decision. lizzy burden is with us. what do we expect? lizzy: the upside inflation surprise yesterday surprise because it was the same debate that francine had mentioned over in the u.s. and the euro zone as well, whether financial conditions have tightened so much because of the recent banking stress that the work has been done for the bank of england. then we saw this print that inflation is still in double digits in the u.k.. it is a complicate of one but

economists are expecting rates to go to 4.25% the highest level since 2008. what we might also see is the emergence of a new dove in the form of john cunliffe joining tenreyro and dhingra in favor of holding rates because they are worried about the impact of previous jumbo hike. dhingra in particular is worried about domestic inflation being overestimated. that might give us a clue as to where rates are going to peek in the u.k.. dani: has got to be a dilemma for rishi sunak too because atop the prime ministers agenda has been cutting inflation and we got double digits again yesterday. lizzy: it was not a nice event for rishi sunak at 7:00 a.m. yesterday morning however economist did they they still expect inflation to fall towards the end of the year even if it is looking sticky now. yesterday was a big day for rishi sunak but he ended it

pretty much unscathed. he had his vote on the latest brexit deal, the windsor framework and he wanted to buy 515 votes to 29 even though his predecessors liz truss and boris johnson joined the rebels. you saw boris johnson testifying on television in parliament on party gate, the scandal of the gatherings and downing street during the covid lockdowns. it was a long testimony at times and he got angry. we are not going to have the verdict for a few weeks and yet the episode does seem to reduce the chances of a johnson come back even if a cast a long shadow on the conservative party. dani: probably a welcome distraction from the print. that is bloomberg's lizzy burden. snb president thomas johnson will be speaking to bloomberg about the central bank's latest rate decision. francine lacqua will be there all day speaking to him at 11:00 a.m. u.k. time and 7:00 a.m. in new york.

we will speak about the bank of england's decision at 12 p.m. in london. this is bloomberg. ♪

dani: shares and crypto exchange coinbase tumbled in after hours trading after it disclosed it had received an sec notice of intent to sue. sec chair gary gensler has repeatedly warned firms that many crypto products are securities. joining us now is bloomberg's crypto reporter in mumbai. what exactly is this notice on the sec? what does it mean? >> as per the filing by coinbase, it seems like the notice pertains to the spot market of the exchange as well as the services known as

coinbase which are offered by the platform. it seems like another u.s. regulator has upped the ante on the products which are offered by crypto exchange is. earlier this year we saw that crack in -- kraken had a $30 million penalty to settle similar allegations from the sec as well. dani: why has the sec been so aggressive as of late? sidhartha: since the collapse of ftx, we have seen the tightening of regulations, especially in the u.s. and the sec is of the opinion that most of the crypto acids and progress -- products are essentially securities and they are being offered to users without proper registrations. they believe these are illegal security offerings and they should get the proper licensing done with them.

dani: this is never a question i thought i would ask talking about anything on bloomberg, but what do lindsay lohan and soldier boy have to do with this? sidhartha: the sec sued it just in son and a bunch of celebrities in the u.s.. this pertains to a different case with regards to the illegal promotion of securities so back in the day i think the celebrities were involved in the promotion of two crypto assets which were backed by crypto justin sun and it seemed that they had received compensation for the promotion of these tokens which they had not disclosed. we have seen the sec penalized celebrities in the past for nondisclosure of compensation and the promotion of various crypto assets. dani: all right, thank you very much.

bloomberg's sidhartha shukla in mumbai giving us the latest. we are basically turning into tmz at the same time here. a quick check on your markets as we had to the half hour. it continues to be a story of bond buying. 2-year yields you can see that in the middle column still lower by nearly seven basis points. it is a market that is still willing to bet that the fed will cut rates despite a jay powell who says that is not his base case. the dollar following in sympathy. less than two weeks after the second biggest failure in u.s. history, jerome powell makes clear it is inflation that is has top concern. this is bloomberg.

dani: morning.

this is bloomberg daybreak: europe. i am dani burger and london. these are the stories that set your agenda. >> if we need to raise rates higher, we well. i think for now though, as i've mentioned, we see the likelihood of credit tightening. dani: jerome powell reiterates fighting inflation remains the fed's top priority. this is less than two weeks after the second-biggest bank till you're in u.s. history. but markets baffled, conflicting messages about deposit insurance from powell and treasury secretary yellen sent stocks into a tizzy with the s&p 500 web sign before ending -- whip sign before ending the day lower. inflation concerns continuing to swirl. policy decisions are on tap from the s&p and bank of england paired rate hikes expected across the board. the muddled message continues to play through, especially combined with maybe a more

dovish powell going from continued rate hikes to maybe continued rate hikes. you are saying that play out in the weaker dollar and stronger euro and stronger sterling. that is also because of the rate differentials. the ecb going another 50 basis points last week less inflation in the u.k. surprising with double digits again. bond buying back down another two basis points with the 2-year yields pricing in cuts. at the same time, oil falling. it was more than 1% and now down about .9% for wti. meanwhile, stocks attempt to climb back both in s&p futures and the msci asia pacific index. the fed hiked by 25 basis points as was largely expected. jerome powell signaled more tightening may be in-store. but then there was a mixed message. you had yellen saying there would not be a blanket insurance for depositors, and bill ackman

said the combination of those two means that he expects an acceleration of deposit outflows from banks. joining us now is chief economist for americas and europe at standard chartered. how important is that when they have conflicting messages when it comes to the question of uninsured depositors? sarah: it's a big challenge because at the moment it is all about confidence and any spoken words as we have seen last night have an impact on markets. there is still a huge amount of nervousness around the banking sector and while of course we know that the vast majority of financial institutions are solid and strong, and are not in a position where they're going to be facing questions about the deposits or people moving money out of the banks, there is still

a lot of nervousness around smaller institutions that they could be vulnerable. it is important that you get a clear message. it is a challenge because yellen is not in a position to make a blanket guarantee. those dip -- that the deposits will be covered. there are legal aspects that need to be considered. i think the confusion that arose last night is not particularly helpful for markets. dani: there needs to be legislation to have that blanket detection, but considering what congress looks like and let's be honest, has looks like a long time, we are talking about not being able to even raise the debt ceiling. how could something like this type of protection that perhaps the markets want actually play through? sarah: there is a big risk, of course, that once it gets into the political arena that you make things worse because the

last thing that is needed at the moment is to have a political battle about exactly which deposits are guaranteed and exactly what the level of guarantee should be. that is very unhelpful. we can just imagine a situation where we get headlines about a certain politicians pushing back on the guarantees, and that really making markets gyrate in a very unhelpful way. so, i would imagine that as sort of a more benign set of comments about reinforcing the message that where institutions are in trouble, that the authorities will step in to support the deposits, that is probably the most helpful way ford. obviously, that was the message that was coming through from fed chair powell yesterday. dani: when it comes to that message, sara, i want to read you what form he was one of the

big takeaways in the opening statement from jay powell. he said recent developments are likely to result in tighter credit conditions for households and businesses, and to way on economic activity, hiring, and inflation. the rest of the fomc understand that disinflationary measure mechanism of the banking stress paired we talk about something needing to break for the fed to stop. is this them acknowledging that this might have been something breaking enough? sarah: there is certainly an element to that. at the same time, of course, he did very much stress that inflation is too high and that the labor market is strong. indeed, he said that absent the financial sector, banking sector problems of the last couple of weeks, then the fed would have probably been more aggressive in its rate -- rate hike been -- hiking.

it is all a question of how long and how severe this current crisis is. if it is something which has been managed, which we start to look at in the rearview mirror and the focus is going to come very much on what is happening to inflation and what is happening to the labor market. at the same time, financing conditions will be tightening, and credit conditions will be tightening. that is going to result in slow growth and will have an impact on the macroeconomy. that in turn will put the drag on the employment situation and should calm inflation. he really was quite frank that is too early to tell exactly how much of an impact the crisis will have on the real economy. dani: sarah, quickly before we let you go, can we talk about the u.k.? 10.4% inflation. why do we still not have a grip on inflation in this country? why is it still surprising to

the tune of double digits? sarah: well, we have a lot of supply-side shocks as you know, which have caused food prices to rise. we have got a very strong labor market, a similar story to what we see in the u.s.. wages are rising, private sector wages peeking now and coming down the public sector wages are playing catch up. there is going to be a broader knock on effect to underlying inflation so it is not just the food prices. energy prices are coming down and the shock is that we are still seeing inflation rising beyond the point at which i think policymakers would have expected it to have peaked and be on a sustained downward trajectory. the impact of sustained monetary policy tightening will have an impact on the economy and ultimately will bring inflation down, but it just not happening quickly enough. dani: sarah, i'm afraid we will have to leave it there.

sarah hewin chief economist for americas and europe as standard chartered. thank you very much. finma releasing a statement for why they have written down the at1's from credit suisse. they relied on the perspective from credit suisse at1 bonds, not the emergency laws passed late sunday night. making clear that is the documents that served as a reason for doing this. it goes back to a talk to with luke ellis of man group yesterday who told me that if you don't read the documents, you deserve whatever happens. harsh lines but this is what happens perhaps when you don't read the documents. let's get to our other top stories this morning with the first word news. here is madison mills in dubai. >> u.k. prime minister rishi sunak got out of the day and parliament unscathed after convincing a key brexit vote. lawmakers backed a crucial

element of his northern ireland to deal with the eu by 515 votes to 29. elsewhere in westminster, former llama boris johnson faced a three hour grilling by a parliamentary committee. johnson told the televise hearing that he did not intentionally or recklessly mislead our limits over a series -- mislead parliament over a series of and parliament or the pandemic paired janet yellen says regulators are not looking to provide link it deposit insurance for banks. in testimony to lawmakers, janet yellen hinted at raising the current $250,000 caps on protection in what she called a special one-time assessment. take a listen. >> it is important to be clear, shareholders and debt holders of the failed banks are not being protected by the government and no losses from the resolution of these banks are being borne by the taxpayer. deposit protection is provided

by the deposit insurance fund, which is funded by these insured banks. >> neither billionaire jim radcliffe nor the qatari consortium interested in by manchester united have reportedly submitted approved bids for the british ballclub. that is according to sky news saying both bidders have been granted extensions to last night the deadline in order to increase those offers. the groups are competing to acquire the club from the american laser family. global news powered by more than 2700 journals -- journalists and analysts and more than 120 countries. i am madison mills and this is bloomberg. dani: we are joined by bcg global chair rich lesser and we will get his view on the state of the global financial system and ask him how our clients managing risk in this uncertain time. at that exclusive interview is next. this is bloomberg. ♪

>> the banking system is pretty sound and we are talking about a few banks. we heard from the chairman powell today that this is not something that is spread across the entire banking system. this is not like it was last time. this is not a credit crisis. this is a situation where it is a few banks. i think that we will have a significant number of small banks that will not exist 12 or 24 months from now that exist today. >> which ones will be taken over and which ones will have a shotgun marriage and which ones will disappear of their own accord? that's a question clearly the central banks and regulators are trying to stop things

disappearing of their own accord. the shotgun wedding is with us. dani: man group ceo luke ellis and city chief executive jane fraser having different thoughts as to whether the banking turmoil is truly over. now with rising rates that exact banking turmoil and slowing growth, there is a heck of a lot ceo's up at night. one of the big three global consulting firms boston consulting group is well-placed to observe how those chief executives are navigating the economic headwinds and managing risk. joining us now is bcg's global chair rich lesser. thank you for coming into the studio and giving us a visit on your europe tour. you have a lens into how ceo's and businesses are reacting. when it comes to this crisis, is a turmoil confined to the banking space or have you observed any spill over to the wider business climate? richard: i don't think we have

seen spillover yet. i'm not anticipating spillover. what ceo's are dealing with across sectors as massive uncertainty right now. the bank which is the latest on top of inflation challenges, recession risk, geopolitical tension that we have not seen in decades, a revolution in ai that is coming so much faster. everybody knew it was coming eventually but it is coming months and years rather than years and decades. when you put all that together, ceo's are confronted with enormous uncertainty right now. actually, i think the read that many will have to the announcement yesterday it's on the slightly more positive side. had the fed with the inflation data that has come out, had the fed not been able to or felt comfortable raising rates at all, i think that would have been a real sign there is a lot of turmoil underneath it. had they gone up more than a quarter of a point it would have seen over the -- seemed overly exuberant.

they fared pretty well in offered protection to the banks in terms of term lending. i think ceo's will feel like we have gone through this banking thing better than we might have and we still have the inflation battle that is going in the right direction but not as fast would like that does not eliminate the broader uncertainty. dani: how would you measure confidence among ceo's? confidence may be that the crisis is over but you were just saying these other headaches they are facing, are the ceo's confidence? richard: it's interesting. most ceo's are 50-50 on the state of the economy may -- maybe even slightly below 50 whether we will tilt towards recession. they are anxious about that. their own underlying businesses are doing pretty well, and that has led them to i wouldn't say be confident in the macro outlook. most will be talking about all the risks, but i think it has caused them to not overreact in their own businesses. for me, one the most encouraging things is while we all focus on the layoff in the tech sector

after a couple years of dramatic over hiring come the broader economy despite a year of one negative headline after another has not seen large numbers of layoffs or workforce reductions. most companies realize businesses are doing reasonably well through this and the biggest shortage right now is top talent. that is the issue. dani: artistdani: -- are they still willing to spend for talent? the tech sector is confined to their. as everyone else still paying up to get the top players? richard: paying up? i think a year ago the expectations were substantial wage increases were required for the workforce. if you surveyed ceo's and said what are your expectations for wage increases this year versus last year, it would be consistently lower. that's encouraging, right? we needed to get inflation under control and bring down wages. dani: powell would love to hear

that. richard: that is different than saying you will take a workforce reduction because you heard negative headlines. the majority would say no. in distress to do what you need to do but this preemptive layoff , we have seen many times in the past when everybody starts talking negative news and rates go up everybody wants to get ahead of it and start taking out people. in tech, for sure. in most other sectors of the economy, really not. for me that is one of the most encouraging signs of resilience. it does not mean you can't at the form resilience -- four resilience more broadly. dani: how do you feel about the recession in america? richard: i still tilt slightly to the more optimistic side that we will avoid it, but i have no crystal ball either. is there a real chance of it? yes. i think the course that the fed is charging has put us in a place where if there is a recession, the most likely one is a classic recession where you

need to raise interest rates, get inflation under control that is relatively mild. we are starting from a high employment base so if employment goes up hopefully does not spike too high. a mild recession is still degraded -- the greatest downside risk. when banks fail you have to worry about financial stability but i think -- instability but i think the fed has done largely the right things and the risk is pretty low. dani: when it comes to top risks, mike wilson at morgan stanley is talking about the risk of a credit crunch and bank of america's leases -- latest investor survey they say the systematic credit event is a top risk market. our folks worry about access to capita? richard: some are improbably certain smaller indentations are. many people got their balance sheets in good shape when interest rates were low. people are not entering this with really thin uncapitalized balance sheets. most are in good shape in larger places.

i am not hearing a major concern about capital, and i have app -- optimistic in the fed was right to say barring what just happened, some tightening of credit the equivalent of one or two rate increases they might have needed to do on inflation. people have talked about it being the equivalent of 1.5 point increase in the fed's fund rate. i don't think we are seeing signs of that. no one knows for sure but that's not where i would be. dani: you started out mentioning that one of the top risks is ai. when chatgpt went live, the story blew up. everyone was concerned about it. what does that that look like and how do ceo's respond to something like that is of getting better and a threat of being left behind? richard: yes, there is a threat. there is certainly a cyber risk that increases as these things can imitate people better and better and there will be other challenges. every time tenant -- technology

comes out to upsides and downsides. for many companies it is about the opportunity. how do you create a more personalized relationship with customers and enable your workforce to be even more productive and spend less time on drudgery whether desk based or physical? i actually think the upsides are enormous too. the issue is not only that it is a downside risk but it's a massive amount of change. after spending years on visualization and analytics of this core agenda that has been at the heart of what we are doing, the next resolution -- revolution is coming very fast. that is challenging at one level but opens up opportunities in others. that combined with the overall focus on resilience in the core business because of the uncertainty, and obviously the multi-stakeholder world that we live in with all the different pressures, it's a very interesting time to be a ceo. dani: i asked chatgpt to write a script for daybreak europe. our producers will forever be in

a job. you can't do anything close to the humans behind the screen right now. richard: i agree but can we also acknowledge that chatgpt three scored a 10% on the lsat and is now 80% on the lsat. with one generation better. it is getting better so much faster than we perceive. that rate of change, people use to thinking about medium improvements that we are on an exponential curve on this. dani: rich lesser they are global chair of bcg. coming up, dollar bears roar with delight on the back of the fed latest hike. it a greenback suffering from a lack of confidence? that is next. this is bloomberg. ♪

dani: the dollar falls evermore

after the fed decision yesterday. let's get to our chief rates correspondent asia garfield reynolds. garfield, the dollar is falling. yields on the front and continue to move lower. talk to me about the divergence between powell saying no cuts the market certainly pricing that in. garfield: the market is very concerned about the idea that you don't just go from taking by 475 basis points in the space of less than a year to leaving rates alone because the economy is just fine. the expectation is that the dollar will come down because the u.s. economy is going to slow down, and therefore, the fed is not just close to ending its rate hikes. it is close to pivoting two rate cuts. dani: quickly here, talk to me about the dollar. it is this divergence when we are about to get a boe that will grapple with 10.4% inflation. garfield: that is a big part of

the picture 2000 -- too. in europe and the u.k. you have the expectation for further rate hikes. it is clear that inflation is not under control there whereas there is the potential that the fed is getting closer to getting it under control and certainly that it won't need to hike rates. that means you can expect euro strength and pound strength against the dollar because investors don't have confidence as you are mentioning that the fed is going to take rates noticeably higher or that it can keep them high. dani: ok, garfield. we will have to and things there. bloomberg's garfield reynolds in sydney. this is bloomberg. ♪

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dani: