>> inflation is headed back to goal, but you have to be confident that it is headed back to 2%. >> we have seen the noise, one month does not make a print. >> there is still risk on the downside. >> it comes down to this achiness -- to the stickiness of core inflation. >> the headline will be below 4% by june, we are pretty confident. >> this is "bloomberg surveillance" with tom keene, jonathan ferro and lisa abramowicz. tom: good, lesser inflation in

america and a greater inflation in the united kingdom. the comments over the bank of england announcement. jamie -- jamie dimon, francine lacqua and the disney debacle. the bank of england, this is the difference between the united kingdom and america. lisa: hiking into weakness and acknowledging it. basically saying things will get worse and we need them to get worse to bring down inflation which is still double digits even after 11 consecutive rate hikes. tom: we have the perfect cast, jeffrey who will join us on the cultural approach to whipping inflation in the united kingdom or whipping it here. let us go to what we saw yesterday in america. mike mckee nailed it with his new index that chairman powell is looking at, things are pretty good. lisa: things are coming down as expected. the question is where do we go

and how messy do we get in the process to head down. i will say today that we will get factory price inputs. and this to me will be interesting because one thing that paul donovan pointed out is that factory prices are rising at a slower pace than the prices that consumers are paying meaning higher profits for companies. tom: this is cpi and ppi, and ppi used to be higher watched and then it drifted away. i agree with you it has some merit. here is the inflation structure in america for those keeping score. services inflation the peak is 7.3. it is 7.1, and now 6.8%. it is moving in the right direction. i looked at the united kingdom and it is on the edge of double. lisa: 10.1%, all in inflation. this comes based on expectations that was 9.8%.

it is not coming down quickly enough. what do they do with that? do they acknowledge that inflation is not able to be brought down. tom: you will do disney and a brief but it did not happen. lisa: subscriber growth is a concern, they did not add subscribers and we will get to that later on. but we are looking at is what is going on with the bank of england and ppi inflation rate. at 7:00 a.m. we have the right decision on how they parse the weakness in the economy with which -- wages that are also keeping pace with inflation. do they want to induce a recession? do they say that based on prior suggestions? the read on inflation in the u.s., the u.s. ppi, it has fallen significantly below where cpi is, the prices that consumers pay. factory prices are lower and

consumer prices are higher. this is corporate profits and this is the confusion of the moment where companies can make bank while consumers are feeling the pinch. chris waller will speak in madrid and it is very curious how financial security weighs in on how long to stay high for the central banks. tom: this is somebody steeped in the research of the fed. it is in madrid? even from madrid that will be important. is that all you've got? lisa: lots more, but let us leave it there. tom: we will have the stock check with disney. dow futures up 28. the vix is stunning, under 17. 16.73. i want to make sure i get the chart, the one of the massive melt up, 12 months trailing on the standard 500 in the dow. it is up 5%, that is not a bear

market. we are up 5% 12 months trailing and the nasdaq is up 100. let us look now at the words of mohammed on the huge difference on inflation approach in the united kingdom versus what we see in the united states. it is really simple, he is talking here about a june hike. "the case for a rate hike is very simple, inflation remains too high. there is evidence that inflationary pressures are persistent. we have to follow the fed." they have to follow the american economy. "when you put all of those things together, i would argue the bank of england has no choice but to raise interest rates. it would not surprise me if we get another rate increase in june." that is a moderate take. the gentleman from stanford, the chief economist for the shot came out with statements on the

bloomberg, thank you for the others in london for this. he almost said it was cultural and the people of the united kingdom have to fall on a sword and spend less. they have to accept the worst and that they are worse off. this is completely opposite of the american psyche. lisa: it is also probably not received well in the public and it really raises a question, how long can it go on. tom: it harkens to the british take from the depression, jeffrey you with us. you are perfect with us, the british treat sky high inflation differently than the u.s. does, don't they? jeffrey: right now it is household income growth that is strong and that is one major miscalculation on the boe side. look at the forecast waiting for a refresh, expecting seven courses on four year declines

this year. i do not think this will happen. real incomes will expand. if that is what is happening to the underlying pocket, then why should they not spend that? and then why not should they not pursue house purchases? and that is what we are seeing in the real estate market. that generates a wealth effect and feeds into itself. you mentioned that import prices are coming off or input prices are coming off, and that matters us for the u.k.. the services economy feeds into itself as jobs are rebounding where elsewhere in europe they are peaking. and that is driving demand. lisa: does the bank of england need to kill that demand and induce a severe recession to bring inflation under control because hope is not a strategy for people to spend less. geoff: i agree with you, but given the comments by various

leaders, what they want to do and induce and whether that can be done as politics start to come through over the next 18 months, that is a different story. so today's communication they will be asked about what they are telling the general public and how the public will treat the comments. that brings in a new dimension that will factor not just into the leadership but all of the members as well. so, i would not nail it on that. they will have to hike ad infinitum. 5% might be a bridge too far, and they want to see what the effects the previous hiking will have on the economy. lisa: if they say they are open to potentially pausing at their next meeting, some people are suggesting that this will be that this will be the 12 consecutive hike and then it will stay there for the bit. will the pound crater or rise? how much are people baking in

this facing a 10.1% inflation rate? geoff: two things. looking at the underlying flow, the clients have been buying against the dollar and euro. just from a position point of view you will see that on that side. on the other hand, having a strong pound impacts inflation less in the u.k.. if there are strong services demand and input into domestic wages and we see strong labor market tightness, having a stronger week pound will not make too much of a difference so it goes back to the demand story. tom: this goes back to the word that no one speaks about in the united kingdom political economics which is austerity. there seems to be an immense embedded elite comfort in telling the british people that they must be a stair -- austere. overlay that with the reality of your three or four of brexit --

of brexit. talk about the british comfort with austerity and the experiments of brexit? geoff: put it this way. the former prime minister basically pledged that this will not be the age of austerity anymore but the age of leveling up. the chancellor is not putting it in austere terms but there is a need for retrenchment and restraint and that can happen further down the line. most of it is on the corporation side but going past the politics and what is happening in local elections. political and fiscal giveaways are a tradition ahead of elections so what i worry about is heading into autumn we might start talking about fiscal easing, that is inflationary when the boe is thinking about pausing the timelines. tom: on sterling, what is your call 12 months out? geoff: weaker.

two things i mentioned the positioning that needs to come off but fed cuts are being priced in far too aggressive so that aggressive -- so that aggression alone. lisa: great -- tom: a great way to start. i cannot say enough about the difference an american optimism about growth and the embedded belief that we can grow our way out of this and a british difference. with hugh today, a phd from stanford and he is not all british. what he said you cannot say that in the american press. lisa: there is a good chance he could not say that in the english press either. it is a little bit of that tone to it and i am sure that he will be duly received among many people. there is a question of central bankers caught between a rock and a hard place not finding an easy way out of a quagmire that

puts them in a tenuous position and that is the issue he is dealing with maybe just spend less for six months and we can get out of that and a lot of people are saying it does not work that way. tom: you are the expert on this, cnn was talking about in biden administration takes the inflation reduction act off of debt talks. lisa: hopefully this is progress made and a lot of people are concerned about the tail risk. tom: another meeting tomorrow. lisa: maybe we'll get progress although former president trump had some fiery words. tom: there is a meeting today with francine lacqua in paris. look for her conversation with james dimon. stay with us, good morning. "bloomberg surveillance." ♪ >> keeping you up-to-date with news around the world from the first world -- first word. donald trump is urging republican lawmakers to get is invited to agree to spending cuts or to push the u.s. into

its first-ever default. he spoke in a town hall event with cnn in new hampshire. he holds a tight grip on the republican party and the polls show him as the front runner for the presidential nomination. the bank of england is set to go ahead with a 12 straight interest rate increase thanks to a double-digit inflation. the decision is due at 7:00 a.m. new york time. still the end of the boe's hiking cycle is coming into view. a survey expects an increase to 4.5%. israel and palestinian militants exchanged fire. islamic jihad squads launched rockets towards israel and is really aircraft killed the chief rocket maker in gaza. efforts to reach a cease-fire has not worked. saudi aramco is pushing back a deal that would've been the largest share sales. it is delaying the planned ipo of its energy trading business

which might -- might be pushed into 2024 unless the market approves. aramco was considering seeking a of $30 billion. shares of disney are lower. the world's largest entertainment company posted a drop of subscribers to disney plots and predicted a bigger loss in that business this quarter. disney says the loss from streaming will increase by $100 million because of shifting market costs. 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. ♪ the first time your sales reached 100k with godaddy was also the first time your profits left you speechless.

at the counter or on the go, save 20% with the lowest transaction fees and keep more of what you make. start saving today at godaddy.com

>> short of a default, brinksmanship over the debt limit can also impose serious economic costs. we know this from recent history. as we learned in 2011, just the threat of of a default can lead to a downgrade of our credit rating and a weakening of consumer confidence. lisa: that was janet yellen speaking at the g7 meeting when it seems like politicians are trying to generate some interest on wall street about the debt ceiling debate that are they are

getting some interest but not elsewhere. tom: i think it is people, there is an understanding going back to my sainted mother and a complete panic in the late 50's at the world will come to the end, the debt thing and this that and the other, cry wolf and it does not happen and that is in the people of america. lisa: which is why you see gains and the reason that people are optimistic and the tail risk seems to have been taking off the table that we will head into a default. last night possibly helping hurting, donald trump the likely republican candidate for president yet again came out and said that he hopes that republicans demand a actual debt default unless there are massive spending cuts and this is something that a lot of people are concerned will be the tail risk. james at l the partners joining us, what did you make of that, was that helpful and how much does he represent mainstream within the part -- the republican party?

james: trump represents the republican primary base but not the general public, and the fact that donald trump will say this underlines what i've been writing about which is the theater going on in washington, brinksmanship and exactly what tom was saying. we want to the financial markets to demonstrate that we are important, but i've -- but i think the financial markets in general public understand the game and they will not take the bait. i what -- i think there was some risk and something to worry about that i think they will get it done. tom: you have decades of wisdom on the schiphol -- on the shifting tides of capitol hill but part of that analysis is the middle ground. you mention the primary polarity which shows his success or someone over on the left's success. what is the power of the middle in the next coming weeks over this debate and into middle

june? james: the power of the middle is that members of congress have been bottled up. they are they are there to legislate and to do deals and they are looking for a deal. we are waiting for a senate gang, we are waiting for the house problem solvers to start offering alternative solutions. and as soon as you have talks at the white house or there appears to be some substance, ira is off the table and this is off the table and this is framework, that means you will unleash the hive mind of congress meaning that leadership will be losing control of -- at some point and you will have independent actors working towards a deal. more importantly you have to look at the timetable. they do not have the -- they do not have enough time to give themselves extensions and i think we will see a long extension through september. tom: you have a terrific

chronology and the word that comes up all the time in your research note sentence to sentence is vacation. explain how the lack of attendance gets in our way, even if they kick the can down the road to the end of the fiscal year or until autumn, they are really not there much, are they? james: no, they are in and out, they move in and out like the title flows on the sea. they are in monday evening and they are out thursday afternoon meaning that washington moves in one week intervals and means that they are in person for very little amounts of time and it means that they cannot respond quickly to new situations. not only are they constantly coming in and out, but they generally need a pause to process, to think about what happened so it is always a stop and start, a pause, reflect, new

action, pause sort of cycle. they have been doing this for nearly 40 years. there is no real change. lisa: we will talk about the debt ceiling debate with increasing frequency unfortunately or fortunately. as we are battling inflation and the rate hiking cycle, how much is the underpinning inflation really heightening that the -- the debt ceiling debate in a way it has not been even back in 2011? james: we are seeing a fundamentally different sort of debate than 2008 during the banking crisis or 2011. when you still had the key party effect, which was really driven more by the banking crisis than anything else. i think there is a much higher tolerance for spending, and i do think that inflation, or the sense that inflation comes from too much spending driving this

cycle as opposed to angry people worried about personal debt in the wake of a banking crisis. tom: very quickly one final question, we have the privilege of speaking to james dimon's in paris -- james dimon in paris. this came up last night, where do you sit with your experience and your tenure of duty at prudential and i will have to say the team that prudential had years ago was best in class. can jamie dimon be a good secretary of treasury? james: sure, he has the skill set, presentation style and credibility. i think you will be a great treasury secretary. tom: thank you very much. that is still percolating, there is a whole group of people in washington that hates wall street. we could never have anybody in wall street. this does not go away, this thought does not go away. secretary dimon does not go

away. lisa: washington is more ok with it. we will keep whispering. there is this issue-- tom: people bankers. lisa: how much could a banker or a very wealthy individuals in the financial sector actually get elected. and this is one of the big questions. donald trump dead and he has a wealthy -- did and he is a wealthy real estate investor, but there is a different nature to those who work in more established circles. this does not play with the population income. tom: it is a cabinet position and the answer is you are looking for people who have communication skills and dr. yellen has a whole different cadence and pace than what you get from some of others like trump. lisa: the question is what he leave jp morgan to do that? tom: i am just trying to stir

the pot. francine is in paris, ask dimon if you wants to be secretary of treasury? lisa: the confidence that something will get done and the confidence of the headline about taking some things off of the table in the discussion is actually steps of concrete progress. tom: my measurement on the data check and tension in washington is the comparison of the three month yield and benchmark 10 year note. we are back out to 100 -- -182 basis points, not record ride -- wide and even with the better equity markets and s&p futures up 10. i am looking at the bottom and there it goes back to 3.91% on the two year. not new lows but getting there rapidly. lisa: yesterday the tone seems to be we got the expected decline in cpi and this is

incredibly positive and shows that we are at this inflating and the fed can cut rates. to me this is a question, will it be a messy process and cause a lot of angst as people see volatility in the numbers? tom: the yield structure is lower. 3.42%. really good moves. economic data at 8:30 and the 8:00 hour with claims in ppi analysis. francine lacqua in conversation with jamie dimon. look for that. on radio and television this is "bloomberg surveillance." good morning. ♪

these days, our households depend on the internet more and more. families grow, houses get smarter,

and our demands on the internet increase. that's why we just boosted speeds for over 20 million xfinity customers, on us. so you get more of the speed you need for day and night streaming. more speed you need when you're work from homeing. and more speed you need as your family keeps growing. check in on your current speed through the xfinity app or upgrade to the speed that's right for you today.

tom: good morning. "bloomberg surveillance" on radio and television. jonathan ferro is on a silent -- on assignment, deep on assignment somewhere. rumored to be back tomorrow. rumored. what do you think, 50-50 odds. lisa: depending on the performance of some teams, perhaps the next day. tom: you are telling me that. we welcome all of you this morning. the data is still the up take off -- uptick off of servant -- service disinflation.

dow futures up fractional, but 12 months trailing you have spx and staff up 5% and the nasdaq 100 has a pop to it. lisa: it has only been boosted by the idea that we are getting disinflation in the u.s. and not in england. to me the district -- the distinction is palpable. wanting done does not work in the same way in england. tom: i want to sell this to you. this is not a normal conversation. francine lacqua in conversation with james dimon in the midst of the american banking crisis. the banks are all open for business is morning? lisa: pac west coming out that they are going to complete strategic asset sales this quarter, highlighting how the positive sides that we saw in some banks does not apply to more of the troubled sides. tom: jamie dimon will do it is strategic asset sale with a new

building on park avenue. we will see how it goes. lisa: we are half an hour away from the bank of england and there is a question of the 25 basis point hike. janet henry expects that but she is looking for something we have not been seeing the u.s.. "though our base case is for a 7-2 vote again as in march, any deviation from this will get the market's attention. if anything, the risk is that the recent data have spooked the hawks and we could get a few votes for a larger 50 basis point hike." that would certainly cause markets to move. tom: janet henry is with hsbc and they have been brilliant over the ark of the crisis, i am talking 10 years of a lower rate regime and more subdued gdp in the back and forth that janet henry has provided leadership. what will be the nuance? i love that the bank of england is more fractious including catherine man, a great supporter

of "bloomberg surveillance." what will you look at to interpret the body language of the boe? janet: as always, it will be about the vote. it will be about the language and a little bit on the forecast, which are always their own mystery where the bank of england is concerned. more than other many -- major central bank the bank of england has a lot of diversity of use. so the you came -- the u.k. team said in that comment we expected a vote of 7-2 but it is possible that we get a four way split. two people are -- and they think it is time to cut, where as we know some of the more hawkish people if you include catherine man, actually view -- in view of the recent run of data which shows not just the pay numbers and inflation numbers and the business confidence and the

service sector pmi. they might be voted -- they might be minded to vote for 50. anything on the hawkish side might have influence on the markets as they try to keep the statement neutral. tom: is double-digit inflation in the united kingdom, is brexit part of that reality? janet: i think there seems to be a brexit impact on the supply side of the economy, particularly on the labor market. it is not all of it and the u.k. seems to have a particular impact on long-term. if you look at the u.s. labor market participation around pre-pandemic levels and france and germany it is actually above it. in the u.k. it is below it. a lot of them is a age workers. the other impact of inflation which is not talked much about is that the 10.1% print, a huge

amount of it is still energy. the headline inflation in the u.s., energy has detracted to headline inflation off of 4.9%. in the u.k., it is still adding 3.2. we did have a very disappointed reading of 10.1 and that is too high. and i think the bank of england's forecast was impossibly low but inflation will come down as the energy contribution drops out. it is why i have been inset -- the -- that is why i have been saying the move from 10 to five is easy. five to two is where the challenge lies. lisa: i was thinking about this morning, are we seeing the end of the global rate hiking cycle, is at the beginning and the ecb will taper off later this year. thinking how messy it is with the data that will fluctuate so much. how much in this can the bank of england, out and say we are

going to avoid recession or will they have to double down the idea on a severe recession that they brought up last year? janet: that is why the forecast will be interesting. remember their last forecast they had a prolonged recession. unlike the rest of us they probably will revise away the recession. it is possible that we get a negative q2 and we have had a lot public holidays in may and an extra one because of the coronation so you could get a negative q2, but that will take away the recession. but where they will face the difficulty in terms of sending a message is probably with still very low inflation forecasts two year ahead from only 1% three years ahead, something like .5. usually they use those forecasts to say market is expecting too much on interest rates. in the market in the near term the next couple of months is expecting quite a lot.

and then quick cuts. it will be a difficult communication challenge to say actually we do not think that interest rates will come down quickly. for now they will focus on the idea that they would like to call. this is where they were last meeting. if there are persistent pricing pressures, and we get two more prints before the june meeting, that would warrant further tightening. the forecast versus the messaging could be where some of the confusion comes out. lisa: do you think that we are entering the end of the global tightening cycle, or is it becoming a splintering exercise of different regions with different challenges? janet: certainly on our forecast we are at or close to the tightening cycle for a lot of the major central banks. it has been interesting looking around the world, you have some companies that will really see a

recession, the likes of new zealand and sweden. they will probably cut more quickly. for the bank of england and ecb, we have rate rises in june, and then it is more likely the ecb continues to raise beyond june than the bank of england. given how their reaction function seems to be coming through. i think we are close to the end, but relative to market expectations i am more in line with a lot of economists that the interest rate cuts come later, getting inflation confidently back towards target will take longer than they expect unless they get something much worse on the macroeconomic side or fundamental side. lisa: tom was mentioning what we saw in respect to some of the concerns and with respect to the idea of a populace feeling, take less and do less.

as we move forward, how much do we expect that kind of tone to receive pushback and a lack of willingness to get back down to a 2% level. the last mile that would be that much more painful? janet: that is a good question. i think it is very hard for any central banker to send the message to populations who are facing a costs of living squeeze and firms who are facing input cost pressures, so to say please do not ask for pay raises because if you try to offset the cost of living with higher pay increases than the whole process will take a lot longer. a certain individual has also said the same to companies as well, do not push up the price increases. but the fact is, central banks, particularly the ecb and bank of england no where the -- know

where the persistence on inflation risk comes from which will be if wages respond to inflation. so 10% inflation, you will not get 10% pay raises. if you get four and the productivity is still zero, then that keeps inflation much steadier for longer. tom: we have to leave it there, thank you so much towards the bank of england meeting today. maybe it was a bit of a snooze but it is not now. the tension of a better-than-expected u.k. economy versus the worries about slowing down. citigroup really capitulating yesterday or the day before. i thought there foreign-exchange team was great. we were wrong. they came out and said we are wrong and the u.k. is doing better than expected. lisa: i wonder if that will be the same if they keep raising rates even if everyone stops. how much can they really fight inflation, 10.1% if they are not

raising rates much more significantly? tom: the focus is on james dimon who runs a small bank and will be in paris. this is off the radar and this is something that we like to do. ci financial is the mother of all asset-backed rollup that is out there. it is a small group in toronto, based in toronto. ci financial will sell a stake in their u.s. wealth management. i do not know the details, what i do know is that when i talk about roll up's this is the mother of all asset management rollup including part of eaton vance which morgan stanley took up years ago. the future of getting scale, it is an example of can you work and get scale. the stock price as it is not working. the stock has given them fewer mutual -- mergers and acquisitions opportunities.

to me, it is a perfect example opposite the giant normandy of -- gianormity of how we get scale. lisa: it is the irony in the financial sector after a decade of people saying smaller is better and big is potentially risky that bigger is somewhat more stable and everybody wants to be bigger. tom: we will lean forward into francine lacqua and jamie dimon coming up. the head of citigroup on the united kingdom, stay with us. lisa m.: keeping you up-to-date with news around the world with the first word, i am lisa mateo. former president donald trump says the u.s. is spending money like drunken sailors. at a cnn town hall he urged republicans push for spending

cuts or go into default. he says he does not believe a default will happen because democrats will cave under pressure. polls show that trump is a front runner for the 2024 nomination. consumer expectations for a eurozone inflation rose significantly bolstering the case for the european central bank officials who say interest rate increases might need to continue past the summer. in its monthly survey the ecb says that inflation expectations rose from 4.6% to 5%. in china, inflation at the consumer level has slowed to the weakest place in two years. rose .1% from a year ago. producer prices fell further fueling debate on whether more policy stimulus is needed. the biden administration is cracking down from the u.s. -- on the pollution for the u.s. electric sector. it would force coal plants and the largest gas fire units to stifle all of their carbon dioxide emissions.

it would spare most natural gas plants and utilities would have more than a decade to comply. microsoft has become the latest u.s. tech giant to tighten its belts. it will freeze pay for all full-time workers this year. in a memo the ceo said that the move is necessary to generate funds to and faced in the platform shift towards artificial intelligence. 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. ♪

♪ (upbeat music) ♪ ( ♪♪ ) ( ♪♪ ) ( ♪♪ ) -awww. -awww. -nope. ( ♪♪ ) constant contact delivers the marketing tools your small business needs to keep up, excel, and grow. constant contact. helping the small stand tall. >> i guess that is nothing, so i am not speculating. what i realized is that first of all, and this is good news, headline inflation is coming down in core is still at risk

but not as comprised. so, what i see is that we are coming closer to the respective territory, but we are not there. tom: the ecb governing council member, but much more than that, a voice of hawkishness. do i editorialize, i am not sure? lisa: no, he is on the hawkish side. tom: this gets us to the bank of england side. good morning on radio and television. bank of england festivities coming up. is it like seven 0 0. maybe they will declare victory which is what the governor said this time before and then we will go into a conversation with jamie dimon and francine lacqua. we have to stop the show, there are reasons including when tottenham wins. krispy kreme, abramowitz briefed

on this. krispy kreme just killing it. it is a beat as they say on wall street. lisa: i am not a krispy kreme expert, whatever tom will try and throw on me. it is a beat because we have good news to see a beat more broadly. i was introduced to krispy kreme and dust when i moved to fargo and people camped out to get the first krispy kreme doughnuts. and then it lost luster and it is making a comeback for the doughnut themes. -- doughnut themes of the world. tom: bloomberg intelligence will have more this morning. adams will have an in-depth analysis. this is important. it is so important to keep score on wall street of world-class frontline analysts who say whoops, i was wrong. it was a wonderful note from citigroup and there ahead of

european fx strategy when he said you know what, it is not that slow in the united kingdom, i do not know if it was charles iii that put them better and we know that they have recalibrated at citigroup. what surprised you most in the dynamics of politics and economics that turns the united kingdom around? what was the factor that you most got wrong? >> absolutely. i think looking at the likes of a similar structure of economies in new zealand, the house correct -- the housing correction has been about 4%. the u.k. it has been 4%. and we have to admit that the resilience in the housing market has been quite remarkable. now, it could be that things get worse further into the summer

where we will get more people and more households starting to refinance at higher mortgage rates. but that does not detract from the fact that as of now, housing correction has been far more modest than i would have expected and most people what have expected. and it definitely adds a lot of resilience to the u.k. economy. tom: how does the bank of england adapt and adjust to this better outlook on the united kingdom economy? vasileios: well it allows it -- here is my thinking. my thinking was we are going to have -- tom: i think we have some technical difficulties. we are going to come back on that and see if we can reset the audio and linkage to the video.

i just cannot say enough about how people are allowed to be wrong and get a macro call wrong and then be visible when they adjust. it is a different that a lot of viewers perceive. you, out and say you are wrong -- you come out and say you are wrong. i find that studying the people in the middle or people who are in the wrong factors are always valuable. lisa: everyone has been humbled and then some over the past two years were everybody has gotten it somewhat wrong including the official setting policy. this has been a push that has been very difficult to understand including the markets back. thank you for bearing with us. i want to go back to what tom was talking about with the persistence of inflation or lack thereof. janet henry was saying that in the u.k. there is a massive energy component so when you

look under the surface it is dis inflating faster than people would think. vasileios: i agree with that, there is an element of dis inflation. that is specifically u.k. in labor margin shortages. this is what is keeping wages quite high and we have surprised everyone on the upside and spooked the bank of england. that is going to be one of the factors why, a hike of 25 basis points today and keeping the guidance unchanged. this is definitely an element of persistence. part of it is due to private elements of the labor market, supply issues and labor market shortages. lisa: given that that is causing resilience on people being able to spend, do you think that the bank of england in general and

central bank should err on the side of being over restrictive to get inflation the last mile down? or is it important for them to take a step back and not hike rake so far? vasileios: it is quite difficult to do this right now, because we are already way past the neutral rate meaning that monetary policy is restricted. this is where i see a dove risk because some of the centric members might after lean very probably -- prominence -- prominently on monetary policy transmission. we have just said we can hike one more time and then we want to see how monetary policy transmits into the rest of the economy. the centralist scenario is for a change in guidance but i see the risk from central people allying more with the dovish members. tom: thank you very much,

particularly with the check -- with the technical challenges. we are going to do disney at the bottom of the hour but we have to touch on it right now. disney was the buy. i was watching a movie, a spectacular movie on youtube and i cannot remember, it is like hollywood without the makeup and it is candid videos and the guy who took it was legendary and he had his two daughters and walt disney on a cart at the walt disney studios as they were literally building out disneyland. i'm thinking it was 1952 or 1953. this is an iconic company and to be abrupt they are flat on their back and there is no polite way to put this. lisa: they are segmented. the disney world and disneyland side of things they are not flat on their back. it comes to growing their subscribers in a competitive market they are falling short. it seems like that is driving negativity into the rest of the

year and share prices. tom: i think it is a streaming thing. we had one of the team that went to orlando for four days. they had to mortgage the house. they had a summer place that they had to unload. you know what it costs per day four or five kids? lisa: yes actually. tom: it is painful. they are making money. lisa: they are making money at that. on the media side of things there is a transition between streaming and cable. advertising is paying less so they are getting squeezed on that side and on streaming it is not fully adapted and we do not understand how to make the money in such a massive way unless you jack up prices and subscribers are getting used to it but they are pushing back. at what point do you shift completely and then maximize profits on the streaming side? we are not there yet. tom: i would say that gina is excellent on this. if you go to the hulu or disney

plus page we are getting back to bundles. we are going back to what we knew as kids where you get disney or disney plus or you get hulu disney and espn all bunched in together. the reports i got off of the call are people are like maybe not. lisa: remember a year ago when we were talking about content being king? everybody was taking out money to invest in productions and how the content we have is good not, too much content and a different tone now. tom: but don't you think that is an issue? who has the time to watch it all? lisa: i have so much time. i just go home. i take your point. tom: we will cover this in 30 minutes. the path is to greet the bank of england and then we will get disney at the bottom of the 7:00 hour. we will lean forward into james dimon and a conversation in 8:00.

stay with us. this is bloomberg. ♪

>> inflation is headed back to normal but they have to be confident it is heading back to 2%. >> we have see the noise of the data. one month does not make a print. >> it does come down to the stickiness of core services the deflation. >> the cpi headlight inflationary will be below 4% by june. >> this is bloomberg surveillance with tom keene, jonathan ferro, and lisa

abramowicz. tom: good morning. the bank of england does something we've never seen. it is the biggest upward revision to the gross domestic product of the united kingdom. that show some of the dynamics. the guest was brilliant on the housing analysis. there was a belief in united kingdom housing cratering. lisa: the bank of england was expecting a deep recession and to hike into weakness. now they expect the u.k. economy to avoid a recession, delivering the biggest upward revision to gdp in history. how much will i have to raise rates? they raised for the 12th consecutive time to 4.5%. that was a line with projections. does that mean they are doing less with respect to hiking or

they have to do more? tom: looking at sterling dollar. cable is 126. euros sterling showing the same validation of the sterling stability, sterling recovery with the economy. in the united states red and green on the screen. dow a little bit negative. mohamed el-erian saying the debate is a sign -- the healthy debate is a sign of a healthy institutional strength. this headline is not minor. the idea of a younger institution, the bank of england without the fed history across the 20th century, bank of england delivers upward -- biggest upward revision in history. lisa: the vote was 7-2.

we will be getting more details about what those were. to give you a sense of what the economic projection is, the bank of england expects the u.k. economy to grow 0.25% this year. they previously saw a contraction. the year after into a 24 with the growth of .75% after sega .25% contraction. this is a firm growth trajectory. tom: the inflation risk skewed to the upside. she has recovered from her coronation coverage. our royal correspondent lizzy burden is in london looking at the bank of england decision. give us some color on the quality of the dissent at the bank of england. lizzy: it was a 7-2 but that is what we are expecting. they have been the doves in previous decisions, telling us

he would be a full to be hawkish right now. in other words do not turn on the hot tap when you need to be patient for the warm water you will scald yourself. she is worried about the monetary transmission lag. she has been ignored and overruled. the committee went for 25 basis points, another hike, because we have multiple digit inflation in the u.k.. the committee is changing its outlook for inflation on the back of the double digit upside surprise and says inflation will fall more slowly. not with the prime minister wanted to hear. his number one priority is halfing inflation by year end but he will welcome the news of this biggest upward revision to the gdp forecast. no recession on the horizon for the u.k. says the boe. lisa: is your take that the bank

of england has to do more because of the slow process of declining inflation or is it that the bank of england will be more patient as they try to avoid some type of deep recession? lizzy: if you look at market pricing, traders see 4.95% by september. we were speaking to a former bank of england executive on bloomberg radio who says that would be an unwise move to take rates that high given the spillover effects from your side of the pond, of a u.s. recession , given all of the regional banking turmoil. we have to wait for the presser to see how confident the bank of england governor is. i want to hear how much weight he puts behind these forecast. it previous decisions they told us we were having a recession but that was predicated on the market cutting rates, which they did not endorse. tom: a doctor was on my panel at

the international monetary fund and she underscored this is not the united states of america. it is that entirely different economy. from where you sit and with your boe team in london, is it fair to compare and contrast the fed with the bank of england? lizzy: the fed has had the luxury of being much clearer in its signaling. economists i've spoken to says it would be unwise and lose the credibility of the boe if they do anything but say the future path for rates is data dependent. that is the tone they were expecting from the governor. in terms of the difference between the u.k. and the u.s., the timings of all of this has been different. there are base effects that separate us from the euro zone in terms of adding the energy

price cap. bloomberg economic says you are going to see a conversion later in the year. right now it looks such an ugly split between the euro zone, the u.k., and the u.s.. tom: economics outside the bank of england. sterling at 1.26. i will call it unchanged off the decision. maybe it is the two dissenters. sarah hewitt joins us right now head of europe and americas research at standard chartered's bank. citigroup says they got wrong the house in question. explain to our international audience the resiliency of the united kingdom housing economy. that has been a game changer, hasn't it? sarah: it has, and it is a big challenge for policymakers because the resiliency has been

due to the fact that many people are on fixed rate mortgages. we know the mortgage terms will become significantly more onerous in the coming months. so far we have seen a recovery in the funds. ultimately the higher cost of borrowing is impacting many households in that impact has not come through yet. it is the question about time more broadly. we talked about how bank of england policymakers take decisions, how far do they take into account the extensive policy tightening that has already happened. they have decided today that need to do more to bring inflation down. lisa: looking at what lizzy was talking about the traders are expecting key rates of the bank of england to peak at 4.95% in

september, up from 4.5%. does that cohere with this idea of expansion this year and next to the u.k. economy as the bank of england expects? lizzy: intrastate -- sarah: interestingly, that we look at what the bank of england is expecting for inflation, they still see inflation well below target in two to three years, which suggests in their view if rates to go up to what markets expect that will be over time. they are not expecting a recession anymore but they are expected the economy is flat for the first half of this year and that they are expecting subdued growth. a lot of the better economic outlook has to do with the global economy, lower energy

prices helped enormously. fiscal support. although they do still talk about a tight labor market, they do not expect unemployment to rise meaningfully over the course of the next year. tom: sarah hewin with standard chartered bank. as we move forward we have sterling at 1.2608. a stronger sterlite. real nuances. that brings us back to the 8:30 data in the united states. lisa: sarah said something intrastate that the unexpected booming growth is what is happening globally. how much of that is because of china and the accelerated schedule of reopening in addition to lower oil prices? this is intrastate because overnight there are questions about how much china is expanding. there are questions around credit creation and thinks her.org as quickly as possible. i wonder, that uncertainty, how is peggy and there?

tom: some of it is the pandemic. you have the war in ukraine. that is there. to your point, out of the pandemic so much of this is unpredictable. i would suggest of the over analysis of what we do and financial media the mystery into the summer is greater than we perceive. lisa: it has been a mystery for bunsen bods. your point about the data -- four months and months. do we get the data we saw in the u.k. with the labor market remaining stronger than what people expected? the dearth of workers is adding to a stickiness of wages and a strength in the overall economy. tom: i have a lot of respect for guests that really matter. the four week moving average is

from 191,000 expanding out to more claims of 239,000. that is legitimate math. that is a trend. i am hearing 250,000, 270,000 is where we begin the surveillance sweat. lisa: it is ticking up at significantly significant rates but with such a low base. is this just a very best the process? tom: we will continue to analyze the bank of england and the comments of the governor of the bank of england. we turn to the united states and in paris our francine lacqua with jamie dimon of jp morgan. lisa m.: keeping you up-to-date with news from around the world with the first word, i am lisa mateo. donald trump is urging republican lawmakers to get president biden to agree to spending cuts or push the u.s.

into its first-ever default. the former president spoke at a town hall event with cnn in new hampshire. he holds a tight grip on the republican party and polls show him as a front runner for the party's presidential nomination. for a third day israel and palestinian militants in the gaza strip exchanged fires. islamic jihad squads launched more than 500 rockets towards israel. efforts to reach a cease-fire have not worked. ukraine needs more time to launch its long-awaited counteroffensive against russian forces according to president zelenskyy. he told the bbc the rv is still awaiting promised aid from allies such as armored vehicles. shares of disd are lower input -- shares of disney are lowered premarket trading. it posted losses to disd plus and predicted a bigger loss this quarter. disney says the loss from

streaming -- new learn bloomberg has learned -- bloomberg has learned -- the company is delayed of the planned ipo of its energy trading business, which may be pushed into 2024 unless the market improves. aramco was seeking evaluation of more than $30 billion. global news powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo. this is bloomberg. ♪

>> would produce an economic and financial capacity. millions of americans would lose their jobs. household incomes would be reduced. incomes would see credit markets deteriorate and millions of american families that receive government payments would be left without the resources they were promised. tom: on the west coast of japan overlooking korea and russia the secretary of the treasury of the united states steeped in the dynamics and history of american labor economics. that is janet yellen.

annmarie hordern in conversation with the secretary of treasury from japan. 3:30 new york time in the morning. only bramo will see that. i will stay in the surveillance lumber. london 9:30 in the morning. afternoon down south in hong kong. that could be interesting. lisa: especially given the tenuous nature of having to deal on the national stage at the same time a domestic issue. i feel like washington is doing its best to get everybody's attention to say we need the eyeballs on us, we need the drama, we need the political leader to get something done and people are not budging. tom: our next guest cup i did. take he takes this same vacation days politicians do. i think he is to the office a little bit more. we have the debt ceiling

deadline. it is a moving target. he adds "we pay particular attention to what happens if the x date is crossed, a meaningful risk. while we maintain a base case default about occur markets have to contend with an elevated probability of default or economic downside in that scenario" something markets are not doing at this point. tom: michael is one of my favorite people on this. it is a wonderful mix of policy analysis during this debt limit crisis. he is with morgan stanley. michael, thrilled to have you on today. is this for real? is it a crisis? michael: it is for real in the sense we need to take seriously

the idea we could do something we have not done before. the x date being the day treasury is not able to do all of its obligations. that does not tell you there will be a default. i would argue we are knocked or to default because there are a lot of options that take default off the table but the options are not particularly good for markets. we are talking about pavement prioritization where we take 70% to 18% of it, out of the economy -- 17 to 18% of income out of the economy or use something like the 14th amendment where the white house could decide we will pay the debt anyway. the problem is another judicial crisis and create substantial uncertainty. the options are not good and that is what we have to pay attention to. tom: lyndon johnson would not have done this.

i think we all yearn for help lbj could get heads together and saying no one is leaving the room until we fix that. is there it lbj in washington to get this done? michael: i would not pin this on a person. i think this is about the moment of the pressure. another potential outcome is you cross the date and because i just described become so apparent to voters and businesses and anyone who is a vendor of the government that the political pressure forces everyone to the table and forces compromise. that is more what it takes an individual personality. lisa: last night we were talking about individual personalities. former president trump in the cnn town hall discussion talked about encouraging a debt default if there was not significant spending cuts agreed upon, saying it could be nothing if

the u.s. were to default on its debt. how significant would it be in your view? what are the market risks that could emerge? michael: i would not downplay the idea of default as something the markets can whistle by. you are talking about, and secretary yellen talked about the direction of credit flow. bags are loaded up with nonperforming assets. there will be some impact on lending and there has already been an impact on lending to the issues with the regional banks. that would be a pretty substantial problem. whether or not you go there, it is more preferable for the white house to do something with the 14th the bed bit or do pavement prioritization but all of that leads to economic downside or uncertainty. lisa: how do you game out a

recommendation in terms of gaming out the degrees of labor with economic deceleration and where the likely spending cuts will come from? michael: ultimately a compromise is about limiting potential future spending growth and limiting potential future deficit growth. that type of austerity might impact markets in the sense we are in the middle of an economic slowdown. you need gdp numbers lower for some of the deficit shrinkage impact in the next year. that might matter. that type of compromise probably only matters in a marginal sense because the next congress could come in and easily undo all of that. tom: rap in all of your world-class fixed income analysis. wisdom tree just trots out a chart, i think you have a tattoo of it, it is interest payments by the government.

let's call it $500 billion in they may click through $1 trillion if rates keep going up. his interest payments the government is making, to you as the adult in the room, are they getting out of control? michael: this is a question -- it is not a question of interest payments too high. it is a question of whether or not inflation is a problem. of course the government has the ability to source the dollars that needs to pay because it is creating those dollars. the question is about the inflation as the real constraint. unless you believe the fed is not asked to bring down inflation or does not have that capability, this conversation is a sideshow. tom: thank you so much. michael's asos with morgan state -- michael zezas with morgan stanley.

annmarie hordern will be of the secretary of the treasury tomorrow. you look at the cbo, i cannot say enough about the bipartisan quality of the congressional budget office. what is interesting is there gdp guesstimate is out 10 years in this full tread back to the bank of england, which is the key headline. they are saved like citigroup the bank of england got it wrong , what a cautious view on a recession in the united kingdom that folds back into what is our gas out one year? three years, 10 years? lisa: how do we understand what debt load is sustainable in terms of a proportion of gdp? how do you game this out and a time of economic uncertainty with projections key to the physical stability of the -- to the physical stability of the nation. tom: i will put it out on twitter. olivia blair chart with the

growth analysis. he is heated there are things we do not know about 10 years out. lisa: one things we do know is some of the earnings that are coming through. product first quarter -- prada retail sales rising 23% because of europe and asian sales. how much is this people's bed date at how much is this the bifurcation between the haves and have-nots? tom: it goes to the china open eight. we are an hour away from important american economic data. jamie dimon be paying attention to that after his conversation with francine lacqua. this is bloomberg. ♪

you know doug, ever since switching to workday you've been a real rock star. rock star? what do you know about rock stars? billy idol? i mean where's the skin-tight leather? my shoes are leather. where's the unnecessary zippers? that thing! billy, rock star is just how doug feels when he uses workday. thanks, rory. i'll show you rock star! be a finance and hr rock star. workday. for a changing world. billy idol just stole your golf cart!

tom: bloomberg surveillance. jonathan ferro on assignment. we have to get back to the block and tackle data, market movers. big events coming up. annmarie hordern in japan with janet yellen. francine lacqua with jb diver it about 45 minutes. markets -- with jamie dimon it about 45 minutes. the yield space is important. the two year yield is broken down 3.88%. it really begins to threaten what we saw back to bay fifth.

a dramatic move from a 4.05 down to a 3.88 on the 2 -- on the two year yield. the 10 year yield 3.40%. oil a pullback as well. gold up seven dollars. dollar giving be not much of a story. we will have to watch this carefully. what is important is to get the movers. there is a big mover in anaheim and their other movers of the bags that are funding the trips to disneyland as well. lisa: let's talk tuesday. the shares are lower after -- let's talk disney. they expect fewer than expected subscribers for that disney plus platform. the concern is how quickly can you ramp upstream big as advertisers pullback from cable, from the classic television

trading networks rather than the bespoke once. robinhood shares are up 3.9%. people are looking forward in terms of product innovation. tom: what is product innovation at robinhood markets? lisa: it will scare you. 24 hour trading at etf. if you think bitcoin is the only thing that trades all the time, it is not anymore. tom: $9.42. is it a meme stock? lisa: it had bid because it has been fluctuated much it has been the representative of traders. whether it becomes that way. i want to get to pac west. the most important story of this stock movers. those shares lower. this after they said deposits declined by 9.5% during the week

ending may 5. the majority of that decline occurred two days after dues reports on may 3 about strategic acquisitions. they also talked about sales of assets and the line no executive ever wants to have to say. they believe the company has enough cash to fund its deeds over the next 12 months. tom: $4.78, this is on jamie dimon's radar. he will not tell francine lacqua that. it is not just the pac west's of the world. i will not call it the dead cat bounce. it does not deserve that. it is just sorta kinda like. lisa: jp morgan has played a role in some of the banks that had issues including first republic. i'm curious how much the blackstone's of the world will take stake in the shares.

there was a story about blackstone coming up with funding programs. the question is are we out of the woods with the smaller bags. is this idiosyncratic at a time is being pressured by real rate structure? tom: every strategists looking at the baggie debacle as it unfolds. you have the advantage of down the hall is jason trennert looking at the equity markets fully in the equity markets of the world into your fixed income analysis. what is the strategas view on the length of this banking crisis? does it get fixed? >> what is your definition of fixed? we have more bank failures on the way? probably. does it become a risk to super regional banks? probably not. is there credit tightening to the u.s. economy ahead of us?

absolutely. and with monetary policy acting with lag we have to assume there are more banks to fail. tom: which spread his most valid to you to get the temperature of pac west and other banks. i am looking at the three month 10 year. which spread tells the best story? tom t.: three month 10 year might be a better measure than banks. i do not think anything gives you a good picture of how much their net interest margins have compressed over the last two years. those are probably zero to negative at this point of time. long-duration assets might have been bought at a yield of 2% to 2.5% of their funding costs might be 4.5%. lisa: we have moved from deposits be there to the deposit state will be a problem given her much they will have to pay

to keep them. from your vantage point, what are you expecting in terms of the number of failures, the ramifications for monetary policy? tom t.: probably low double digits, high single digits, not many more. fairly far in size. that is the norm over any given two or three year period in the past. from 1980 to 1992 we had 1000 bank failures. in the last years we had about a dozen failure. the door might be two to three per year on average. lisa: if it is just the normal, it is not sending any alarm bells and does not change anything with respect to your approach to what you invested? tom t.: let me answer this from the fed perspective. this should change their perspective. the of monetary policy acting with lag. multiple bank failures and multiple bags at negative net interest margins for at least

the next 12 months. that is a reason to pause. the mission is not accomplished on inflation but that is a good reason to pause tight a to see how the incremental tightening plays out. you may end up having to hike again in the future. tom: we have jamie dimon coming up. this conversation is just as important because you are in the trenches looking at the ramifications of trust it jp morgan. will bank of america have to save the day again? tom t.: i do not think they will have to but whether they do make additional plays, that i cannot speak to. i think this is a system that your super regionals are in good standing. you're talking about smaller bags going forward. there will have to be consolidation in the regional banks. tom: you are doing it with that

a bidding process with the government is forced to take the low bidder or a normal m&a context? tom t.: both. you can have additional failures where there are negative net asset values where the government is forced to take the lowest bidder, but you should also be expecting to see typical m&a were regional banks consolidate and become super regionals going forward and even super regionals may grow themselves to breach the threshold. that should be the expectation going forward. the reality is the u.s. banking system is migrating more towards what you have in canada or australia where you have a few large dominant banks. it will not be three or four like you have in those regions. lisa: let's dovetail the question about financial stability versus what we will get, the latest read on inflation. there is a question about whether there is more strength or what we have ceded the banking center is normalcy

rather than a sign of some massive fissure. if it is a sign of strength, what does that do would terms of the stickiness of inflation as well as growth like what we saw in england? tom t.: you had mentioned on a discussion of sales from places like prada luxury goods. the u.s. economy continues to be driven by a consumer. the labor market is not yet rolling over. there is strength to the consumer side, their strength to the labor market is a retail space at luxury space. there is still strength of the u.s. economy and there is still likely to be sticky inflation. what that means is even if the fed pauses, they are not likely to cut as soon as the market is pricing in. the market is pricing it rate cuts from july to august. that seems too early given how sticky inflation is and how strong the labor market continues to be. we think the labor market will roll over inflation were made sticky.

there be more stress on banks because the fed funds rate or made at this late -- at this rate longer and drag on credit formation because net interest margins will remain negative for longer. lisa: how do you play this? it is really against consensus. tom t.: equity valuations do not reflect or associate risk or reflect the fact that there is credit titanate to cobb. spreads are too tight. you plate -- you play this by being very cautious and hold cash at elevated or above average levels and you wait for something to bring to the downside. tom: where is trent on the market? tom t.: we are expecting equity valuations to dip lower. tom: 10 year yield, 4.20%. what are the ramifications if the 10 year breaks down to a new lower yield below 3.3%?

tom t.: our forecast is about 3.2% for bottom. we could get out close to 3%. if we get down to or below 3% that tells us of the gives breaking the credit side. that would be by takeaway. tom: thank you so much. i love it. it is like with michael darda, we could dovetail it equity analysis because he is screamed at 24/7 about buy stocks. lisa: in my unbiased opinion i think people who study the debt markets are at the epicenter of the action. tom: when have i not heard this? lisa: whether it is the credit of bags or the credit of companies and how they are doing at a pivotal moment. it is the income statements, it is the cash flows you are getting now, and stayed conscious what you expect to happen later because of

equations that do not match up if you're baking that negative interest margins. tom: from enjoyed losses within the equity market, it you are correct. the only way you learn this is to lose body what type or two times or three times. lisa: the bond market has lost plenty of money so nobody has had too much of an edge at a time of unusual distortions. tom: we do equities and bonds and currencies and commodities. the two year yield under 3.87%. jamie dimon and francine lacqua. coming up, brian wieser on disney. lisa m.: keeping you up-to-date with news from around the world with the first word, i am lisa mateo. former president donald trump says the u.s. is spending money like drunken sailors. at a cnn town hall in new

hampshire the arch republicans to push for spending cuts or go into a default. he says he did not believe a default will happened because democrats will cave under pressure. pull so trump as a front runner for the gop nomination. the biden administration is cracking down on pollution from the u.s. electric sector. the plan would spare most natural gas plants and utilities would have more than a decade to comply with the limits. consumer expectation for eurozone inflation rose significantly in march. that bolsters the case of the european central bank officials who say interest rates may need to continue past the summer. the monthly survey the ecb says inflation expectations rose from 4.6% to 5%. in pakistan the rupee has fallen to an all-time low in the wake of violent protests following

the arrest of former prime minister imran khan. a special court has granted investigators eight days to look into corruption charges filed against him. for the first time in its 240 year history, the man group will have a female chief executive. robyn grew will take over as the ceo of the world's largest listed public hedge fund. global news powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo. this is bloomberg. ♪

mmmm, your morning coffee hot delicious comforting. but by the third or fourth cup, your stomach might not feel so good. if that sounds like you replace your afternoon cup with 5-hour energy. it's perfect for when you're feeling coffeed-out. coffee in the morning... 5-hour energy after. your stomach will thank you. discover 5-hour energy. ♪♪ >> you have to look at the amount of money being spent on content by the companies. from disney's point of view you

have a learning curve. lisa: that was mario gabelli yesterday. disney shares lower five point 5% after a disappointing read on subscribers. is that a shock that people are not setting up as quickly? tom: i am briefed on this by paul sweeney who was world-famous on this. can you come out in february to some island in the caribbean where we will brief you? that was his life. i get a huge advantage of saving this come. i just go back to the word profit. where is the beef? where is the profit? i do not observe it. lisa: that is something all of the streaming server -- august rebate has struggled with -- all

of these to rebate servers have struggled with -- brian wieser is an expert. there is a question of why is this surprising given the transition was going to be awkward from cable toast rebate and it is a rocky process amid economic uncertainty. brian: i do not think it is that surprising. this was never going to be a better business than the one it is were praise -- the one it is replacing. they had a 40% margin 10 years ago. more costs for marketing, were costs for streaming come and way more content to make this work and you cannot force the bundle. this is the right way to make a business that survives for 50 years and beyond. that is what i said with i was an analyst covering this. that is what has played out for everyone.

tom: -- lisa: there is concern as we try to grow subscriber base and different street big companies try to expand their user base. you raise prices and what do you prioritize? increasing subscribers or revenues. how is tuesday given that they came in with a disappointing projection of just growth? brian: they cannot continue to raise prices and grow subscribers. the problem is that money is coming out of traditional pay-tv . on a sub stack there was putting out there is 28 billion dollars in the united states on pay-tv services dow declined a good of actual spending. that is $100 billion of body that could go to the streaming services. it will come out of pay-tv. tom: where is sports in five years?

disney has a huge effect on sports. where is the brian wieser view on sports entertainment in five years? brian: it will still be super important. bob iger was wise enough to point out there is an inevitability to es said -- to espn having streaming services. the reality is not everyone needs to watch everything that is on espn or traditional tv sports. it may end up being more niche. not as ubiquitous as it has been historically. tom: i look at dizzy and i look at a creative guide as well. is there a lot of cost-cutting to do? is there a lot of fat to cut or are they bare-bones? brian: they talked about containing their increases in spending. it is hard to say with that is. there is a great story from

paramount with spending on yellowstone and other shows. that is a bit extreme in terms of spending. if you spend more money on programming you will get more viewers. they will continue to grow the platform. as long as they continue to increase their spending overall in programming. obviously they need good editorial choices. lisa: we used to say content is king and today we are talking about cost-cutting. if anyone goes anywhere near social media they will see discussion of the writers strike in hollywood that is affecting a host of different street big network, and i wonder this idea that writers want to get paid, this idea content once to get rewarded, given years of largess, the networks are not willing. how much will that be a persistent battle based on the dynamic we have been talking about? brian: i worry about that.

both sides of the strike by be too optimistic in their expectations. all spit guard video, theatrical spending, and i calculate a 1% annual growth rate over the last 50 years on average. maybe that is about right going forward. it is shifting towards the far less profitable business of streaming. there is less money to divide up. lisa: there was also discussion with disney about declining revenues on their cable networks. how much of this is companies not necessarily having the extra money to advertise? how much of this is all of the advertising moving to google, to facebook, to these other social media platforms? brian: that has been a big factor.

television is in the high single digits. i did i think it will stay that bad all year long. package good companies are shifting to the retail networks. tiktok is still doing really well. there is a lot of new places that are seeing a lot of growth. tom: thank you. brian wieser from bad is it. -- from madison. he is 67 years old, he had a cancer scare, i guess he is doing well as chairman and ceo of jp morgan. i do not think there is been enough bait about the academics of jamie dimon. he wandered through harvard business school with the guy from comcast, a great investor as well it slid out among that

talent as a baker scholar at hbs. i do not think enough has ever been made about it. baby it is his own fault, he downplays it. this is a guy who is chairman and ceo of a bag and we all had got his annual letter. lisa: it is not as if he has not been incredibly successful. he gets compensated just fine. there is an issue of whether he could build a successor because he really is the face of jp morgan, c get through a host of different times. tom: i want to frame out the annual letter. one letter, you could tell he was really upset about people do not understand the day-to-day executive grind of hard work. you know the romance of 18 hour days and libby got planes. this year was much more of a strategic response. this is where baking ftse it as

essential part of the american economy. these are real sensitivities. with red seed it is the angst going out to jp morgan -- and the panic of 1907 jp morgan wrote the check to save the nation. this idea you go through our baking history and now there is an absolute dominance of jp morgan and bank of america in terms of size, even against the other ones. lisa: over the past decade a lot of people have bid decrying big bags not having the same -- bigbanks -- this is the year people reward bags for being utilities and being stable reward drivers. some of the other banks have seen serious distress. at what point does that model,

that fortress of trillions of dollars of deposits create something people hunker down a safe asset rather than something that will be more volatile with the economic cycle? jonathan: even with the -- tom: even with the pullback of jp morgan is nothing like other banks. the statistic of the bloomberg's 12.96% of the year for the bloomberg. lisa: how much of this as they gather deposits from all of the bags that are losing them? we talked about them needing deposits. just repeat the news, pac west deposits tropic 9.5% in a week. tom: in 15 minutes of conversation with jamie dimon. francine lacqua in paris. in 30 minutes, claims. we look at the labor economy of america.

stay with us worldwide. bloomberg surveillance. ♪ ( ♪♪ ) ( ♪♪ ) ( ♪♪ ) constant contact delivers the marketing tools your small business needs to keep up, excel, and grow. constant contact. helping the small stand tall.

bridgett is here. constant contact. she has no clue that i'm here. she has no clue who's in the helmet. are you ready? -i'm ready! alright. xfinity rewards creates experiences big and small, and once-in-a-lifetime.

to finally lose 80 pounds and keep it off with golo is amazing. i've been maintaining. the weight is gone and it's never coming back. with golo, i've not only kept off the weight but i'm happier, i'm healthier, and i have a new lease on life. golo is the only thing that will let you lose weight and keep it off. who loses 138 pounds in nine months? i did! golo's a lifestyle change and you make the change and it stays off. (soft music)

>> we are in an environment where inflation is produced key. -- pretty sticky. >> they have given a lot of

credence to the fed and their credibility to bring inflation down. >> be sure when you stop you are not going to look back just a couple of months later. >> we are not in recession, probably will not be in recession in the second quarter. >> this is bloomberg surveillance. lisa: 30 minutes away from economic data in the u.s., 12 minutes away from a conversation with ceo of jp morgan. it is thursday, welcome back. john will probably be back tomorrow, that is the rumor. we will get to jamie dimon and the interview francine lacqua is doing in about 15 minutes, there is a question of where we are and creeping higher unemployment. tom: when did we first hear about recession? lisa: about a year. tom: or longer.

the united kingdom, recession is coming. a couple days ago, i think the bank of england wrote to citigroup and they reversed it today. lisa: the fact they came out and increased productions -- projections for gdp growth, expansion for two consecutive years highlights the conundrum that everyone is having. do you stay negative, do you stay conservative? do you stay conservative amid the uncertainty and upside surprised economic growth? tom: a guest earlier saying housing has been more resilient, i am going to take a note from jamie dimon. the west needs america's leadership. i am going to suggest part of that leadership is this insatiable american exceptionalism. it has changed and morphed over the years, there has been ugly moments.

dimon is channeling the growth of the american messages. lisa: at a time when u.s. growth is perhaps not quite keeping pace with other areas, i see europe and china in particular, where it is outpacing almost more. lisa: the question here is, where are the opportunities? are the in the u.s.? we have seen more and more move to europe and china. tom: i do not see the academic input that you see coming from other places, continental europe has burgeoning technologies. not like the major tech companies of america. lisa: i wonder how much is a reluctance to try and fail. the point that we saw some headlines about europe pushing back on artificial intelligence, we see this headline going

around. heading into all of that, you are getting no certainty in markets, that is notable. equities, just nothing. absolutely nothing. 4140 seven on the s&p, looking at a 10th of a percent decline. i am going to stay out of that argument, i am going -- and other indexing experiences, the 10 year going down. yields are lower across the board, which is interesting. inflation is coming in high. yesterday, people cheering the cpi report. one report does not make a trend, yet here we are. tom: i am sorry, the four digits , we are now 15 full basis points on the two year yield.

it is amazing how we moved. lisa: at the same time, the volatility in the two-year is what gets my attention. it whips back and forth, how do you get any stability given some sort of risk appetite? joining us to discuss as we head into an important hour, megan horneman. as we look for the data in the u.s. in half-hour, how much do you expect it to represent the strength and resilience so many people are rejecting is a passing phenomenon? megan: there is inconsistency in what we are seeing, whether it is the labor market showing strength. that is the only thing from an economic standpoint that is showing strength of a whether you look at manufacturing or housing. all of these things are suggesting we are heading toward a downturn. you take into account the tightening cycle and tighter lending conditions, these will

start to filter into data. not right away, but the rest of the year. tom: i want to go to your heritage. et coast competitor. we are talking to jp dimon in about nine minutes, he is salvaging the banking crisis as it is, will he have to do more from where verdence sits? megan: i do not think the regional side of the banking crisis is over, the bigger banks will have to step in and do more. what has changed over the past couple weeks since he came in and rescued the last bank, nothing has changed from a regulatory standpoint or the federal reserve. the federal reserve has said we are not going to see rate cuts right away, so the pressure on small and mid-cap banks with higher interest rates and taking losses is still the case. that will be a problem.

in the absence of knowing anything has changed, i do not think that is over. there's more to come. tom: you have the advantage of not being manhattan-based, how does commercial real estate look like? what does -- what is all of the analysis you see? megan: it is something we are concerned about and it is not being talked about enough. we are concerned because of a slower economy and higher vacancies, the double effect is we have higher interest rates, then you throw on top of that a maturity wall. that is where the concern comes in. these are big years where there are commercial real estate loans that have to refinance at higher rates and in a situation with tighter lending conditions. lisa: that is an area of strength we may get a better

sense of an about 20 minutes time as we get the ppi, that comes out in the u.s. it is expected to be significantly below cpi, which is being captured as profits at companies that are increasing profit margins at a time when people expected them to strength or absorb inflation against pushback by consumers. is this giving you optimism to go into certain stocks, certain credit? megan: no. at this time, that is probably short-lived. the consumer is weak, we have seen that in the recent data and we have seen that with the fact they are relying more on credit card debt. they are not spending the way that they used to. if you look at the cpi report yesterday, airfare is starting to come down. you are seeing weakness in the part of the economy that consumers are spending money on. leisure and hospitality.

there's a lot of cracks surfacing, so i am not optimistic is this is can continue to pass on the costs without it further hurting consumers. lisa: are you in the camp there will be disinflation that will accompany the weakness we see as it accelerates through the end of the year? what's been pushing everyone to keep going to bonds? megan: we are looking at slowing inflation, slowdown in the economy. most likely a recession. the inflation situation has been improving, we cannot deny that. there's a lot of work to go. the biggest inconsistency that we see is investors are pricing in rate cuts and that is not something that we see, the fed is not there. they do not have the ability to do that with inflation where it is. they cannot come in with a stop and go approach like they did in the 70's and 80's. i think they will stay on hold, interest rates will stay higher

for longer. they made it clear they will sacrifice economic growth to achieve their goal of bringing inflation down. the bond market is not pricing that in. the best places to park money in cash, take advantage of opportunities. there will arise the second half of this year. tom: do you deploy the cashier or wait? -- cash here or wait? megan: specifically some of the high-growth technology names, these are still too high from a price to earnings multiple. they have room to decline and realize the fact the fed will not come in and save the day. they've been able to do that in the past, they are not able to do it this time around. there will be correction in u.s. equities. tom: i am going to go back off j.p. morgan as we wait for mr. dimon and suggest -- i am still

thunderstruck by what his colleague said eight years ago of a run rate of the american economy sub 2%. at the time, it was groundbreaking when they came out with that research report. the whole thrust of james dimon's annual letter is a u.s. growth strategy, that is an entire theme. his boss saying that is not acceptable. lisa: at a time when a lot of companies are betting on the united states, think about warren buffett and meeting we just saw. there's going to be a real question about what the strategy is, particularly expanding into places like china or europe and a time when there is more growth. tom: going back to cash -- it is

so strange. we are getting research studies that say there's a fair amount of gloom, you hear that with megan. lisa: cash yields something. if you're getting for 5% on cash, it is an asset class in itself. people expected to break in a negative way for the economy. we are at a place of inflection where we have seen the growth and now we see inflation go down. tom: 18 minutes into economic data, before that francine lacqua in conversation with jamie dimon. futures at negative one, stay with us on radio, television. bloomberg surveillance. lisa: keeping you up-to-date with news from around the world come at the bank of england has raised its benchmark lending rate to the highest level since 2008 and says more increases may be needed if inflation persists.

the central bank left of the key rate a quarter-point to 4.5%, officials delivered the biggest upgrade to growth projections since 1997, bracing a recession they previously forecast. trump is urging republican lawmakers to get the president to agree to spending cuts or push the u.s. to its first-ever default. he spoke at a town hall in new hampshire and hold a tight grip on the republican party, polls show him as a front-runner for the party's presidential nomination. israel and palestinian militants in the gaza strip exchange fire. they launched more than 500 rockets toward israel. israeli aircraft killed the chief rocket maker in gaza. efforts to reach a cease-fire have not worked. ukraine needs more time to launch its long-awaited counteroffensive against russian forces. that's according to president zelenskyy. he told the bbc the army is

awaiting promised aid from allies. shares of disney are lower in premarket trading, the world's largest entertainment company posted a drop in subscriber to its streaming service and predicted a bigger loss this quarter. disney says a loss from streaming will increase by 100 million dollars because of shifting marketing costs. global news, 24 hours a day, on air powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪ >> a default is unthinkable. america should never default. it would be tremendously

economically and financially damaging. tom: the former chair of the federal reserve janet yellen in tokyo -- in japan at the g7 meetings, annmarie hordern in conversation with her tomorrow. widely anticipated after a set of economic data. we get data in 15 minutes they could change the course of the view on her labor economy as well. what we would like to do is go to paris, it is the paris of j.p. morgan that is important. in world war i -- i will get the pronunciation wrong and francine will correct me. it was the commitment of the j.p. morgan bank to france in the heat of world war i, she is joined in paris with jamie dimon. how is my pronunciation?

francine: full marks for french pronunciation, you are almost french. i am delighted to be joined by jamie dimon of j.p. morgan, thanks for joining us, as always. debt ceiling or banking turmoil, what are you most worried about? jamie: glad to be here. the debt ceiling is potentially catastrophic, that is a whole different issue. the banking crisis i believe will sort its way through, it is not like 2008 or 2009, so hopefully it is getting near the tail end of that. francine: if you are janet yellen, what would you do differently? jamie: we need to finish the bank crisis. we fed uncertain policy on mergers, you have to assume there will be more. the federal reserve, whatever they need to do to make it

better, they should do. be thoughtful, be forward-looking. some of these things have been known about for quite a while. we have handled three. svb, signature and first republic. the regional banks, who i've been speaking to every day for the last week, they are quite strong. they are worried, but financial results are good. the financial results will be ok next quarter. they are earning money, good clientele, very diversified. francine: if you are asking janet yellen to get the job done, what does that look like? why not? jamie: be prepared for problems. francine: what do we need right now? do we need regulators to look at short-sellers of banks? jamie: folks would tell me that

is not the problem. if you analyze stocks and sales, it is not that big a deal. i think they may be wrong, because some people use other means to go short. if you look at the detail, the sec has the enforcement capability to look at what people are doing by name and options, derivatives and short sales. if someone is doing anything wrong, people are in collusion, they should go after them in vigorously and be punished to the full extent of the law. my experience in life has been do not assume too much. francine: do you think they are looking into it? jamie: i hope so. francine: the position of j.p. morgan, you did not buy any bonds. people sent to stop porting cash. do you think regulators and investors pushed some of the banks to take unwanted risk? jamie: i do, let us be clear.

the people to blame are the bank ceos and things like that. having said that, there needs to be humility on the part of regulators that the federal reserve itself never forecast rates going up, not one fed governor forecasted. whether forecasted or not, you should be stress testing people. their stress tests always had low rates. there are huge incentives for banks to put securities and health and maturity. huge incentives to own treasuries. i am hoping all of that gets looked at and say, we are a part of the problem, as opposed to pointing fingers. francine: this is a supervision problem. jamie: a bit of both, they become very related. supervisors look at, are you doing the right thing by regulations? even the stress test, when you have a stress test and a company

completely focused on that for three months, does that low people into a false sense of security -- lull people into a false sense of security? i am not asking for many at this level of detail, but our stress test is 200,000 pages long. francine: do you think things will change, this is like a catalyst? what do you mean by worse? jamie: more regulations, rules and requirements. i hope they do it thoughtfully. we are the biggest banks of those folks. if you overdo certain rules, requirements and regulations, some banks tell me they have more complaints people van loan officers area it could make it harder for them to do business, there are hundreds of rules in place. change liquidity, maybe not capital. if you change capital, maybe not

liquidity. do something with deposit insurance. they should have a thoughtful conversation about what those things are and what we want the outcome to be. if you look at the present outcome, a lot of things are leaving banks and they should. that should be done with forethought, not because you are putting rules and regulations in place and do not know the consequences. just be careful about what you wish for. francine: you bought first republic, i imagine you had a good look at what is inside it. what did you find out? jamie: we had a good look before we bought it, 800 people working around the clock to look at something like that. they did some things really well. if you talk to their customers, i get calls and emails, great culture, great customers. the credit is pristine. we have hedged all of the

exposure, we've got thousands of people going out and learning. there is no surprise. we had to make sense for shareholders, but this notion -- it was a nice thing. i have to do that. we also did it to assimilate the bank in a way that is safe in the system and did not cost uninsured depositors -- it cost the fti see as little as possible. -- fbi c as little as possible-- ftic as little as possible. another thing about big banks -- we need healthy, big banks. we are the best banking system in the world. francine: very big. jamie: banks are becoming smaller and smaller. when they look at banks, they say it is big. when you look at the banking system to the system, private

credit is love. a certain trading functions are left. you have apple, neo banks -- you have to be more thoughtful. francine: but americans should not fear too much finance consolidation in their hands? jamie: no, most of the size accrues to clients. most small banks cannot do what we do, banking large corporations, 50 countries around the world, move $10 trillion a day. these are complex things. we are not being complex because we want to be, we are complex because the people we serve are complex. countries, the world bank, we do a lot of things. but i want community banks to thrive. we want to do everything to help them. we did not want this to happen, we did not cause it to happen. the second it happened, we knew it was bad for all banks. francine: are you too big to fail?

jamie: i do not know what that word means anymore. we have asked all of our people when the crisis happened i did not want anyone soliciting any client or banker or community bank. francine: anything else you would be buying? jamie: no. we will have a lot blowback having bought this one, it was the right thing to do. my job -- people always look at the financial deal. forget the financial deal. 800 people working around the clock, 10,000 people to deploy and consolidate systems. branches, real estate, vendors and technology. it is a lot of work and distracts us from other things. marginally beneficial for shareholders, it was good for the system. now we have to be prepared for the other side. francine: how worried about you

about the debt ceiling? donald trump did not seem to worry and told republicans to stick to their guns. jamie: another thing he does not know much about. two categories, one is actual default. that is potentially catastrophic. you can go 3 million waves, anyone knows that is catastrophic. i do not think it will happen. the closer you get, you will have panic. markets being volatile, may be the stock market will go down. you already have certain bills trading 3% and right next to them 5%. this is not good. people should remember the american financial system is the foundation to the global economic system. the closer we get, more panic. the last time we downgraded we had a 70% gdp. now it is 105, the deficit is at

two or three times that. we better be careful. i am respectful of both sides, one side wants to make up. i would love to get rid of the debt ceiling thing. but please negotiate a deal. francine: do you think the markets will spur a deal? jamie: it is a bad idea, because panic becomes something that is not good and could affect other markets around the world. but at the end of the day for gets to that point, people have to react. we've seen that before. panic is the one thing that scares people. even in 2000 eight, people selling certain securities at 40% of what they would be worth if we had a great depression. i want out, i want cash. i am not betting my families money on this.

we've got to be careful about getting close to a situation that causes this. francine: do you get a call from janet yellen about this? jamie: i do not speak about personal calls i am getting. everyone has -- francine: how do you prepare for a possible default? jamie: we have people who are very smart. it is unfortunate, time-consuming. it affects contracts, collateral, clearing houses, it affects clients differently around the world. you have to anticipate what people are going to do, which is different than the legality of it. the closer we get, the more that room -- it is taking place once a week, but my guess is sometime -- may 21, it will be every day, then three times a day. then much more conversation with clients, what they need to do to help get them through and things like that. it is very unfortunate and should never happen this way. francine: should there be a

special commission looking at debt in the u.s.? jamie: god no. francine: why not? jamie: i do not want to. francine: looking at finance, what kind of message does it tell companies that want to do business there? jamie: looking at finance has been limited, they are careful about touching the financial system. look, this is a serious subject. anything that relates to national security, i am a patron first and will salute my government. but that aside. but the government should do and wants to do and say they are going to do is have conversations. they are going to be tough, but should be thoughtful. we should not confuse the two. america and china have a lot of common interests. climate, nuclear proliferation, antiterrorism. we have differences.

we are capitalists, they are not. it is ok, we can sort that out. but we need to keep the western alliances together. around strategic, economic relationships, including trade. we cannot take trade off the table every time we talk to europe or asia. i would go back, surround the world. i want to keep the world safe and democracy, i want to have open markets. when i was here last, we passed an act. there's too much social engineering inside of it. francine: if they start doing more noise on finance, does that hurt chinese growth? jamie: you've already seen -- not trade, but investment going both ways coming down. that is ok in the short run, but in the long run -- the government has got to decide.

this is not business companies deciding, nor should they. there may be truth to that, they have to decide what is ok, what is not ok, what do they want? that is around trade and investment. francine: i give you one million pounds, where do you invest? jamie: i would not buy sovereign debt anywhere. francine: why? jamie: i think there's too much -- matter of fiscal stimulus took place surging through the system, these were extraordinary numbers. not just in the u.s., but europe and other parts of the world. i mean extraordinary. there's a chance you have more inflation than people think. the fed does not completely control longer rates. you could see longer rates sticking up because of higher inflation. a lot of us experience that in the 70's and 80's, i would be

worried about that. rates are low, spreads are low. francine: where are you putting the million? jamie: central banks. francine: if you look at fragmentation -- equities are doing one thing, we keep being told there is a recession. why is there this massive idiosyncrasy? jamie: unemployment is there .5% , home prices have gone up for 10 or 15 years. stock prices have gone up 10 or 15 years. they are spending the money. you see it in travel, and restaurants. hotels. that is all good. excess money has been spent down. the bite of that will happen later this year, early next year. the bite of qt has not happened yet. those things are coming to fruition may be sometime at the end of the year, we do not know the effect of that.

i would take a mild recession happily right now. i'm far more concerned about geopolitics. ukraine, trade, russia tomorrow relations with china, etc.. america has a 75,000 per person gdp, china's is 15. they import 10 million barrels of oil a day. they are not a 10 foot giant, i think we can grow more. francine: a lot of people say it is commercial real estate, we talk about nothing else. everybody knows that could break. is there something we are not seeing? jamie: it is amazing when you talk about markets, it is like a bunch of birds flying to one thing with endless comments. yes, that is an issue. you look at real estate, chicago, new york, portland and seattle.

probably not nashville, tampa, orlando. you have to be more thoughtful. thanks have 600 billion of office commercial real estate, they had a question. maybe some of that will go bad. they are going to be ok. it may take a few banks down, that is normal stuff. that is not abnormal. what is abnormal as the war, trade, the future of democracy. i am much more concerned about that. francine: if there's big geopolitics, how do the markets do that? jamie: cautious. i remind people, businesses are not there to trade. they are there to serve clients. we are there to serve our clients no matter what happens. francine: how are you feeling about the epstein deposition this month? jamie: i am so sad we had any relations with that man whatsoever. we had top lawyers from the sec

enforcement, doj. had we known then what we know today, we would have done things differently. it is unfortunate, i have deep respect for these women. that does not mean we are liable for the action of an individual, but i have a deep respect and my heart goes out to them. francine: thank you for your time today. tom: francine, thank you. a conversation with the chairman and chief executive officer of jp morgan, i would underscore his focus on geopolitics. as he says in his letter in his wall street journal essay number of months ago, he is very concerned of western alliances, including france. in the meantime, we had reaffirmation of lower interest rates in the united states, to year yield with 3.8 to handle moments ago, that was over 4%.

michael mckee is here. two days in a row off of inflation, claims and ppi, the markets move. michael: if you want good news on inflation, you get in the ppi. it does not have a direct relationship to cpi. ppi comes in lower than anticipated, higher than last month. year-over-year, it is down. a 4/10 drop the prior month, the core of 2/10, compared with flat reading. that is a revision upward for the month. year-over-year, 2.3% for headline. 3.2% for core. those are both down. definitely progress on the factory gate prices, jobless claims also feeding into that.

the labor market is getting looser, 264 thousand from an unrevised 242. so a jump. tom: jump is the right word. michael: 24,000 on the month. a gain of about 12,000. so it does look like the labor market is starting to respond, at least in the claims area. we are seeing lower inflation. tom: you nailed the vector of service sector inflation, going from 7.3 to whatever. vectors are in place for disinflation, right? michael: we are seeing disinflation, it is a slow process. the number you are talking about is jay powell's indicator. we are waiting for housing to start dropping. it did not on yesterday's cpi. but once it does, we should see

inflation, at least in the headline numbers, start to go down significantly. tom: 3.3 6%, to year yield to four digits. 3.8266%, remarkable to see that this morning. sometimes we think -- let us get john ryding on his bank of england. citigroup comes out, says we got it wrong. the united kingdom looks more resilient, do you buy the resilience? john: the uk's a small economy, what happens in the rest of the world be important. i am still a bit skeptical on that. i think the full impact of

adjustments post-brexit, that is still out there for the u.k.. when i am more skeptical about is the decline in inflation. currently 10.1%. within a couple of years, they are down to 1%. i do not see how you get that kind of inflation drop with an interest rate of 4.5%. i would be very surprised if -- in the u.s., we are above 5%. the inflation problem is not as bad as in the u.k.. there is more rate hikes than the market has priced. tom: you are the single best person qualified for this delicate question. i was thunderstruck by what the phd from stanford said this morning about begging the united kingdom to spend less money, it reminded me of the 30's, telling

the u.k. please do not spend money. the non-american like language that we hear out of the united kingdom is absolutely exceptional. john: it was very interesting. there's too much groupthink, inflation is product. -- is product of too much money. it is not about, in my opinion, how much consumers spend. that is part of the transition mechanism. ultimately soften consumer spending. if the bank of england put more thought in the first place to not -- same is true of the

federal reserve. more thought in the first place to not letting the inflation genie out of the bottle, it would not be out there begging consumers not to spend. or same people have got to get used to being worse off. tom: we are talking about the middle 20th century theory, theology. do you sense a tilt in the u.s.? do they have illusions of a demand side, ordering people to spend less money? john: that is exactly what the fed is trying to do. what has prevented monetary policy from biting on the economy was all of the fiscal injections provided during the pandemic, which ended up in people's bank accounts. at the peak, people had $2.5 trillion more in aggregate in their bank accounts than they

would have had had not been a pandemic. it is hard to slow the economy down on a consumer side, it is easier on the housing side. tom: the biden stimulus, do you suggest we have run out of the stimulus and we are back to a normal american economy? john: it is probably close to $1 trillion total of excess savings , but we have seen an adjustment in the savings rate. which is still lower than one would expect given were interest rates are. people are spending more than you would expect, given fundamentals, because of this. tom: do you have a recession call? john: i think in both the u.k. and u.s., it is inevitable, but not imminent. the inversion of three-month to

the 10 year yield has invariably correctly predict a recession a year or so out. we may have a rolling recession. the manufacturing sector is in recession, the service sector there is still going, relatively speaking, strongly. maybe it is a rolling recession, but i think it is inevitable. tom: just brilliant with his experience. nasdaq with a little bit of lift , 17.2 seven. 3.8 3%, stunning yield on the 2-year note. stay with us. ♪ lisa: keeping you up-to-date with the first word, former president donald trump says the u.s. is spending money like drunken sailors. at a cnn town hall in new hampshire, he urged republicans

to push for spending cuts or go into a default. he says he does not believe a default will happen because democrats will cave under pressure. trump is a front runner for the 2024 nominations. the biden administration is cracking down on pollution from the u.s. electric sector. proposed requirements would force coal plants and largest gas fire units to stifle nearly all carbon dioxide emissions. it would spare most natural gas planes in utilities have more than a decade to comply with limits. in pakistan, the rupee has fallen to an all-time low in wake of violent protests following the arrest of the former prime minister. a special court has granted investigators eight days to look into corruption charges filed against him. adidas is leaning toward the sale of easy products for charity, according to the ceo. he says several charitable

groups advise the company not to burn the gear. adidas broke off its ties with kanye west after he made anti-semitic remarks. yeezy inventory has a retail value of $1.3 billion. for the first time in history, the man group will have a female chief executive. she will take over september 1 as ceo of the world's part quickly -- largest publicly listed hedge fund. global news powered by more than 2700 journalists and analysts in over 120 countries. i am lisa mateo, this is bloomberg. ♪

conventional thinking delivers conventional results. at allspring, we break away with purpose. harnessing data-driven insights and boundless curiosity. we dissect the market from every angle. helping to build portfolios that redefine what's possible.

because investing isn't one size fits all. allspring. purposefully divergent. jamie: the debt ceiling is potentially catastrophic. the banking crisis will sort its way through, it is not like 2008

or 2009. so hopefully it is getting near the tail end of that. tom: jamie dimon in paris, at the end turning around to the geopolitics that he has been focused on, he writes about in his annual letter, little bit of talk on the banking crisis unfolding in real time. there was a fdic headline about special assessments. i have no idea what a special assessment is. there is a special assessment announcement potentially coming from the fdic today. red and green on the screen, watching the two year yield which is the only reason -- good morning. chief u.s. interest rate strategist bloomberg intelligence, the team really

writing on the short-term. also focused on the short-term is michael mckee. we had a call deal structure, i will say back to the middle of march. what happens to your world if the two year yield falls below three point 80%, what does it signal if the yield breaks down? >> it is signaling the federal reserve will be easier, certainly that the market is thinking we will have a much slower economy. in my view, the market is probably not going to start to see a big trend lower in short-term yields for another three to four months, but it is coming. it is on the horizon. some people are starting to get set up for that. a lot of people were short two year treasuries and long tenure treasuries, that is probably going to start to unwind.

you have seen that a little bit, i think it accelerates as the year goes on. tom: is the three-month space so distorted by the debt discussion that you cannot use it for fed analysis? ira: that is right. when you look at the fact that money market mutual funds are avoiding certain maturities, you cannot really use it for analysis of what the market is thinking about the fed. we do use other instruments, the overnight index rate, which is settled to the federal fund effective rate every day. those are the instruments we have to use to assess the path of policy over the summer. tom: this is funny, usually you get 42 pages to go through and you have really a insights.

after 42 seconds, what is going on? but today, it is a little simpler. what is beneath the headlines? michael: in general, producer prices are going down as supply chains normalize. they are heavily affected by energy prices, which at the wholesale level, oil prices went up then back down again. natural gas prices have fallen. that helps with that. what interesting thing is service prices rose, do you know why? it is these guys fault, because banks and broker-dealers were charging more because of volatility in the markets. tom: so they raise the price and it gets into ppi. do you have an observation? michael: i want to follow up on something jamie dimon said, you

are talking about the debt ceiling. jamie told francine that at some point, we are going to have a panic. that is going to be will put the pressure on washington to get something done. do you agree with that view and if so, what assets? ira: it is interesting that you say that, i've been getting this question a lot. people on capitol hill calling and saying, where can i look to see where the panic is based on the debt ceiling? everyone is panicked but the market is not showing it. what is tended to happen in the past and will probably happen this time is we will go another couple of weeks and when we are about a week before, the markets will crumble. you wind up having 10 year treasury yields rally and you see lower yields on the long end of the treasury curve, because the stock market is down 5%, 10%. it will be almost every asset

will be affected, probably not until we are right up against the wall. that might be the impetus for congress to act. i've said it before to both of you, this is the dumbest debate we have. we cannot to fall on her debt. if the u.s. does that, there's a lot of potential effects in the longer-term you cannot take back. you cannot promise we will never do this again once you've done it. so congress has to address this somehow and we need to have a budget fight when you were debating the budget, do not have it when you are debating whether to pay the bills. michael: another question along those lines, the bond market is back. even leaving aside the debt limit, you are going to have a bond market that is going to be pushing the other financial assets and politicians around,

because short-term rate cycle is turning. ira: the market certainly thinks the federal reserve will be cutting interest rates starting later this year. when you talk to the chief economist for the u.s. for bloomberg economics, and i concur with this, i think the federal reserve will be more reluctant to cut interest rates. when you look at the distribution of what the market is pricing, we are not pricing for two or three cuts this year, we are pricing for no cuts or 150 basis points of cuts. the market thinks there is such a small risk there is a crisis this year that will cause the federal reserve to cut interest rates massively and if not, the markets do nothing. we look at that using options on some of short-term instruments that i was just talking about with tom. tom: we get to june 14, july 26, when do we get a redo and what do you expect when we dot adjust? michael: june is the next

forecast, i think it will be less about the dots because i do not think they will want to move them unless we get surprising inflation news ahead of the june meeting. it will be in the forecast because the forecast for unemployment right now makes no sense. i think we will get to 4.5 percent by the end of the year and given the strength of the economy, the fact we are at 3.4% , you have to see hundreds of thousands of jobs being lost and it does not look like that will happen. it is interesting to see how they reframe the economy and forecasts going forward. tom: it is critical. we are at 200 ish, claims are coming up and it is a different algorithm, a different branch of function. what number do you need to see three-month moving average of nonfarm payrolls to get to the

employment guess of the fed? it is a shockingly low number, is in it? michael: if you return to keep the unemployment rate from going down and fill in the jobs created each month, it is somewhere around 80,000 to 100,000. the labor force is gone significantly smaller in baby boomers are out. everybody entering the pandemic went back to school, they are starting to graduate. they are done. we need fewer people in the markets, even though some categories like leisure and hospitality are desperate for people. tom: some data, 3.266. what will your team right about to stagger to friday? ira: i am talking about whether or not the federal reserve can jawbone out some of the cuts being priced into the market. if the federal reserve can convince the market they will not be cutting aggressively later this year or early next

year, that is as good as them doing more hikes. when you saw the data this morning and yesterday, inflation is better than it had been, but still well above the comfort level of the federal reserve. that note will be out monday. tom: look for that bloomberg intelligence over the weekend. thank you on ppi and claims, i thought john ryding was brilliant. differential across the atlantic with britain in the united states. we are moving from a conversation with jamie dimon to a conversation in the early morning. annmarie hordern from the west coast of japan, overlooking korea and russia. janet yellen, treasury secretary of the united states tomorrow morning, 3:00 a.m. new york time, 8:30 in london, afternoon in hong kong.

this is bloomberg. ♪ hing. cheesecake cookies? the chookie! manage all your sales from one place with a partner that always puts you first. (we did it) start today at godaddy.com (jennifer) the reason why golo customers have such long term success is because we focus on real foods in the right balance (we did it)

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

lisa a: and lisa abramowicz in for jonathan ferro. 30 minutes away from the start of trading. we can see -- the countdown to the open starts right now. announcer: everything you need to get set for the start of u.s. trading. this is "bloomberg: the open", with jonathan ferro. lisa a: coming up, fresh economic data strengthening the case for a pause.