>> the fed has been trying to talk this market down and in the end, the equity market has ignored it. >> for and sectors are performing in different ways. >> the market has gotten more selective. >> the economy is less interest rate sensitive than we thought. >> every indicator of a recession is flushing deeply red. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. tom: good morning, it is bank of england day. we will declare victory with a smart set of guests across this morning. we don't have governor bailey with us, but if we did, it would be interesting. lisa: especially because markets

are pricing in 6% rates for the bank of england by december. this is something people had not expected and this almost guarantees a recession. the question is, is that inevitability anyway and a question of how much they can moderate the inflation in the process. tom: adam posen of the peterson institute taking the high ground on the telegraph. i'm going to go beyond the banner. he says the united kingdom needs 6.5% rates, makes it clear that maybe even higher than that. say good morning, jonathan ferro on assignment. lisa: on occasion. -- vacation. tom: a different eyelid, it is very nice. not with us which makes us lesser disease very good at the bank of england while his americans try to keep up. lisa: the appetizer is shocking. what we got from the swiss national bank, a surprise rate

hike, the norwegian central bank saying more is needed. it hawkish tone across the board and it raises the question, what are central bankers still getting wrong? tom: it makes it important. you don't see it in the headlines in financial media this morning but there is terrific attention -- tension there. thank you for pointing this out on twitter, two-year, 10 year yield, we are now through 100 basis points that happened a couple of hours ago. let's take a moment of silence for priya misra. ira jersey also quite good. lisa: this is the key question. is the stock market waking up to

what the reit's market has been saying for a long time? you did not see a big move in rates, you did see the third straight daily decline in tech stocks in the nasdaq sector. tom: i use a trading envelope, pa function, which sets up the standard should movement in a series -- deviation movement in a series. i'm looking here from two stated deviations, we have come back, the two sweet, a little gloom. lisa: let's correct the record. i was not saying this is the end all be all a we will get this crash. i'm saying there is a bigger reaction in equities and bonds. are equities coming to the realization, trying to grapple with the implication of higher rates for longer which is what the fed and other central banks

are saying. tom: lisa has an important brief coming up in 10 minutes. coming, the french finance minister and mr. emmanuel macron with an announcement harris and francine lacqua with a conversation with bruno le maire. lisa: if things hold, we are seeing a 4th street -- fourth straight day, the longest streak going back to may. this comes as to your yields are around the highest in the u.k., going back to 2008. 6% u.k. rates by the end of this year. it seems tricky. in terms of the economic data, 8:30 a.m. jobless claims, the current account balance, 10:00 a.m. u.s. existing home sales,

interesting given the resilience in the sector. jobless claims ticking up. is this enough to give people confidence the labor market is listening to the degree they want to see it? lisa: -- you heard from alton goolsby surprisingly hawkish, a close call not to hike rates and fed chair jay powell basically towing the line with a little more of a hawkish tone. tom: we have a busy top of the hour.

we have the faces of the fed speaking today. for all of you worldwide, this is the american difference within the federal reserve system. each of these people is highly unique. to master, the mathematician and barkan who is outstanding a business process, two ideas. we're waiting for bruno le maire, joining us for a brief with franklin mutual. katrina, are the interest rates going to drive higher? katrina: you already have the implication from powell that we've got at least another two rate hikes before the end of the year. i think we need to trust the fed. you talked but how smart the people in the room are and if they are indicating this is just a pause and it was done on the margin, you got another two rate hikes coming. lisa: the bonds of christ in

more hawkish central banks. stocks seem to be waking up, what is your view of? katrina: there has been an ai trend which is deflationary. it is replacing a certain amount of functionality that was done by humans often with technology. you got a deflationary trend, the performance and the equity markets, on the bond side you've got a lot of fear because the fed continues to hike. they hiking because we keep seeing -- i think the equity market is being rational. we have seen in the last couple of days that selloff, and is affecting the interest rate tools near the back end of the tech company earnings. lisa: so you don't think it is -- has legs. and you might lean into the idea that sectors act as a haven given that there are different

factors underpinning some of the rally. is that correct? katrina: if you look at what is driving it, we don't have a lot of breath in the s&p rally. there is a big move in stocks but if i look at different markets, japan, the european equity market, the european equity market facing the same rate hike cycle but you don't have that lack of breadth and the market is still holding up well. the economy is just not this interest rate sensitive as it has been in the past. we also need to think about in terms of what the absolute rates are. a lot of people are focused on the rate of change. the level of interest rates that we are talking is a level that is manageable for companies. that is what we need to focus on. manageable interest rates on a trend people can predict. tom: i would suggest there is a trend of stasis, healing, a little price up and yield down. what happens with the bloomberg

total return index, global, u.s.? where price gives way? what will be the behavior response if we get price down, yield up? katrina: if we look at what is happening with yields, we are using yields and all of the central banks to fight inflation. got to see some abating of that. you have showed the chart earlier. we are starting to see a tick up in the initial jobless claims. that is the other factor the fed is watching. but everybody that we talk to you, particularly around the manufacturing economy, which is the engine of this economy and what is being reassured in the united states, is holding on to it. they're looking at this to train the next generation. as long as we continue to have the labor market strong, the fed can keep raising rates to fight

inflation without causing a significant deep recession. maybe we have a small correction but i don't think we are looking at having a deep recession here. tom: thank you, katrina dudley from franklin mutual shares. this is a joy. for america and summer, it is where we are heading. without question, everyone i talk to, there is only one estimation. --destination. it is paris. it is stunning to see the number of people migrating to france, leading the way is francine lacqua from london and the conference of emmanuel macron on the climate and funding for poor nations. she is in conversation with the tour director for paris, telling us about the highlights, bruno le francine: you could not be more right. everyone is here in paris.

talking about finance sustainability and how to tackle poverty which is spearheaded by the president of france but also there was fashion week and it does seem like every american at noon -- europe has decided to descended on paris. paris is buzzing. it is raining today but it is back with a vengeance. what are you trying to achieve at this conference? money transfer, debt forgiveness or keeping the momentum? bruno: to keep the momentum and have new architecture for the polish countries of the world. back home we don't want the countries to be confronted with a choice between fighting against extreme poverty and fighting against climate change. we want to provide all of the financial means for those countries to be efficient in the

fight against poverty and the fight against climate change. this is the key point of the summit and i think the key point would be new architecture for the 21st century. francine: are you frustrated that it is taking this much time? we not -- we have not seen chinese officials and u.s. officials talking about these issues but you have pushed voting rights in the imf. how is that going? bruno: we are totally determined to have a final positive outcome for the summit. i think we are moving in the right direction as far as the debt restructuring is concerned. we want to move faster, quicker. we could have a positive outcome as far as zambia and sri lanka

is concerned. to have the chinese prime minister here in paris today talking with the head of states, this is a very positive outcome. we have a new president of the world bank and we are defining a new order, providing money for the polish countries. things are moving in the right direction and the final outcome should be positive. francine: in the corridors they talk about trade, the fact that secretary blinken was in china, the fact that we have president xi -- what does this mean for global growth? bruno: it is good news because we want to improve the relationship between the three continents, china, the u.s., europe. we are determined to defend their own economic interests in europe.

which is now at the core of the future has been defined by president macron. we want to defend technological assets and economic interest while talking with china being aware there is a necessity to have the tools to defend economic interests. >> the economy is extremely complex. we need to attract in europe and in france specifically more. >> we are open to chinese investments in france. we had yesterday a very fruitful discussion between the prime minister of the chinese republic and we made very clear that there is any willingness to invest more in france and europe for instance on the eeev's in

the batteries. francine: we have a lot of u.s. viewers at this time in the day. would they worry that investment that could have gone to the u.s. is going elsewhere including europe? bruno: it means a lot of new investments in batteries and ev's. there is a place for everybody. we should be cautious in the way we are defending technological assets or key technologies. the fight against climate change will pay the way -- pave the way for new investments and innovations. we had fruitful talks and constructive talks between the u.s., of the eu and china. how difficult is it -- francine: inflation of courses going up which leads to higher interest rates. at the same time you need to

deal with this because of future deficits. bruno: fine tuning i would say. to bring the prices down. the new have to take into account the necessity to come back to some public finances. i just announced last monday we would cut in public by 10 million euros by the next 2024. coming back to some finances and stick to the path of reform which is two key reforms. reforming the market and pension reform. francine: do you not worry interest rate hikes will be so severe they'd have to put them into a recession to achieve their target?

bruno: if you want to avoid recession you have to find the right balance between private and public finances and keeping a high level of investments in the fight against climate change. since we have -- this balance we want to preserve. we are in the process of defining the new rules for european countries. we want those new rules to keep the right balance between investments and some public finances. we need flexibility of course, we need countries to of i'd -- to abide by the rules. the key factors to keep a high level of investments in innovation. >> thank you for joining us. with that i will hand it back to you.

tom: we wish we were here. francine lack while -- francine lacqua with bruno. it's not often a finance minister makes a splash that he's making. the french is lacking. lisa: i will say -- i wonder if paris will become the new wall street. tom: that's a loaded question. there's momentum happening from london. that's the immediacy. we do a data check towards the bank of england as lisa mentioned. equities a little light.

i'm going to go to the yield a all start with a headline 99 basis points. massive and curve inversion a number of months ago. yields creep up. lisa: that's that yield curve inversion you're seeing the two year yield at the highest level going back to march 9 right before the banking crisis. fed chair jay powell is correct so far that inflation expectations over the longer term are controlled. when does that change. when we see these upsides to inflation. when do we see that longer end creep higher? tom: there's worry about economic slowdown and that's a dynamic we face here from the governor of the bank of england here in a bit. i also note this is the day the currency market again to adjust. for waking up in america, three

banks acting today. to borrow from peter hooper this was hawkish out of oslo. lisa: it was clear with what we got from last week from the federal reserve. 3.7 5% is the new rate. they are further behind the united states. still, inflation is a problem. it is not abating and that is the theme. tom: the currency market breaks. yen gives away. euro, 110 print. looking at stronger euro. confirmed through sterling. this argument about 25 or 50 basis points. so much of the story of europe and what we will see from governor bailey in 39 minutes is

about energy. and maybe the better tone of west texas intermediate. but far more -- olga is the deputy director european energy security. thank you for being so patient with us. with the french finance minister into the show as well. how much is the war in ukraine, the geography of the dam break, how much is this affecting continental and united kingdom oil prices? >> what happens in ukraine does not stay in ukraine. any kind of instability particularly the horrendous cost of the war will have global implications on prices so not just in europe but the risks and

uncertainty around upcoming winter. it's hard to pinpoint exact percentage point link but i would say anything that's happening right now in the region and how well europe is preparing for potential shortages and other unexpected events will directly impact the futures. >> do we see a shift in terms of diversification of energy sources based on what we've seen with russia? olga: great progress made on coal and oil, natural gas. a lot of the questions are around how permanent that diversification is. as of right now there are no sanctions on russian natural gas coming into europe. russia sanctioned itself in terms of exports. there are some exemptions. there's some gas going into

europe through ukraine and turkey much smaller quantity. the question is how do we ensure that the supply security is permanent and that enough projects, online. here see the pipeline for the next 10 years but how do we ensure -- a lot of those are tied to long-term contracts. that will be important to make sure that gets replaced. natural gas gets replaced permanently. lisa: you mentioned: other sources, we just heard francine lacqua speaking with air france finance minister about climate change. how's the fight to fight climate ended, or been postponed as people look to energy security first and foremost? has been less discussion about that and more around the immediacy of fueling the homes and cars, businesses of the european region? olga: we look at the

conversation differently. you don't have to pick one or the other, you don't have to just to say we will focus just on climate, or energy security. the two are now permanently injured -- intertwined. so we have to figure out how to do both. a lot of the solutions contribute to both of these areas. there are solutions such as heat pumps that provide for more efficient ways to manage your own temperatures. they contribute to decarbonization and less reliance on energy that they need to use at home. clean energy production at home once again is less the reliance on energy imports into the country, but there are other supply-chain constraints. but there is a robust buildout of clean energy sources and making sure those of chains are diversified so they don't face the same problem as with the reliance.

tom: olga khakova, thank you. it seems like two worlds, cheaper oil, we are celebrating $71 and $.46 a barrel. there is a unique american thing, we had madison avenue complete and clogged. we need fifth avenue as yesterday jammed, from 102 all the way to 40th street. it was like before the pandemic. lisa: one of the most confusing moments i can imagine in the fossil fuel space. in part because china has shifted to electric vehicles. the potential demand has shifted in terms of transportation versus usage of fossil fuels. and around the world, that shift is uncertain in terms of how much it is taking demand away from the oil space. tom: there is huge market tension with currencies on the move and new inversion. mark chandler on short notice

scheduled to join us in 20 minutes, 645 time. leading us on boe with his foreign-exchange expertise. and he minces no words, higher for longer is the shift for the gentleman. lisa: we have seen that across-the-board in terms of rhetoric out of the central banks of europe about as well as jay powell, he doubled down yesterday and we will hear it again today. tom: futures at negative nine, we are interested in bonds and foreign-exchange. at 8:30, maria tadeo in conversation with the prime minister of ukraine. good morning. ♪ ♪ ♪ the vehicles are all-electric. the feeling is all mercedes.

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tom: bloomberg surveillance. good morning. the next 30 minutes will be worth watching if you are part of global wall street. also to straighten out my bow time for review--radio. simon french will join us in moments and mark taylor will join us on the astrology of the moment. and we move on to bailey of the bank of england at 7:00. chandler, french and bailey, looking forward to that in 30 minutes, getting out to a mysterious bank of england meeting. what is the biggest mystery? lisa: how much they can hike before they torpedo the economy. the 25 or 50 will be

interesting, but are they going to follow up with a 50 or 25 basis point hike? what is the threshold, given the inflation, it is much higher than expected. tom: i'm going to pick on euro 110.06. glass -- 1.1006. what else do you see? lisa: i'm looking at the pound and making it weaker. if you look at the pound versus the euro, that is what i'm watching. it has been fading. the question is at what point does protect overtake the expectation for from the rate hikes? tom: sterling dollar is called cable, euro sterling francine lacqua calls it pharaoh, gush

ferragamo -- ferragamo. lisa: within a half an hour before the decision. this is the concern, hot inflation may force it to end up with a basis point hike. it may be another push for the pain, where luck likely to engineer a hard landing. we do not see a 50 basis point or 75 basis point move this week as the least bad. this is the tension. if you frontload the hikes and induce some sort of recession, do you allow it to be shorter or are you inducing pain that might otherwise be avoided? tom: 27 minutes away from this bank of england reading, simon french, chief economist. 25 or 50 basis point? simon: 25 for may but i would

associate myself with the comment there is no easy and no good decision the bank of england has to make in 20 minutes time. tom: it is simple, as this a y or x axis study? adam posen from the telegraph talking about 6.5%, that gave me a y axis move. or is it about the x-axis moving out in time? simon: i think it is more and access access moving out in time. i tried to do my homework ahead of this. i know you want your historical reference points. and there was a paperback in 2000, the american economic journal about central-bank credibility, why do we needed and how do we get it? the bank of england unfortunately -- because it has got the market to where it is today? y -- it finds itself with a

market split today on what to expect. which is where it known central bank ever wants to be. that credibility point eliminates the point that the bank could pause today and follow the fed. the key transmission, this is to lisa's point about what this does to the economic cycle, we know that only about a quarter of the rate hike impact impulse has passed through into the real economy so far. they should be able to fall back and say we have done 440 basis points of hikes, we still see three corners of that too, and they refinancing cycle but they have not got the credibility. lisa: it seems that people were talking about inducing a hard landing to make the timeframe less long and painful overall. is that still in the zeitgeist or people moving onto the hope of a soft landing that seems to have overtaken most policymakers in the u.s.?

simon: i don't ever see -- maybe because my background as a labor market economist -- is what a hard landing, even if you engineer phase, best engineer it, presents a long-term outcome. this is the impact of labor losing its attachment with the labor market. we saw both sides of the atlantic, the impact of the pandemic on people removing -- being were moved from their place of work, their profession. it has a is going impact in terms of labor market trends growth. your question links nicely with tom's first one. let's try and elongate this through a combination of explain the transmission mechanism, rather than going quickly. potentially amplifying of scarring. lisa: i'm thinking about the comments in a bloomberg opinion pace, the u.k. inducing credit

in the inflation but it is a warning to the rest of the world, europe. do you see it is the same, there are unique features of inflation but that is something you are seeing in places like norway, italy, spain and that central bankers cannot ignore? simon: that is right. they decompose the u.k. inflation picture. and why the spread between the headline and the gt average, it is almost entirely the conversation of the energy market and the outsized impact of european gas prices, which took their cue from the war in ukraine. but to the point on not just in portable cross-border's -- it is such a movement. we are going to get that -- q1,

2023. it is not the history of inflation and i don't think it will be different in this cycle. tom: i look at where we are and the answer is we end up embedding in the case of america the biden stimulus into our prices and a permanent level, permanent lift in inflation. is that what we have wrought, where we are rationalizing out within the markets in quarter to quarter, central bank meeting to central bank meeting? that we are embedding in a higher one-off level of prices? simon: i think we are. whenever one thinks of the strategic narrative around the inflation reduction act, the reality is you are transmitting economic output and activity, from geographies where the price point is more competitive to a price point that is higher and less competitive.

merchan reasons. one of the privileges, i don't have to get back in a political debate. from an economic standpoint, we are embedding a price point from every geography, taking control of the supply chains, there are strong she teaches reasons, let's not pretend it is not doing a sustained elevated move in the price level. tom: we welcome all of you on bloomberg radio and television. we are 20 minutes or so away from an important anchor england -- shock from norway and switzerland. futures -12, yields are higher, dollar weaker. lisa: to bring you up to speed,

first we have the swiss national bank raising rates by 25 basis points, the norwegian central bank coming out with a surprise rate hike. now we are 22 minutes away from the bank of england. as we move forward, do we have a better sense of what we are going to? is this going to be the low rate regime that we knew when we get inflation under control, or is it apparent this is a new paradigm and one that will have greater implications for assets around the world? simon: i don't think we see a reversion back to the pre-covid level of monetary policy. the last of my was on the show, it was shortly after the imf published a blog showing some of the structural drivers as to why we may see atac act toward our

start being lower than the terminal. i think you see something of atac back. one thing i said when i was appraising that research blog is there were big decisions on trade, protection and the length of global supply chains, which are going to frame a lot of that medium-term, long-term outlook and they are by no means predetermined. the political rhetoric i see sees that reinforcing those supply chains, elevating the price level and it does move higher. lisa: i have to ask how much you are studying artificial intelligence in terms of productivity, offsetting some of the frictions we will see continue in the supply chain in the workforce? simon: i am studying it. i don't prepare -- profess to be an expert. a lot of economists reinvent

themselves as epidemiologists or more during brexit. i don't want to pretend i am now an ai expert. but there are decent -- in terms of potential, and allowing a repro filing of activity away from repetitive activities into more value-added. it is a strong empirical basis. the problem is sometimes, actors in the market, including government actors have a good idea. we have grade productivity estimates. and it is integrated into the economy. tom: before the bank of england reading, we have more weight in the fed because we are based in

america, but this is an important meeting. micro data, i did not know this, norway is a lot about salmon. have a beverage and salmon and crackers. your familiar. norway salmon up 26% from the beginning of the pandemic. you think about the smaller nation, norway, far less people than what we perceive. the inflation is tangible and that is why they have to act. lisa: you see this in the housing market, people saying it is more concerning and scandinavian countries have seen real price inflation. it is idiosyncratic, but this nation, at what point do you start putting it together? at some point you have to wonder what are we missing? tom: i take your point.

we take the idiosyncrasy, some stability for mr. sims act -- stability there. it all coalesced into what adam posen was talking about in the telegraph, a higher set of inflation. lisa: have you had some norwegian delicacies? tom: some of it at gunpoint. lisa: moving on. one thing that is different about the u.s. is that fiscal impulse is less clear. that is also what we are looking for as we talk about the recovery in ukraine. starting to get withdrawn to the student loan referrals. do you still have the fiscal in the monetary side? tom: i did not listen to what you said because i was imagining

the norwegian finance minister. sending team surveillance. one of those wooden boxes of salmon. lisa: and the berries, that is more swedish. i lived in north dakota. of course. tom: that will do it. taking in that scandinavian view, that is a view of inflation. we will hear it from the bank of england, governor bailey will not declare victory today. mark chandler next sees rates higher for longer. good morning. ♪ it can happen to the people who serve us and the people who served. the people we work late with and stay out late with. it can even happen to the person in the mirror. opioid use disorder is a disease that can happen to any of us.

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advancing flight for future generations. ♪ welcome to a new era of flight. >> i am monitoring carefully the possibility of additional tightening from the beginning -- banking sector with respect to credit. there is the downside with the

economy and i'm watching it carefully. tom: i am thinking about the lox and bagels from lisa. an interesting conversation with the governor of the federal reserve, very much thought to be the next vice chairman, philip jefferson. interesting to see. as lisette mentioned, a set of fed speakers, this is after what we are going to see here in 14 minutes. the fed speaker said they could add value to the length. lisa: jay powell set almost all fed members wanted to raise rates further and thought that would be necessary at the end of the year. raphael bostic seemed to want to keep things on hold. -- tom: an important meeting, i wish jonathan ferro was here. he doesn't better. but he will be an interesting meeting to say the least.

what is important about it is the linkage of equities and bonds, currencies, commodities. mark chandler joins. he is truly the expert on the foreign exchange. what does sterling do here? a new resilient, stronger sterling. what is your call off of this meeting? marc: i think the bank of england diluted eight when he five basis point rate hike, showing the selloff. it is pricing about a one in three chance of a 50 basis point hike. like norway delivered, i think that real issue here is the trade-off. not so much the trade-off as far as 25 and 50. but higher than expected inflation.

the perspective that a recession is worth the risk of getting inflation under control. it is the key trade-off. i think the bank of england is committed to lower inflation and they are willing to risk the recession to do so. lisa: there is tension about whether further rate mean stronger currency or whether it incurs pain on the economy that actually infers weakness. when to be crossed that threshold and how is that balance changing as we head closer to a tipping point in the u.k.? marc: we see this in the yen. it is the underperformer, partly because this is a question of monetary policy divergence. last week when the federal reserve said the median. point of the ftse base -- 50 basis point hike, the market believes it.

the dollar has weakened. we got the euro above 110, for the first time in a month, we've got the canadian dollar. it is affecting the euro. the market is down. a few weeks ago it was pricing and cuts from the federal reserve. now the federal reserve says 50 basis points. the market is saying unlikely. i think the dollar suffered for that. i think rate hikes are -- don't necessarily mean a stronger currency. the markets are confident in the central bank forecast. tom: we talked about this. the whole move for banks is less the level in the move up and down. they will go out longer. framed longer for the central banks. are they going to hold rates where they are a little higher for quarters, or do they go into 2024?

marc: it is an important issue. whether you are looking at the federal reserve, the ecb, canada, australia, we are at the tail end of the tightening cycle. many of us including myself -- it looks like they're going to extend into later this year. depending on what they do today, the market is pricing in rate hikes into early next year. but when you think about the bank of england or norway, there is tightening before the federal reserve and many people are critical as it was slow out of the box. here are two central banks raising rates before the federal reserve and having -- can raise rates more aggressively now because inflation is higher. there are new cyclical highs incorporates. we know the u.s. rate is slipping. the headline rate is faster than the court rate. they were talking about a few more months of tightening.

the bank of england is the exception and the bank of japan the exception on the other hand, being very slow. tom: marc chandler, briefing us before the bank of england meeting eight minutes away. we reported on the midyear outlook for the team at jp morgan. they don't mince words, they are looking for a gdp slowdown. of on radio and tv, the united states down .8% from 1.5% potential gdp. they look for a q4 of 0.7. the same idea in the united kingdom. china, 5.8%. they say disinflation will be incomplete. that perfectly encapsulates the frustrations we see over the

last 24 hours with norway, switzerland and what we will see in eight minutes with the bank of england. lisa: what does this mean for markets? they talk about the frustrating readthrough that has not been logical. talk about how volatility is abnormally low given these crosswinds and the likely higher inflationary outlook. they don't necessarily see a massive surge in the vix because there are technical pressures. ongoing, there is a key question and as i dig through i want to hear what they have to say. our tech stocks the new safety plays in a higher inflationary environment? this is the oddity of the past couple of weeks that is turning on the head the logic heading into this year. does this have a new promise with ai? tom: you are busting my chops with this. but from the jp morgan major outlook, they go from 44.10 to 4400 down 5%. it is pulling into the equity market.

i don't have it in front of me, but it was almost a centre tendency. do you i'm off? lisa: it is almost bearish, the seachange was beyond. it means potentially shifts in leadership. tom: a preview on the bank of england. during us with her perspective, she has been studying the makeup of this committee, is lizzy burden. i look at the telegraph and adam posen taking the headlines this morning, looking for a fix .5% level. that speaks to the oddity of your bank taking in those pesky foreigners. his catherine man the huber hawk between 25 and 50 basis points? lizzie: she might be joined by jonathan haskell. he has been hawkish. some economists are seeing a three-way vote split.

at the dovish end, they are constantly emphasizing this lag in monetary transmission. as you know, when there is no press conference or a forecast, sometimes the bank tries to commit a get its messaging through the split. look out for that. tom: thank you. we will look to speak to you in minutes about the bank of england. futures down 13 as well. the two's tense spread, 99 basis points, it did breach 100 basis points earlier this morning. lisa: i'm watching two-year yields in the united kingdom, hovering around the levels they were heading into and out of the 2008 financial crisis. 5.05 percent for the two-year year and could that go higher if the gaming out of 6% rates in the united kingdom has this

meeting? tom: jonathan ferro gets this better than you what idea but we can look for the fractions versus the quiet from jerome powell. lisa: it is needed given the uncertainty of any good decision. you've heard that from simon french and many others, there is not a good option today. your hiking into weakness. do you want to repeat the strength quicker to get inflation under control? tom: it will be interesting to see the two year yield, 4.75%. 10 year yield, 3.75%. not historic, but rounded up, 100 basis point curve inversion right now. dollar weaker, 127 .86, an important decision by the bank of england is they see record high core inflation. stay with us from new york. bloomberg surveillance.

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♪ >> the fed has been trying to talk the market down and has diverted. >> the market has gotten more and more selective. >> the economy is a lot less interest rate sensitive family thought. >> this is -- sensitive than we thought. >> this is bloomberg surveillance. tom: good morning. we are here with a historic

moment on the independence and certainty on the bank of england that go against consensus and raise rates 50 basis points. you see it immediately in sterling 127 up to 128 6 -- 12826. lisa: growing in the third quarter how is this match with more aggressive rate hikes. this is a time where the majority of commentators thought it would be a 25 basis point hike. they took a page from norwegian central bank and went 50. tom: that's an important point. the oscillation of the swiss and what we see in the bank of england. and they are saying we need to act. lisa: inflation will fall

significantly this year, but they say that further tightening we needed if signs of inflation persist. and the ongoing feeling that there is some -- nobody on the committee thought it was important to keep rates where they were rather than not raise at all. that gives you a sense of high yields for longer. tom: right now i want to look at the single phrase. each has their own set of headlines. euro tying -- here are some commentary from governor bailey. it is a tight labor market. over the last 18 months that is what central banks have gotten. lisa: what you see in the u.k. is wage increases above what we see in the u.s.

i was reading about this and i'm sure that lizzie could correct me but it is above what we see in the u.s. at a 6% rate. and it brings in the question of wage price spiral. when you see this since across the nation. i did not know what they can do with that. how -- is this structural? tom: to give us perspective we bring in lizzy burden. are you shocked by this? lizzie: i was. many said that if they went 50 of would freak of panic but they did it anyway. they are hiking anyway when they have been repeatedly emphasizing the lag in transmission. it follows the other central bank this morning. there trying to get a grip on laois and after the court --

grip on inflation after the core surprise. the risk becomes about recession. bloomberg economics research shows that if rate get to 6% you would see a recession u.k.. rishi sunak has the number one priority to fight inflation, but if it takes a recession is that, one of his other priorities is rowing the economy -- growing the economy. being able to deliver on both of them is looking more doubtful. chesser jimmy hurt -- jeremy hunt -- chancellor jeremy hunt needs to do more to help people. and he does not want to go against the bank of england. lisa: there's confusion and the forecasts we see with them because they see stagnation in the u.k. in the second order but a rebound in the next quarter. does that resound with the

potentially 6% rates as soon as december? lizzy: if you look at the sh ok shocked terminal -- shock on the terminal, we have a long hike today and i expect markets to be pressing in an even higher rate. they see 6.2 5%. you can expect those to go up. tom: if the meetings have a wonderful panel and they are visiting the bank of england, from where you sit in study and this every day, is this a hawkish or dovish beckoning? lizzy: when there is not a press conference that can communicate its messaging and future path through this. it seems to me that the bank is trying to communicate this is a hawkish -- they are being hawkish through this.

the fact that of them have gone for a hold is a signal. but megan greene will replace a former employee and she has been making hawkish noise. perhaps we will see more hawkish and is in august. tom: i would suggest that she is not making hawkish noises -- lizzy joining us this morning. and a historic moment. no other way to do. as a side show turkish central bank says that they will be tightening. mira moves to -- the currency moves lower on the day. right now on this story, in america, we have deterioration of usurers of the bank of

england announcement fractionally looking toward a hawkish tone from the american central bank. we have jay powell again today. lisa: yes, 10:00 a.m.. tom: switzerland -- i am doing well this morning. switzerland, norway, and the united king them. -- united kingdom. and now and now sreekala joins us. is it a hawkish tone in europe? >> i think it clearly is from the u.k. and norway as well. they were running into this. and they have had in 10 debate there were questions about

whether this would be a 25 or 50 basis points from the bank of england but clearly this is a surprise. running through the statements, their reasons are very clear. this is something that has been signaled in speeches for quite some time. it is or services in nation that is strong -- poor services inflation that is strong. -- who are core services inflation thas strong. when you look at the market with the inflation number is standing out with the wage pressures that it has. you may see a bit of a stabilization or rollover if you look at another european country in the fed. but the u.k. stands out from the core services and wage angle. lisa: we are watching the pound

strengthen in response to this. this is departure from what we saw from the liz truss era. how much is this a positive that people believe they can withstand -- that they have confidence that you can fight inflation without creating a deep recession? sree i think that will be very challenging -- sree: i think that will be very challenging to be honest. the markets were looking for 6% of believe. this triggers the economy. what we see is that fragile conditions have tightened significantly. there is further to go, but 6%

would be trickling -- triggering a recession more than economists are forecasting. there's a number of different countries where a soft landing is difficult and unemployment rates will start to move higher. the tightness in the labor market is worrying and that the more the recession is delayed see severe in terms of rate hikes later next year. tom: inform our american audience, we understand the dynamic of a fully employed ohio or kansas versus challenging city unemployment rates for america. the perception we have is london looming, the south blooming. i am struck with the unemployment in northeast scotland. how and even is this delight -- debate on monetary policy in the

u.k.? how much of the u.k. is truly in a recession right now? sree: i think there's a regional issue and it needs to be measured to really address. from a monetary policy perspective, the bank of england and what is happening to their aggregate inflation rates, what is their target and how to get back to the target. the regional divergence is very difficult to look at without physical measures and lessees on the issues. if we think about what happens in terms of a recession, we are not in a recession yet. we see weakness in data but q2 we have strike action, healthcare services, and extra

bank holiday for the sport -- king's coronation. this will lead to some inactivity but not a recession yet. what the bank of england is for the economy to also the imbalance is that are driving inflation -- imbalances that are driving inflation ease. where in not seeing that yet. tom: thank you so much. that is a truly historic moment for the united kingdom. starting 1.2827 -- and it is down .3%. lisa: if you're joining the program right now we are taught about how hot-ish the rally has been and it gains steam and will continue to. it goes against the ethos

looking backwards. this is the highest one in 2021 -- since 2021. and in the past it spiraled out of control and in the -- perhaps they are saying rates will rise 15% from 8.5%. tom: this is a changing of the guard for them. it is what i would call early erdogan. the recent air one as been geopolitical. a huge distraction of where they are with the war in ukraine. you wonder if this is a new one personified by sim set, the new finance minister, usually respected in the financial community.

and the central bank making -- a splash here. first of all i think a road trip, but -- it can be food or a trip as well. lisa: i think you're spot on about that. goldman sachs, first republic comas princeton heading over there. -- princeton, heading over there -- tom: the press conference of the governor of the bank of england coming up a little later. stick with us this is bloomberg surveillance. artner that always puts you first. start for free at godaddy.com

>> we never used the word pause

and i would not use it here today. we agreed to maintain the rate at the meeting. almost every single of the 16-18 participants on the fomc wrote down they believe it would be appropriate to raise rates twice this year. that is pretty good guess of what will happen the economy forms as expected. tom: the chairman of the fed reserves in the last 24 hours before actions i switzerland and norway and now action by the united kingdom to get their hands on inflation. ripping up the script this morning for bloomberg surveillance. this is a lot going on to say the least. we updated all the break with rameau looking at cable. cables stronger than would

expect. higher interest rates and more traction. money comes in divine merchandise for the family on the next trip to london. and then we are at 1.2761. lisa: it is sobering because it means that people are looking at a rate hike as hurting the economy. and not looking at the long-term prospects for the united kingdom read this is not what the central bank wants to see. it highlights is this necessary of a solution? tom: outfront this morning -- he talked about the good, bad, and the sterling. he said if you raise rates it is good for your currency until it is not, juckes. lisa: slower growth is bad for our current with the takeover of

hawkish this. then the banks have to hike into we this -- weakness. tom: maybe that is some of the recession slow down and out there with the dollar weaker. we are monitoring sterling closely. it is a political discussion always. we speak with research partner at strategas. lisa wants to goes to issues and i'm going to go simple. inflation. in world is inflation what is the price of a gallon of gas? dan: in politics that's exactly what it is. inflation expectations are coming down marginally tracking with the price of gasoline. but generally you see a dramatic

decline in the united date. we will likely end june moving from 5% to 3%. it is an down and it shows there is progress being made on nation. that is why the central banks around the world continue to tighten, but we have a money's by contracting for the first time since 1940. it is raising economic risks which we are starting to see. tom: politicians are aware of those economic risks. when a look at kansas or ohio i am looking at 2%. it does not sound like a recession. dan: i think there is some hope that you can actually get inflation down and employment remain strong. but the point is with a big

liquidity drain, we drained about $80 million in the quiddity the last three days. that's why we see a rotation in the equity market and volatility building. you have slower growth, less liquidity, and tighter credit. this is what is coming out of this. the banks are tightening credit and that starts to affect jobs. in the second have of your politicians the can do that at 40% but there is no focus on inflation. lisa: what are the underappreciated risk of the past 12 months? you've gotten some increasing funding from the federal government. at the same time, the other hand is fighting inflation. that will change in october. there's a lot of people focus on the fact that they will have to pay their student loans for the first time in years. this hits disposable spending and income significantly.

housing forget is that? -- how significant is that? dan: i think it started this week where the tga is no longer offsetting qt. it is the first week we have qt posting the debt ceiling. drainage is starting. and the student loan payments are coming again. it is likely in the next couple days the supreme court will rule out president biden's student forgiveness plan. then you will have student loan payments coming in. that is a .3% of a gdp drag. it is not viewed as insignificant. we suggest the president will put forward a plan to do income driven repayment after the supreme court ruling to try to offset some of the drag from student loans being deferred.

students with student loans have not been able to -- had to make payments for almost three years. they allocated that two other spending and once they start to come in they will revert the funding back into loans. the fee has dropped dramatically since the debt ceiling deal. lisa: i was reading your report about this last night with morgan stanley, they think this is about 200 or $300 or borrower. there's millions of our hours with these forbearance. how much will this accelerate the decline of the elation or is this something that is correct feel that people are clinging to with the hope that it will this inflate things faster? dan: it will have more impact on growth than in nation. the 16 monthly between supply and cpi has been negative for a while.

inflation low come down. it slows the consumer down. they key issue will be whether jobs get to hold up. if jobs hold up it is manageable, but if you have a drag on the consumer hitting while jobs are slowing it will matter. the key is to watch for the survey and the payroll reports because of the credit is tightening at banks, that will show up in the business sector and that is what reflects the household survey. tom: what we are concerned about is we need to know -- in washington dan clifton stay with us. wiley nickel conference meant -- congressman -- an outlandish question to the chairman and he is an obama guy and all of that. you know he has jerry garcia nailed down. >> i was excited to see you were

the most recent dead and company. we were not here. how was the show? did you like it? >> it was terrific what can i say? i have been a fan for 50 years. tom: i can see him as a young lad buying the white cassette tapes we use to buy. this is the talk of the financial community. are you a deadhead and can -- drive forward that head of dead and company the nation's monetary: see? dan: absolutely we believe that rate increases -- will help generate the t-bills. it is a clumsy discussion as you saw yesterday and with the press conference. if you think you will raise two times, why are you doing now?

if the fed rate goes up the reverse rate go -- will go up and and if so the less money will come out about. if it is not coming out of reversed repose it is coming out of bank recoveries. so it is pressure on the banking sector. that is the key issue in these articles. liquidity is not being sucked up. tom: we have to leave it there. thank you, dan. and we think for the -- thank you for the conversation in washington as well. this is bloomberg. stick with us. this is bloomberg. ♪ smart bed is now only $899. plus, 48-month financing on all smart beds. shop now only at sleep number 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?

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tom: bloomberg surveillance. surveillance correction. i thought there was a bailey press conference. but i was told i wrong. i assumed that they would meet like everybody else. lisa: the fed needs to give lessons to them. tom: we will have to see. good thinking on sharing chairman cowles thought on dead in -- chairman powell thought on dead and company earlier. sterling on a .5 percentage

point lived. and then they are worried about slowing down area of what is important is that rochester is now considering the fed. lisa: the inflation story is sticky. the wage pressure is significant and it will be very concerning at a time where they are fighting off a downturn. here is the tension. have we shifted to the point where the potential for slower growth offset rate hikes in the currency space and starts to attract potential investors. tom: the story we are watching in turkey, it is not working. that's all there is to it. there is concerned with what the central bank has done. they acted off of the huge difficulties in turkey. we will do more research on that because at the moment we have the right guest for that moment.

the dow futures -116. the two year yield 4.74%. i guess it is a recession but you do not know it in the homes based. -- space. lisa: that is what i am shocked by. kb home came out with numbers that were strong yesterday and the shares are bloomberg today. 2.5% lower area i really cannot explain it. perhaps the brief respite will move into something of a higher rate and weaker housing market. i'll keep an eye on this. boeing shares also lower by 3.4%. there is a potential strike on the biggest supplier area union workers voted to have a strike. this is something we see around the world with the labor pushback of raising prices.

nvidia shares up 194% this year. right now taking a breather. tesla shares up 110% so far this year lowered by 3% as whether people think it has gone too far too fast. tom: and with turkey we have to stay with that. the turkish leader in all your of the holocene reaches -- turkish leader we see them at 2%. lisa: to understand the confusion of the market response we have global currencies director and interest rate strategist at mccoury -- macquarie futures usa

joining us. thierry: it's going to take a while for central bank to gain the credibility of the market. the market will be doubters. when you have a central -- situation like this it is important for the central bank to do more than the market expects. i want to make the case that in the emerging targets trying to tackle the nation story -- the inflation story early on has had success. brazil is on the verge of cutting rates in august or september. they were aggressive in hiking rates in the inflation move and they will be early cutting rate moving down. turkey is an exception. lisa: it is piling on the hawkish talk we have heard from central banks around the world today. as the bank of england lost

credibility? dan: i think it did but that's -- thierry: i think it did but i think that's why they had to raise by 50 basis points. the rates did not signal a hike of 50 basis points for the inflation print where you can make the case that the bank of england made an eight -- a mistake. they thought it would be a 3% and a cayman -- came in closer to 9%. i think that is why it happened. tom: alan shorts is here with us as well. you have seen as so many times before. how do you rationalize it is to roddick stories back to the central bank world of jerome powell? how do you leak it -- link his

actions to what we are seeing? >> we have to be cautious to assume that what he will do will be overly dependent. this situation in the u.s. is now the situation in the day -- the u.k.. there's not as much labor strengthen the u.s. i know that the headlines show we can measure this, but the peak in employment has died off since last summer. we are seeing a lot of labor activism now and concession by private equity. as a result, the u.k. and europe are delayed with their ability to fight inflation and bring it down. when you look at the indication of inflation in the u.s. they are coming down and faster than

europe. the atlanta fed principal -- flexible price index is pointing down for the u.s. and powell mentioned this in his testimony yesterday, on the back have year you will see this stickiness that we are seeing with inflation and we will see the inflation index received. i think the market understands that -- the inflation index come down. i think the market understands that and knows the fed will come to an end with rate hikes but it does not see that with the u.k. tom: they call our inflation path income late but one of the great studies has to be the greater number of lesser countries really struggling as you mentioned. is imf going to come to a rescue

or has it lost credibility when we talk about the bank of england? thierry: if you mean regard to the debt load and emerging margin. yeah, i do not think you will see that happen in less -- unless the country adopts a more aggressive approach to the policy agenda. the ideas not to bailout countries that have a mistakes in their political and policy agenda over the last few years. it will bailout countries that it can impose an agreeable base and monetary responsibility. lisa: there seems to be a real difference between the patient data in the u.s. and europe. you were talking about the labor dynamic in particular. a number of central banks have falls for our trying to end now they go back and hiking again.

this is what people do not want to see. what gives you confidence that the u.s. will not be in the exact same position? the housing market has shown incredible resilience along with others. thierry: great questions. let me start by saying the way the price index is computed and calculated, it has inherent stickiness in it. 40 or 50% all of the prices of that are computed. to get a good dense of what races are doing, you can observe it in the market lace. you have -- marketplace. you have to look at narrower indices. but we do that we see a lot more disinflation already. prepare for the atlanta fed index. the class of -- flexible basket versus the sticky basket.

there's a lot of diversion in the last few months. lisa: what is the potential shock to the rates it this is reversed? if it does remain sticky in the u.s. and the lows the european story here buddy you think will happen? thierry: we could see short-term rates go up as well. but to the extent of that -- we -- it will be because inflation goes up. as the inflation expectation goes up and not because real rates go up but that will effectively be the result. inflation breakevens go up which drags higher the teen yield. tom: were looking at monetary policy in the interest of chairman powell. i can't believe is been 27 years since he died, but you saw the

dead when the dead and we are talking about dead and company now. this is been a strong -- long and unique inflation. this is original isn't it? thierry: so far the fed reserve the mistake of inching too much money at a time where they felt the pandemic not in. they took the view that the possibility of it not ending and said they erred on the side of inflation. -- if you look at monetary balances in the u.s., they are at trend level. they went 10-15% above the trend and they have come back down to the trend. that is a strong suggestion that

the inflation that the central banks have created is no longer manifesting. tom: -- dead and company. he said he stood for six hours. that is on the edge of springsteen. lisa: [laughter] evidently they used to have more -- longer concerts. tom: i'm a little bit older. thank you for joining us today with the challenges we see in turkey today. numbers are down .3% on the s 500. lisa: it is a credibility gap and once you lose your red ability it is difficult to take it back. it raises more questions than it

does give answers. tom: we will summarize that as we move through the morning and orton conversation with prime minister of ukraine coming up at 8:00 our. he started with switzerland norway with what we say are shock in is in interest rates. as lizzie said, no one was calling the 50 basis point. lisa: it was a surprise, not the consensus. then they talked about moving forward in subsequent readings. and bank of turkey moving rates as well. i could leave different story but jumping on the train do we see a different story and if so will this be enough to curtail the inflation and wage dynamics. and not raise growth to a degree that you scare away in esther's. tom: -- investors.

tom: dr. wiseman nailed this about the labor differentials and the changes in negotiation -- as a free market wage solution in america. we see that in france and spain the last couple years. that is one of the reasons why we see that surprising to the upside. tom: sterling 1.2 782. this is bloomberg. ♪

oh booking.com, ♪ i'm going to somewhere, anywhere. ♪ ♪ a beach house, a treehouse, ♪ ♪ honestly i don't care ♪ find the perfect vacation rental for you booking.com, booking. yeah. >> we see the momentum and q2 2023 from a revenue point of view is higher than q2 2022. overall i would say the bank is faring well.

in q3 and q4 there is momentum on the business side but for us as a strategy at deutsche bank it is important that we invest overall. tom: cio talking about deutsche bank area. they own broadway and winchester house. and an important discussion with guy johnson in london. he joins us and we talk about deutsche bank. in the bank is underperforming since time began, there is no question about how he has righted the ship, when does the street at deutsche bank have the evaluation of a higher value? guy: there's a number of ways of looking at this.

let's start off by how he looks and feels. he is or calm and has one of the most positive views than i've ever heard from him. they made an acquisition in london. that caught a lot of people by surprise. but he's talking about going further. he believes he can take a look at what is going on. but when we look at the credit suisse story, what was the next place window credit suisse story found the momentum. it was at deutsche bank. he certainly feels a sense of frustration. but look at what happened in the situation we got through it and -- that is what he was saying. he is pleased with where they are. is he please with them,

absolutely. i think that is the message he's delivering. tom: i like the message and it has to come with expansion. our american audience does not know numinous, what is it and what does it mean? guy: it is a big corporate bank in london they are buying a huge number of corporate relationships. this is where he wants to take the bank. this would be the strategy from the get-go. the trading on the business side. he wants to downgrade that and upgrade the sides of the corporate side. the trading side has carried this business through the last few years. the business is till facing significant profit which is why

the cf all -- cfo got on the other day and talked about a move down to everyone had tension. they were good on the aches side. equity was wondering if they can rapidly that. in he does not think so. lisa: does he think higher rates is good for european banks? guy: they have been. they say eventually it will fade and will get a more balanced approach. yes, it has helped. negative rates were terrible for euro plans. everybody in the inking sector in that situation has got away but however look at what is happened today. it is been a hugely volatile macro episode. we look at the north bank earlier, the expectation that q2

would be weaker after the debt ceiling -- what they are saying is the volatility will continue to come back in the second half of the year is likely to be a better environment for the business to operate in. lisa: we do not talk about this often with deutsche bank but in 2019 they cut 18,000 jobs. they made a big retrenchment and now they are looking at trading and carrying the day. how do you square that russian mark what is the message for other banks in terms of what footprint they have to have? guy: you have to be substantial. equities have been part of where the bank has been incredibly strong it is help them through this period. is not the model for where he

wants this bank to be. he is looking at a less volatile rk. the bank talked a few months ago about what rate raising will ultimately be on. investment banking and trading is a lower rated business because of the volatility that comes with it. he wants to take the bank away from it and maybe deliver for georgia -- deutsche's and its investors. tom: an interesting paris air show since the pandemic. i thought it was fascinating the size and number of orders. he spoke with the cfo -- ceo of airbus and it seems to be real competition for boeing. who is winning that right now? who is the technological lead airbus or boeing? guy: in some ways they are not

comparing apples with apples. boeing has been strong in wide bodies, airbus has -- it was john lee that made his decision when he was -- chief commercial officer, this success of the 8020 family has been in norma's for airbus. the narrowbody market has become huge. that is where boeing has struggled with the 737. boeing has strengthened. i think that's where it gets interesting. boeing has had a tough time. spirit has gone on strike. the stuff over spirit -- staff over spirit has rejected the offer to bring the back. they are both facing challenges.

i would say airbus in the narrowbody is winning. the model is sensational in the moment. you plug it into the central bank story with the bank of england the economy sees it as stronger. you see it in the data then you plug it into the volatility at deutsche's and that is how these stories connect. the take away is that the economy is in relatively good shape. tom: thank you so much. i take a look at what he says and your analysis of it as well and i bring it to the bloomberg launch pad with equities, currencies, commodities, one number is the elephant in the room which is the recession indicator. the two year yield individuals is 1.0 bigger than the 10 year yield.

that is undoable in the tom keene textbook. lisa: it is climbing back to the levels that inverted in 1981. the tale tell recession sign may be a tipping way. what i am watching is really yield adjusting inflation expectations of the yield yet. that is the most going back for -- before the financial crisis. the highest going back to february 2009. at a certain point, are we looking at restraint in the financial markets that potentially is more sick if you get and accelerate -- significant and accelerated? tom: and we have oil and i know that it does not fit into the discussion but nevertheless off of switzerland, norway, and the united kingdom on recession wars, one dollar 40 three cents on west texas -- texas down.

lisa: we heard a hawkish tone from jay powell yesterday but this is the offset. atlanta fed president coming out with comment that were dovish. he said we have good reason to expect tightening. this is idea that the longer you extend this, though more pain you inflict on the economy. that is the mystery of the u.s. station. tom: stay with us it is a fascinating day out there. darkest dollar and sterling pulling back. u.s. futures -12 area from new york, this is bloomberg surveillance. ♪

>> the bond market is screaming recession, but on the other hand, the equity market is not going to be able to do what it wants to. >> we are torn between stability, the goals of trying to raise rates, and provide a liquidity. >> how much tightening to the need to put into the economy.

how much do they have to dump for demand in order to get inflation under control. >> we are looking at an economic malaise. more or less that an recession on the horizon. >> two to 3% inflation will become the norm. >> this is bloomberg surveillance with top -- tom keene, jonathan ferro and lisa abramowicz. >> everyone is hawkish today. this is bloomberg surveillance in bloomberg television. tom keene and lisa abramowicz, and jonathan ferro is on vacation pretty will be back after a couple weeks, and that will be a good and wonderful thing. we have central banks. we are talking over that. we have central banks, whether it is swiss national or norwegian. or whether the bank of england or even the turkish central bank, they are taking a hawkish tone. what does jay powell have? >> this is a sea change. wednesday was quiet. this is not quite. i'm sorry, but i will sum this

up simply. there is a sum of all of these parts. in hindsight, the united kingdom raised 50 basis points. of course, should jerome powell have raise rates at the last meeting. >> we are hearing a tone of exceptionalism in the u.s.. not only tech exceptionalism, but inflation exceptionalism. an idea that there is a different dynamic in the united states versus europe. how exceptional is the u.s.. with the upside, over your. >> will have to see. there is a difference here. we have covered it well. through the morning. there is a distinction between europe, but what we are talking about is a potential mindset, and i will give it a broad caller. 5.50%. up to the adam pozen headlines in england this morning. 6.5%. has anyone gone the -- above that. or are they bandying up the structure as we go through june? >> the confusion is why has there been such a resilience?

why have we not seen a greater degree of pain more quickly, that is one of the big mysteries. you see the housing market rebound, and there will be more housing data 10:00 a.m.. that is one of the key issues we face off with. >> i want to bring to you and orton stories this morning. this is breaking, and this is bloomberg news reporting. our reporters in detroit. if you are of a certain vintage as i am, this is stunning. there is no other way to put this. the ford motor company. i chief financial officer, it has garnered 89 $.2 billion loan with the department. the scope and scale of this on this new manufacturing america, this is gary silberg of kpmg. not since the advent of the auto industry 100 years ago have we seen an investment like this.

lisa, i am not prepared for this in such a sea change. >> the goal is for the money to construct battery factories, this goes with the forger million dollar project of the u.s. to build out some of the tech prowess in the new energy situation. versus the other nations, there are a lot of questions. there is geopolitics, and growth of it all. his ability as well because there are loopholes and things attached to it. this goes to the whole exceptionalism question. how unique is the u.s. at a time when you have nvidia, you have tesla, you have these infusions of cash from to government. >> the perfect guide to talk about this. we are to for two. we have turkey going up, and darrell kroc joining us from wells fargo. that is paramount to what is under set which is the battery market. republicans want to take that

market with us. we are making this up as we go. we are bringing up -- ripping up a script. we have wells fargo american exceptionalism. we are talking about this as equities do have a softer tone for the fourth straight day, but darrell kroc is joining us with this feeling that perhaps the u.s. is different. he is president of the wells fargo investment institute, and the chief investment officer of wealth and investment management. do you buy into this? that there is a u.s. exceptionalism that keep your eye and your money focused on the united states? ask i don't know if i would say exceptionalism, but there is absolutely a bias for investors. if you think about it, the news is all about batteries. that is the constraining factor for the next step higher for the market or the electric vehicle market. the reality for your point earlier is that china owned the chip market and they own the battery market. to dislodge that or to move that to other parts of the world from a supply chain standpoint or

diversification requires a huge amount of investment and you are seeing that investment today. those of the companies that are propelling us forward. we are looking as we come in. most people don't understand that if you take the s&p 500 now and you take the nasdaq 100, they are almost the same index. the top eight names are the same if you go down that. they are the same. dealey difference is waiting. they are all the tech names that you know about. we've conflated this into a world of technology. that is what has to win. that is what has to excel for u.s. exceptionalism argument to continue to work. so much of this is such an important conversation, and if you are joining us, the ford motor company has a loan three times larger than gm last year. on the battery battle. the lift -- let three -- lithium battery. there is a difference here. you are weaned off of the fields

of ames iowa. you weren't in three zip codes in your, but now you're at a fancy place. how come you are at hudson yards. what is that about? you can come over anytime you want. >> we will do that. we'll do a show from there. did you see this copper thing? >> it looks like a can opener. a vessel. >> this is serious stuff. we are not prepared for manufacturing america. it's not switzerland. it is something going on. are we going to have manufacturing in america? >> i think you will over time. you are already seeing the pandemic really accelerate at that on a need to cut and back up and reshore get your supply chain. more secure, if you will. what is interesting is we are having a great debate, even with our strategy committee about the recovery, the non-recovering what is happening here, do you look at industrials, they are quietly doing well. why? that is because of the reassuring of the

re-industrialization of america. some of this is the infrastructure act read i travel the country all over the place, and i cannot go to an airport without it and fully under construction. any airport. it doesn't matter where i go. so where's the money going? it is going from the infrastructure acts and places that capital infusion happens to provide research of the economy. >> on one hand, you have investments. you have this promise of new technology. there are technologies that cause you to invest more in technology stocks in particular but stocks broadly. on the other hand, you have a feeling inflation and a stickiness that we keep seeing. which will win out? do you think we will see a stickiness and still see a haven in stocks because of these infusions? >> in our opinion, no. i think the key word you hit on his stickiness. if you track inflation over time, we have had past inflation bow set rise and fall quickly and then trend sideways.

then it rises again. we are strained to see early signs of that. look at the housing starts in the permits. the housing data we saw. that is 25% of core cpi. that is a 5.3%. annualized. way over the fed. if you have labor markets strength, services, strength, that feeds into the core. that is high for the fed. we will probably see june or july, headline with may be a front of it. that is entirely possible. would you feel comfortable going into longer-term bonds if they've lost credibility? we've talked about central-bank credibility. inflation is sticky and certain pockets. core cpi is still very high relative to the goal, and yet, we saw a pause, and is a pretty confusing rhetoric. is that a concern? >> we went favorable

long-duration or long-term bonds in october of last year when the tenure was for a quarter. it ran all the way to three and a quarter and were back to 375 today, but anywhere above 380 and 390, that is a good value on a long side of the nation. the interesting thing is even if you give the fed credence and credibility for inflation, and the number, the reality is that if you give them 2% inflation, it is too low by any historical measure of how you gauge the relative inflation regime. you track that through history and it be higher. why is it not? it is concern about the inverted yield curve and the flight quality. we were inverted by 100 basis points. you references earlier, by one day in march. quickly, and we lost it. all the way to 40 basis points. now were back there again. the bond market is just screaming about of her times

lying ahead. >> i want you to talk about a huge announcement for $9 billion to take on the chinese battery. the fact is, wells fargo heritage is a rutted trail across the nation for that is imagery. i've never been on a stage coach. should we do the remote? we can do this from inside the stagecoach. you can sit on top of the horses. >> will bring the horses. the heritage and branding of wells fargo is about seed assigning she. i want you to talk to the people the people scared over the ten-year view. how should they perceive american investment? >> i think american investment is very strong. i wouldn't be wildly over invested in cash. i think there is good opportunity. we will tell you that we are not seeing those opportunities robustly in the equity markets today. we see them more robustly in fixed income area we think

towards the point that you are in a super bowl market for commodities, long-term bull for markets just on a global under supply across. quick scheme belong on energy and oil? >> we are most favorable on energy is a place to be. it is down 10%. this dispersion of the best and worst performing sectors has tech getting 40. 50% across midyear. that is part of a good value. energy is getting eight to nine multiples with a 3.5 percent dividend. i will take that valuation all day long. >> we have to run. well-timed. wells fargo. a standard and poor percentage move it >> the idea of these loans in the fiscal spending, i think it does dovetails well into this all morning. is there a conflict between the fiscal impulse and a monetary impulse. can you get growth and reduce inflation at the same time?

is there some sort of soft landing or does there have to be a trade-off at some, even if it hasn't come yet? there is a speech, and the person to open was a disaggregation like we talked about with average and earlier with this just aggregation in the united kingdom. it's about have's and have-nots. you see this announcement and i go back to there has to be a winner within that. there has to be winners within the nancy bloomberg surveillance world. but there also has to be a lot of technological losers as well. that is the political battle. >> giveth and taketh. on one hand, you have the giveth of the loan, and we don't know exactly what the amateurs are attached to it,. >> the parameters beat the chinese. avonex percent of the lithium battery market we are scared stiff. >> we are talking about the strings attached, some of these loans in these government programs that you make it a little bit or complicated. on the flipside, there is a student loan issue. i think this is important, and

we don't have to drop it. we have to start paying again for the first time in three years. that will start in october, and there will be three of your dollars and disposable income that is going out the window after all of these other loans have been incurred by the consumers. i think that is significant. >> what do you say to the people who pay their loans along the way? asked congratulations. but there are still $1 trillion of people having more than that. >> the sizes the scope and scale. it is amazing. my head is spinning over what is going on today. the lira set 23. sterling is at 177. michael capon will be with us in a bit. this is bloomberg. ♪ welcome to a new era of flight.

>> we are far from our inflation target of 2%. we are strongly committed towards keeping inflation at 2% over time. nearly all participants expect that this will be appropriate to raise interest rates somewhat further by the end of the year. earlier in the process, we were seeing it was important. it is not important now. given how far we have come, it makes sense to move rates higher, but at a moderate pace. jerome powell unscripted. he stayed close to the script. mike mckee is scheduled to join surveillance. what an aude. thank you for joining in. we will see a data check some of the storylines behind the data check. it will encapsulate a thursday claim. this is the first time we've mentioned claims in 12 minutes. that shows who the topsy-turvy day it's been. i want to go through equities, and pick it up with your story. futures at -11. dow is -88. the vix is 13.81 print i will

call this a fractional weight to the tape after two days of struggle. what do you see? wax a crying higher. you can see this in the united kingdom with two-year yields at the highest levels going back to 2000. you can see that in the u.s. where you have two-year yields grinding to the highest levels versus a 10 year yield going back decades. at least close to that level. you are also watching the pound. this tells a significant story. the pound versus the dollar. we have reclaimed a bit of strength. but if we don't see more strength, what does that say about the credibility of the bank of england after delivering bigger than expected rate sprint >> is mark chandler said, for longer, it doesn't matter the level of every country. norway has a different country than switzerland. then the united kingdom and others. it is simply put, a readdressing for longer today. across so much of what we look at in the fixed income space.

we should mention turkey red with some announcements as what was some say would be a proper policy, but not enough, even with those announcements by mr. central bank, turkish lira breaching 24 which is a huge deal. 25 is unimaginable. we are at 24.23. it seems odd and out there, but maybe it is the emerging-market angst off of interest rates, higher for longer. i'm exhausted by this. we need a break. the interest rate strategist from bloomberg intelligence. how does your world change if all of a sudden rates are higher for longer. >> we have been calling for the higher but certainly the longer for most of the year. that was one of the mispricing pricings in the market. we would have a significant amount of rate cuts is here because of inflation coming down. i think now, we've priced out of

the market, and we've seen the bank of england. a basis point hike that is not price of the market. you are seeing a lot of flattening of the yield curve for europe and the u.k.. i could get more acute. there is a bit of this in front. even if you look at the dots, we are talking about one or two more 25 basis point hikes, where as in england, you can wind up with another potentially 50 to 100 basis points of hike >> you were absolutely nailing the further inversion scope. it was 40 basis points, 60 was unthinkable, 80 was an oddity, it was set by tradespeople iq you, and you had the courage to go to 100 basis points. what is 100 basis points emerging mean to our mortgage industry, to our banking industry to talk about something

as basic as net interest margin. >> for mortgages, this is not that big a deal. you are still 10 year yields, seven aerials, 4%. so really, this was the spread of mortgages, that is being affected by different fed policy. that is affected a lot by that runoff but for the banking sector, i think this is pretty -- there are haves and have-nots. the large financial institutions that have a lot of bank reserves, they are getting paid interest on those reserves, so one of the things you see in last year that the interest margin for some of the larger institutions actually go up because of the fact they have an advantage of interest on those reserves while they are not paying on deposits. but one of the effects of that is now, people have been, particularly this year, with one of the issues that became more acute a couple of months ago is people have been reducing their

low interest during deposits in going into money market mutual funds. that is creating a funding issue and in some places, that is continuing. you see not so much a deposit outflow but a deposit outflow a money market which will fund. you have supply demand dynamics and fixed income. it is not a terrible place to hide a little bit if you think other markets to be following. >> we are 98 minutes from chair powell's testimony and there is a real question here of what hawkish might mean, given there is a doubling down on the message that most members believe that rate should be

higher. he said that the market might be mispricing less. the idea of higher for longer. is this mispricing with a 5% or 5.5%. fed fun rates with a considerable amount of time. >> so, well, let's say first, we have to get to the 5%. we have another hike, fully price. not too, which is what the dot plot suggests. at some point, if the fed hikes in july, that would price and another hike. the market right now, the way that if you look at market options pricing and what what options are on short-term interest rates are suggested to us, that would be interest rates that are at this level into 2024. then, we will slowly go down. by the end of 2025, interest rates will be 3%. that is where the fed funds rate is. i think that ultimately we will

have a much harder landing than what the markets currently are pricing for. it is not going to be obvious that we are in that situation. probably not for another year. not in our view. >> my head is spinning. i have to take some tang. tang zero to calm the mind. are you saying we have a mother of all recessions? because of this interest rate maps? >> i don't think this will be as bad as the last session. we have a significant slowdown in credit activity. we are winding up in an environment where unemployment is rising, but wages don't necessarily go down. it winds up looking much different than the recessions we have over the last 40 years. when you have a stagflationary recession, and it is still high, cutting with inflation.

you wind up needing to see, and they don't cut until they have a much weaker job market, and it is not going to occur until approximately it is too late to occur. with bloomberg intelligence, it is publishing that on the terminal. is your head spinning? >> that is the different note of the debate, and this comes at a time when a lot of people are trying to understand what it means for a central bank responsive cutting rates to weakness in the economy. that is not testing. i think that is the tension, especially as we see some of these political back-and-forth in washington dc. >> there is a petition of accommodative and we have some form of restrictive, and i have no clue if we are restrictive now or not, but the time duration of this may be restrictive to a point, but it's fine. the impact of a different part

of society to me. that is front and center. to rebuild appointed jp morgan, without a significant rate cut, it is hard to see. how will stock significantly rally. this is the tension right now. some of the debates. >> the future is 4398. let's rounded up to 4400 as well. in minutes, we will have a conversation of the prime minister with denny chevelle. this is bloomberg surveillance, good morning. the first time your sales reached 100k with godaddy was also the first time your profitou shless. at the counter or on the go, save 20%

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♪ >> bloomberg surveillance. what kind of day it has been, i didn't mention claims until 14 minutes ago. that is how interesting news flow has been. the economic data sort of staggering to the end of the week. but claims, four week moving average have been of interest recently. here for a report on claims, our chief claims correspondent, michael mckee. michael: the fed national activity index slips a little bit, suggesting a bit of a slowdown in may. i wish i could claim to have the number of claims. but so far, it is a little bit

delayed coming down the pike. tom: do you have a number in your head which validates the economic slowdown theory? michael: when you look at the numbers, you have to get close to 300,000's match where we were in previous with stressors -- recessions, leaving the pandemic behind. 264,000, which is a small increase over the 262 thousand that had been reported a week ago, still waiting for the revisions. the market had expected 259,000. not a big change. it is still way below where it was last -- the last three times we went into recessions, excluding the pandemic. a four week moving average. the continuing claims number, 1,759,000, that is a drop. last week's number, revision, 264. no change at all when the

numbers are was lysed -- revised, which happened last week. the labor market is still tight, backing up what jay powell said yesterday to members of the house. tom: i look at the data coming out and we have to prepare for next week as well. jerome powell, it is a different set of questions today at the senate, isn't it? what is the question you want to listen for today? michael: i'm not sure anybody in the senate is as big a deadhead as some members of the house. but we will find out. the interesting thing about yesterday was it was much less political than a house hearing usually is. clearly, the banking lobby put a lot of questions to the members of the house because a lot of questions were on bank regulation. and probably more than there were on monetary policy. but there more -- were not many don't you think joe biden is the

worst kind of questions from the republicans and don't you think republicans are terrible for the economy from the democrats. you usually get that and we didn't. i'm not sure we will see a lot of change today. probably a lot of news made was made yesterday. the message was we are not done. we are going to raise rates and the market took it as no change from what we went into this with. lisa: before we let you go, i am curious to put this all together, we have heard that there is a hawkish field. people say the u.s. is different, inflation is not a sticky as it is in europe and it will not surprise to the upside, you are seeing a deterioration and it can be a soft landing. is the data backing that up? are we seeing the unemployment picking higher with an ease that can lower inflation without having to cause significant recession? michael: you are seeing 50-50, we saw a tremendous jump in

housing starts this week. and yet, we have seen consumer confidence a little bit stronger, not a whole lot. retail sales are hanging in there but they have slowed in general. the overall economy in the u.s. is in a middle spot. i was telling somebody yesterday, you could get neal dunn and a number of dubs and you can have a nice food fight. the thing you are right about, lisa, is that central banks are increasingly, they are going the same direction but for divergent reasons. the u.s. still has an inflation problem, talking about slowing its rate process. england has an inflation problem that is really bad. they are talking about speeding it up. norway raised by 50 basis points because they are worried about their currency. the swiss say they are almost done. the chinese are cutting rates. this will be an interesting time for divergence around the world. we will see where growth goes

because of it. tom: michael mckee, thank you so much. we turn to michael gates. there are so many trends and as mike perfectly encapsulated, the ambiguities of the moment arguments. what is the thing at the margin you are studying subject to change about american economics? what is the part of the story that interests you? michael: i think there is two parts. one is what lisa mentioned, how quickly can inflation come down, even and in -- in an environment where the market is extremely tight, per powell's words? can we get further diminishment in used prices? the same conversation we have been talking about for some time. the mirror side of that coin which powell empathize and we end others have been picking up on more would have been the bigamist has not come on inflation. it has come in the labor market, where the labor force has

rebounded extremely rapidly this year. last year, the shortfall in the labor force from pre-covert projections was as high as 2 million and non-falling. by our estimate, it is down to 400 fall -- 400,000 now. the probability of a softer landing for the recession is higher and the fed does not have to lean on the labor market is much to bring inflation down. it is that labor force rebound from my perspective that puts the fed in a very different spot today than it was thinking it was in maybe 6-9 months ago. lisa: how does jay powell draw this distinction at a time where his compatriots across the atlantic are moving in the opposite direction? and are facing resurgent inflation, exactly what they did not want to see? michael: i think this is one time where you fall back on the u.s. as a large, relatively closed economy. we are less affected by global

trends than is the case elsewhere and we will make the decisions on our policy outlook based on where the domestic economy is. the upside will come out of u.s. labor markets. whether there is persistent tightness in the labor market that keeps services and inflation elevated. i think you fall back on the historical tendencies of the u.s. to be much more domestically focused, services driven. and then we will focus our policy based on that evolution. lisa: the other aspect is the physical side versus the monetary policy side. people are talking about the fiscal impulse of having to repay student loans again, starting in october. we've been debating this for a couple of days and trying to figure out whether this is an overplayed risk or an underplayed risk. do you think the reinstatement of having to pay back your student debt after three years of a moratorium is going to have a material impact on growth and inflation in the united states later this year? michael: i think we would come

down on the side that from a macro perspective, it is unlikely to have material effect. it should probably dent the strength of spending in september or october. but the magnitude of interest payments is maybe about 2/10 of 1% of personal income. if you fold in personal payments, it is close to half of 1%. from the macro perspective, we doubt it has the material impact. at the individual level, it may affect behavior quite a lot. we don't think it adds up to something macro systemic, if you will. it is probably more about credit markets than the behavior -- and the behavior of those as opposed to the macro economy more broadly. tom: what does bank of america see? i want to get granular, through the month of june, is there any indication of a slowdown of the american consumer? michael: there is, tom.

our data suggests consumer spending continues to slow. but at a moderate pace. when we dig into those details, we do find that some of the revenge spending categories are starting to show softness. airlines and lodging, which were really strong last year, those things that started to moderate. but spending on entertainment and recreation, that is still strong. it maps into what we are seeing in the labor market where two thirds of your gains and private sector employment are coming from areas like leisure and hospitality. there is still some catch up spending, leading to follow-through and hiring. but on the margin, it suggests that spending is moderating. it is flat on a year on year basis. and some categories moving slightly negative. lisa: i'm hearing the noise behind you and i am thinking a lot of people are back in the office and how different this is

from what we have heard for so many years. is that your experience? that this has been a reversion and the homer trend has died out? michael: i think that is very industry-specific and probably job requirements specific, where i'm in at least four days a week . sales and trading is in here five days a week. certain roles are definitely back in the office. i see it on my regular commute as well. monday, tuesday and wednesday -- tuesday, wednesday and thursday are your big peak days. three out of the five days, it is feeling normal. and then it tapers off. tom: friday at bank of america, moynahan is out at the summer place and gateman --

gapen -- thank you so much. i was midtown last night. and i was shocked at how busy and buoyant a wednesday is in new york city. we have to get the wednesday to the friday. that is the great challenge for a lot of business people. lisa: if you go past 59th street and further still, on the weekends, it is quite crowded as well. you are seeing a real resurgence of the city's center. this is one of the complaints about why people are coming back to the office from some of the executives saying you can go out to eat and they are. a lot of people are coming back. tom: i wonder, how do we get from a buoyant wednesday as you mentioned correctly, the noise and the fervor there, at bank of america on thursday. but what does friday look like? you and jon are the only ones here. amy takes off every third friday.

lisa: i was doing research about how the listings for remote work have fallen off a cliff. that whole experiment is not necessarily being fulfilled in terms of what employees want. tom: it's going to be interesting to see. still negative seven, but a bit of a lift. cross current folks are fascinating, starting with the 110 euro. sterling with a 128 print over the shock of the 58 basis point move. thank you to lizzy burden for her coverage from london. lisa: coming up on the open, alessia will be joining me. i am filling in for jonathan ferro yet again. followed by megan robson and mark. it will be fantastic to have him on.

the bank of england, leading the charge as well as the norwegian central bank, i am curious what this means for the nature of inflation going forward. have we appreciated the stickiness at a time where we are seeing an arthur burnsian kind of reversal? tom: i think it will be interesting to see. i just don't have any strong opinion. i wonder if we are going to see in the next 24 hours some research navelgazing and say jerome powell should have raised rates. i wonder if that will be part of what we see. lisa: he had some details on that. he said they are probably going to raise rates further. he doubled down on the hawkishness. he said it matters less the pace. the speed matters less after how quickly they have raised rates. whether people buy it or not remains to be seen. markets, you are seeing a ability from the fed that you're not seeing from the turkish central bank because people are

expecting them to get inflation under control. tom: francine emailed and said john is in ishia. lisa: is that what you were looking at while i was talking? tom: john is having a rabbit stew with portobello. island to island, on assignment, jonathan ferro. futures s&p -- stay with us, this is bloomberg. ♪

♪ >> it is clear that in the e.u., we should have continued to build on our strengths of being a trading superpower. but at the same time, there are certain economic security

concerns which we need to address in a more conventional environment. tom: one of the most interesting voices in continental europe, he is a former prime minister and executive vp for trade for the european commission. he has been helpful with bloomberg surveillance over the years. we love that our global audience, in particularly, our audience in europe, who thinks nothing of flying down to iskia. thank you to oppenheimer and company for correcting my fractured italian. he's on assignment. he does it better than we do. michael: because he follows italian football. tom: thank you so much, frank. thank you for emailing me this

as well. nobody sends me emails about powell policy, it is about for jonathan ferro is. we are waiting for an interview with maria tadeo. we will bring that to you as we can. michael mckee with us. is a war in ukraine affecting the american economy? michael: it is at the margins. it had a big effect in the be getting because energy prices went up. we also saw agriculture prices go up because of the agricultural exports from ukraine that weren't getting out. a lot of that has eased. where you are seeing that a little bit now, particularly, is in defense spending. we have sent so much armaments to ukraine that they have to be replaced. we are seeing defense spending rising, which is something that will add to jp and brings up a debate in capitol hill about spending levels. congress has always hid defense spending and is continuing

resolutions and off budget. i imagine it's not going to -- i imagine it will be the same this time. tom: the prime minister of ukraine is the most interesting guy with many different public duties over the years but all working around trade and the economy of a prewar and a present war in ukraine. in london, our maria tadeo in conversation with dennis. >> we are joined by ukraine's prime minister. thank you for being here with us. we have seen each other in many conferences like this, multiple times. i know how difficult it is for you to get here. getting from ukraine to poland and a lot of security concerns about your staff and team and yourself. we appreciate your time. one of the things you always tell me is when i come to a recovery conference like this, i feel our allies say we stand with ukraine and they mean it. the war is long and it is expensive.

did you feel any fatigue? >> thank you so much for the invitation. it is a pleasure to be with you. it is the second conference for ukrainian recovery. the first was one year ago. today, we are in london. 62 organizations are here. hundreds of businesses are here, international businesses. we feel tremendous support from all of our partners. financial support, military support. the results of this conference, we have many promises and many country agreements, declarations. we have financial support. they have a middle term program for 50 billion euro for the next four years. we have tremendous support from the united kingdom. we had very good meetings with

our partners in the united states, the secretary of state. we have very good conversations, negotiations and results. maria: while all of this is happening, back home, the fighting continues and the counteroffensive is going. i want to make something clear, was there any point in this conference that you got any hint anyone suggested the funding would depend on the counteroffensive? >> absolutely not? maria: no one told you that? >> we have very sustainable, what is strong and unwavering support from our partners. there is no dependence from resolve on the battlefield. maria: they are entirely different? >> absolutely. we have strong messages on the conference. ukraine will be supported. russia must pay because of the

consequences of this terrible war and russian aggression. this message is from partners and they are very supportive and promising. we continue our counteroffensive. this is not an easy war and this is not hollywood as president zelenskyy said. maria: he said this is not a movie, this takes time and patience. this is not hollywood and it is real people and it is lives. >> yes. and very life is important for us. we are not russia, we are not a soviet style army. so, we are very careful. we are very smart. we use nato standards in this war trade we are fighting according to nato standards. the counteroffensive is multiple operations. it is offensive, defensive operations. it will take time. maria: it's too early to make an

assessment now. >> we have first results of our counteroffensive. more than 113, does are liberated. seven kilometers -- maria: you are on bloomberg tv. you have the investment community who are watching this and a lot of taxpayers. some of them are sympathetic to ukraine. president zelenskyy said my government will crush the oligarchs. it will be a before and after moment in ukraine. is that the moment or the message you are sending two people? that things are changing in ukraine? >> ukraine is changing, absolutely. the president, our government, we have zero tolerance to the corruption. maria: you will ditch people who are corrupted? >> we are absolutely

transparent, accountable and open. this anti-corruption infrastructure is working now and we are demonstrate into the world that we are finding with a corrupted country and we will have results. we will continue our firms -- reforms and digitalization. we go to the digital space. and this is very -- a very effective wa corruption. digitalization brings new possibilities. maria: your meeting with mr. blinken, i know you had a 1:1 meeting. is that something that worries you? or did he tell you the united states is in for the long haul, this is about values for the u.s.? >> the u.s. is a very important partner. the biggest supporter for ukraine.

we discussed all of the important issues. we discussed financial support and mr. blinken announced 1.3 billion dollars of financial support for ukraine, for our reforms and our energy sector. it is very important for us. we discussed all other issues very important in sense of development of my country, despite the war. demonic activity, sanctions against russia. development of energy sector in ukraine and many other important issues. maria: the meeting went well. and i wondered with the average american but might be watching this and is thinking but ukraine is a far way off, i don't know anything about this country, what is going on there with my money, what is your message? what would you say? stay with us, because what? >> first of all, we are grateful to the american people, the united kingdom, all of our partners who support us

military, financial and by sanctions. it is important because we are fighting not only for our land but for our families and our people. we are fighting for democratic and civilized values. it is crucial. because of this, all democratic world supports ukraine. why? because this is about global security system. it is very important not to let any aggressor have free thinking about future possible aggression. maria: if russia were to win this, would it be the moral collapse of the west, if we let that happen? you don't even contemplate russia winning? >> it's impossible. i'm sure that the civilized world will not let russia win this war. it's about existential things. it's about world security system. and from my side, i should say

that ukraine has no intention of losing this war. it is about our existence. it is war with war crimes, war against humanity. if russia will win this war, it will mean that ukraine and the ukrainian nation does not exist anymore. from our side, we are liberating our country. maria: it is existential, the word i heard the most last time i was in ukraine, it is existential for the country. another existential question, the nato summit, you said in this conference, for a strong economy, you need a strong country. that means security. what will happen in that meeting? president zelenskyy said my people have shed time. what will happen in that meeting? >> we are fighting according to nato's standards. maria: why is it so scary for

some? >> in fact, our army is nato army right now. we are fighting for the same principles in which nato was created. so, i'm sure that membership of ukraine and nato will be ready. we are waiting for this summer, it will be a strong summit. we will hear very strong messages about ukrainian membership. and we hope that partners will do this. we have an alliance which is supporting ukraine. we discussed with some skeptical alliance. but we are sure inside of our hearts. maria: some people say just sit down and talk to vladimir putin. when you hear that name, does that trigger anything or do you

say this is in the past and i am not interested in vladimir putin? >> we don't believe that he may do something to bring peace in ukraine. so, only one step, take all russian army from ukrainian territory. it has this possibility, since 2014. maria: you say it is now impossible, it is too late. prime minister, always good to see you and thank you for being with us in london. thanks. >> thank you so much. tom: maria tadeo, thank you so much for a piercing conversation . futures at -85. this has been an extraordinary day. i think we blew up the show three times to bring you experts on these issues.

stay with us. this is bloomberg. good morning. ♪ lisa: i'm lisa abramowicz. day four of softness, digesting hawkish prognostications around the world. the countdown to the open starts right now. >> everything you need to get set for the start of u.s. trading, this is "bloomberg the open" with jonathan ferro. lisa: coming up, slumps as central banks worldwide take a hawkish stance. chair powell doubling down on rate hikes