world, and looks at the most effective ways, to get resources to them, to get services to them. the idea that we have saved five million people's lives, it's overwhelming. it's everything. >> i would say it is certainly possible that we would raise funds again at the september meeting. >> i think it will be for longer. >> the good news recently on inflation, further owns the fed to axley get to the 2% target. >> for seems to have been very carefully put together so it's not to send a dovish message. >> why they paused and why they hiked and what they will do next is the message. >> this is bloomberg surveillance with tom keene jonathan ferro and lisa abramowicz. jonathan: live from new york city this morning, good morning, good morning for our audience

worldwide. this is bloomberg surveillance on tv and radio. your equity market on the s&p 500 is posited by 0.6%. meta-in the premarket absolutely flying once again following earnings yesterday afternoon. with earnings from apple and amazon. we still need to work through the central bank trilogy with the federal bank behind us and the ecb behind us and the ecb behind us in the boj around the country -- around the corner. maximum optionality seems to be the message. lisa: there was no forward guidance which is what people took away from this. basically, they don't know and they don't want to give you a sense of what they will do. people are reading this the way they want to read it and that's what the market is doing this morning. jonathan: here is a quotation -- the fact that they see policies

restrictive is dovish. i wonder if they are in the same camp, the belief that growth is picking up again and maybe inflation will as well. lisa: it raises the question whether the data in the u.s. takes on increasing importance. if this is a data-dependent fed, which data are they looking at and how important is each data point when they say it's just one. it's a counterintuitive circular reasoning which is leaving people questioning what they should pay attention to. jonathan: another read on jobless claims this morning. on meta the stock is up bite something close to 150% year to date. you felt like the bar was kind of fight yesterday but the stock is almost up bite 9% in early trading -- almost up bite 9% in early trading. is it doom scrolling? lisa: that would be the tenor of

the videos that tell us this. do you use it? jonathan: i use shorts on youtube. you sit there for ages and it delivers more and more focal content. lisa: this is really an algorithm. jonathan: it goes back to the 90's and italian futbol and it just keeps going. lisa: i am wondering whether we end up seeing consolidation and how much this will come from the company formally known as twitter and how they will gain traction if they give a sense of threads going forward. advertising is really kicking up and that is the take away from companies that have consumer spending and profitability and that's a bigger economic signal. jonathan: there was analysis about facebook and much of the gain so far has been off the

back of the cost-cutting exercise that started on the back half of last year. really? they said we think we will get a react seller and -- a re-acceleration. lisa: if they are coming off a cost base that is that much lower, gives them perhaps more leverage. is the cost-cutting done? we heard this from google as well. they'll still -- they are still looking to pair back expenses. are we done with the broad-based white color cost-cutting job cuts in the tech world we saw earlier this year and last year? jonathan: meta is up more than 8%. we will hear from apple next week and amazon as well. the broader equity market, futures with a little bit of a lift, in the green on the s&p 500. yields are basically unchanged on the 10 year. in the fx market, this euro has been all over the place.

it went through a winning streak and that was the longest winning streak for the euro of the year so far. it was replaced by the longest losing streak of the year so far in the last week and out the euro is back to about $1.11 going into the ecb. lisa: that ecb decision will come later this morning. curious to see how they dovetail the fact that core inflation has been sticky and has remained at the highest levels ever in the euro zone history at the same time you are seeing growth slow and how they parse that as they raise rates up to three. 30 a.m., second-quarter gdp and durable goods orders any expectation is we will probably see strong growth. how do you dovetail that into confidence that inflation will come down? we saw the economics of price index increasingly up in the u.s.. they are good surprises meaning the economy is doing better than people expect. how does this dovetail into the

disinflation narrative? it's the busiest earnings week of the season and we focused on intel which used to be the biggest chipmaker and will report earnings after the bell given the fact that everyone is talking about artificial intelligence, how did they catch up? how did they catch up with nvidia? how do they get on that train at a time when they put their stock into personal computing which hasn't done that well? jonathan: those earnings are coming up a little bit later. let's turn to the broader market, the s&p 500 is nicely positive by 0.5%. the senior global macro strategist at state street joins us. we were talking about what new data has to say. the fact that you got a chairman of the federal reserve calling policy restrictive at a time to growth expectations are climbing sounds dovish. does it sound dovish to you? >> i think that what i got out

of the meeting was certainly the fed wants to stop there they are not comfortable doing it at this point. i guess the take away that everyone has that every data point has indications around it. we are encouraged by the trends. jonathan: what evidence is there that policies restrictive? >> certainly, on the financial side of things. they are looking at credit. we got a sense that there is continued tightening in credit because the fomc got the senior officer survey before we did. that's in the background the u.s. is very much credit driven on the environment and is taking longer. not that liquidity in savings is making this contraction longer but that doesn't mean it's not

affecting borrowing and the yield curve could go on for quite a bit longer. it's another credit challenged we have. lisa: in less than 2.5 hours, we will get the gdp reading which is expected to be fairly strong. the big takeaway people aren't emphasizing is the fed no longer sees recession as a base case. have you shifted your views? you have been cautious. do you feel the data is showing a different story? >> the data to me is confirming that just the pace of this cycle is very different than everything we have seen before. things are taking longer. the parts of the economy that concern us remains a concern out there. it's just taking a lot longer before we seek that slow down. other than the consumer, we are seeing some of the strains that started evolving earlier this year. lisa: you are looking at a situation where markets are

rallying on the idea that they see better than expected earnings from tech shines in resilient consumer and the fed that maybe isn't exactly dovish but they are not particularly hawkish either. they seem to be on an uncharted path so do you get constructive? >> you do, the momentum around this cannot been advised -- cannot be denied. the real money indicators show the imminence of the recession which we talked about a lot and thing the longest and most anticipated ramp to a recession continues to confound people. there is liquidity support in a market where if the recession concerns keep pushing out further, you could continue to see that money gravitating in that direction. jonathan: let's talk about europe. the ecb will talk later this morning so how difficult is the job of christine lagarde at the moment?

>> i think it's harder than jay powell job. i believe christine lagarde would want to do what jay powell did. what's turning in the background is more concerning than what we see in the u.s. we are debating whether or not recession is imminent here. we've seen economies that have a technical recession in the u.k., the lending environment is type from a borrowing and investing perspective. lisa: which is a reason for the whipsaw action on the euro given that you might see higher rates but it's slower growth. where do you weigh in on the bouncing around we've seen of the euro-dollar? >> just looking at what's left in terms of central bank expectations, i don't think you will get a lot of change on the fed. you could argue whether or not 40% pricing for one more hike is

appropriate. we are probably going to get more movement around the boe and the ecb and if anything, the pattern would be there is less expectation for hikes. i think you wind up with a stronger dollar type of environment because of the differentials and expectations will continue to narrow around the u.s. information. lisa: do you think christine lagarde can repeat descriptive jay powell in different ways? >> my goodness, it certainly was the art of saying nothing for an hour yesterday. it will be hard for her because the headwinds are much clearer and when you look at some of the parts of the inflation discussion, they are absolutely encouraging on the consumer side of things. the consumer is struggling but

the other story is more important to the euro zone. we have seen how difficult it is when it surges. we've got higher inflation than a quarter ago. jonathan: there is a big demand for loans in europe and the ecb bank lending survey showed a decline in appetite for those loans. from your perspective, is that by design for the ecb? has it gone too far too quickly? >> i think it's gone too far too quickly. there lending environment is much less robust as a base case than the u.s.. they certainly try to control it more than what we see here whether there is that natural growth. when you see it fall off aggressively as it has, they are making themselves known quite quickly. jonathan: marvin, thank you. the european central bank

decision is about two hours away. yesterday it was jay powell saying basically nothing. it happens sometimes and i think that was by design. lisa: many people said good job. there were no mistakes and that seems to be the theme. how do we read the data? jonathan: i would have wrapped up that news conference earlier, maybe 30 minutes earlier to get out of there. lisa: as a reporter, do you stop asking? you know he will not answer that. jonathan: reporters keep talking about september. the reporters should have left. lisa: they should have gone on vacation. jonathan: we will talk about the ecb this morning but the bank of england has these advisors to the chancellor, this newly formed board in the last 18 months or so.

they are basically coming out according to our reporting and saying they are worried about the bank of england going too far. what's interesting is that some of the advisors to the chancellor are former boe officials. it's interesting they are saying hit pause at a time that boe is set to do anything but next week. lisa: especially because they were in charge of getting it to where it was now. i imagine some people on the board think it's pretty rich. jonathan: it's intriguing, do you want the advisors to the chancellor weighing in in the way they might be? lisa: a robust discussion. jonathan: that's where they are at now. equity futures on the s&p are positive, fnew york, good morning. ♪ cheesecake cookies? the chookie! manage all your sales from one place with a partner that always puts you first. (we did it) start today at godaddy.com

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>> the staff now has a noticeable slowdown in growth starting later this year but given the resilience of the economy recently, they are no longer forecasting recession. we would be comfortable cutting rates when we are comfortable cutting rates and we don't think that will be this year. it's balancing the risk of doing too much and too little. it's certainly possible we would raise funds again at the september meeting. i would also say it's possible we would choose to hold steady at that meeting. jonathan: the art of saying something but saying absolutely

nothing at the same time, chairman powell, the federal reserve chair in the news conference following a 25 basis point rate hike yesterday. the reviews are in for our federal reserve special. were you watching videos of futbol highlights yesterday? that's from a bloomberg subscriber. somewhat accurate. lisa: i guess everyone had their own point of view. it was the unanimous read from the meeting which is that this was the least informative fed meeting we have heard since at least 2011 if not earlier. we looked at a meeting, giving some sort of forward guidance and that didn't happen. jonathan: a complement to the chairman, he wanted to make that news conference boring and he was successful. lisa: that's brilliant. that is a complement.

jonathan: the federal reserve decision behind us, the ecb in front of us. here are the scores on the s&p 500, futures positive by 0.5%. the yields are just about unchanged as you wake up this morning. in the fx market, the euro is stronger against the weaker dollar, $1.11. we have to turn to washington, d.c. for a press briefing from senator mitch mcconnell. it was worrying stuff yesterday for the aging senator who appeared to abruptly freeze while speaking and stood in place for the best part of 20 seconds in a news conference on capitol hill. lisa: he tried to joke about it afterward saying he was sandbagged and joking about the lapses. there has been a very serious concern in washington, d.c. about his role especially since he was removed and off duty since march. he had a concussion at one point and has fallen a couple of

times. it raises the bigger issue -- if we are talking about the age of our elected officials to ask about whether they are fit to serve, what does that mean in terms of the political cycle and the average age of the elected officials of this nation? jonathan: it was a humorous response, the president tripped over a sandbagging and he said he was sandbagged but this is serious stuff. the average age of the senate is in the mid 60's. there are some people that have approached 90. dianne feinstein is 90 now. there is concerns over them and the shapes the conversation more around the presidential campaign going into next year. lisa: senator mitch mcconnell is the longest-serving leader. jonathan: four decades. lisa: he's been consolidating his power. now we have a president who was around the same age, one year younger than mitch mcconnell. it's a really delicate issue because that shouldn't necessarily disqualify someone and yet it's been in the news.

when two people start talking about it more seriously, more consistently from the democratic party side to decide who will step in? jonathan: the press has a role to play in that and you know how they work in the united states. it becomes partisan really quickly. i don't think it has to be partisan politics. it's playing out on both sides of the aisle and we saw it happen to a republican yesterday and we need to be open and honest of what we see on the screen. when you see an elected official struggling to get the words out, that's a conversation we need to have. i think we need to be somewhat careful about putting everyone in the same bucket that once you get into the 80's, you are done. we know some really sharp people in their 80's. you talked about your father still playing tennis and central park. chuck grassley is pretty sharp there much of his 80's. not everyone is at the same

moment when they get to 80 that we have to say they shouldn't be in office anymore. some more than others, it's obvious they are struggling and we need to have an open and transparent conversation about it. lisa: i couldn't agree more and it's something that people have to be able to vocalize without being called out as partisan. jonathan: the managing director of the united states eurasia group. i would love to start there with worrying images on capitol hill yesterday, is not the first time we've seen that area what were you thinking yesterday afternoon? >> my wishes are for the senators best health and grateful for the opportunity gave me when i worked for him and he's been a terrific leader for the republicans in the senate. it's hard to watch. it really was a challenging moment for everybody who has any affection for mitch mcconnell and anyone thinks about the future of this country and its leadership. you are right, we have a lot of folks, americans are living longer than ever and their

mental acuity is better. a lot of them are staying in office as a result and as you said, many of them are doing great. you mentioned chuck grassley and richard grassley was an older senator who retired last year and you also have folks like dianne feinstein who is clearly struggling. then there is instances with people like ruth bader ginsburg who stayed in office probably too long on the supreme court and it cost the democrats a supreme court seat that they will pay the price for for a long time. there is no way to force folks like this out of office. we don't have term limits and absolutely will be an issue in the presidential election particularly if we have two of the oldest people ever to run for the office competing on the democrat and republican side next year in donald trump and joe biden. lisa: it isn't just a partisan issue, it's on both sides. this is not a matter of age, it's also condition and having

an honest discussion around it. how much of the average age has alienated younger voters and created many more of them to vote is independent and not necessarily follow along on the same kind of traditional party lines? >> we haven't really seen that phenomenon yet. the important thing to keep in mind is these are all elected officials or winning. voters are telling us they are quite comfortable with the average age of american elected officials going up. heads of state globally, the average age has gone down. in the u.s., it's gone up recently with few outliers like barack obama were relatively younger. we had record turnout in 2020 with two of the oldest candidates in american history. the republicans will turn out in 2024 with both candidates on both sides. the voters are not telling us

yet that age is a problem relative to what they seem to value with name recognition and experience. jonathan: the campaign really picks up this month as the first debates for the republicans going into the primary is hosted by fox. there is still a question about president trump -- former president trump's participation. what about his standing and will he turn up four weeks from now? >> i think it will be hard for trump to turn down the opportunity to do what he does best which is push people around on the main stage. the debates in 2016 will distinguish themselves. he doesn't need to do that this time around. he's got a commanding lead in the polls and is got universal name recognition and even if he's not there, the subject of the republican debate is probably going to be him and his policies and how the other republicans try to differentiate themselves from him. i'm not sure it matters for his campaign whether he shows up. it is the best opportunity for the other republicans to try to

differentiate themselves from him and taken down a notch, something none of them have been able to do. former governor chris christie from new jersey has set that as an expose ago. it will be massively entertaining and i hope he shows up because i will watch it is there and it will probably be less interesting without him but i don't think he needs it to stay on top of the republican field jonathan: jonathan: until iowa. i think most people feel the same. it's great tv, i agree with you. let's catch up again soon and thank you for your thoughts. we wish mitch mcconnell the best. from new york city this morning, equities just about positive on the s&p 500. janet henry is coming up from hsp. ♪

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jonathan: approaching the ecb decision an hour or so away after the federal reserve, your market looks like this -- key s&p 500 snapped a three day winning streak yesterday, going nowhere. positive by 0.6% this morning and a big lift for the nasdaq. meta in the premarket higher by almost 9%. a monster rally so far in 2023. this time next week on the nasdaq 100, 17% of the index across apple and amazon after

the close next thursday. in the bond market, your two-year yield down by a couple of basis points. you can create your own narrative following jay powell yesterday but the two-year has not done much at all. lisa: people are saying he cap the status quo by saying absolutely nothing. it seems there is a view on the margins that this was hawkish because the fed remove their projection for the session but otherwise, there -- they are data-dependent depending what they are looking at and a lot of people say that's the last rate hike. jonathan: is it good news for risk assets? lisa: if that's what they were following? is that the message you got? jonathan: i didn't get any message. the euro is squeezing out some strength against the dollar, reclaiming $1.11.

it is the ecb rate decision due at 8:15 a.m. eastern. the announcement will come after the fed raised interest rates by 25 basis points and left open the possibility of more hikes still to come. the boj is tomorrow and this time next week it's the boe. this is a story we've talked about at bloomberg with advisors to the chancellor of the exchequer jeremy hunt worried that the bank of england was raising interest rates too much, potentially pushing the economy into recession. i went through the body of the story and there is this worry that the central bank will feel public pressure to continue tightening because they were late to begin with back in december 2021 which would force them maybe to go to for. lisa: it highlights how different people become when they shift from a policy role to a political role. this is something we have seen

in the u.s. as well where you are more concerned about recession in the political role and when you are on the committee, it's inflation and that is the bias in either direction. at this point, their concern could be centered around the world but is the emphasis around the political versus the monetary policy makers. jonathan: the economic advisory council provides independent expert advice on economic policy to help grow the economy and their views do not reflect the views of the government. monetary policy is the responsibility of the independent monetary policy committee of the bank of england. sometimes it might be beneficial if you have this board of economic advisers that do that work for you through the back door. lisa: you could say i'm wrong and it's not politically motivated but other people might suggest your view gets slightly shifted when you are advising people. jonathan: whether it is or isn't

in the optics start to lean in that direction, i believe that's problematic. lisa: that will be a big issue in the u.s. as well, the independence of a central bank at a time when there isn't a lot of data or clarity in terms of where inflation is going next. jonathan: the bank of england this time next week and the ecb around the corner. meta absolutely flying in the premarket and a forecast that beat estimates in the stock is all -- is up by almost 9%, bettingr on this thing calledeels which is the short form video. i'm looking forward to this conversation later on with bloomberg technology, an interview with susan lee, the meta-cfo. the stock is performed tremendously well. lisa: they've done a great job of copying social media platforms. that's what we have seen consistently whether it's tiktok

or the company formally known as twitter. i can't call it by its name. jonathan: no one knows what you're talking about. lisa: the artist formerly known as prince, the same thing. i am looking forward to understanding whether people really lean into this even after the rally we've seen it in the performance we have seen so consistently with big tech. jonathan: phenomenal performance bymeta. performance on capitol hill, senate majority leader mitch mcconnell froze in place for like 20 seconds at a news conference. there are real concerns about his health. hours later, the senator spoke to reporters and tried to reassure them with this quotation -- the president called to check up on me and i told him i got sandbagged which i assume is a bit of humor alluding to what happened to the present when he tripped a month or so ago. lisa: we all feel for mitch

mcconnell. that's an embarrassing moment and one that raises questions about his health. you heard that in comments from the other side of the isle whether it was chuck schumer or others. they want to make sure he's ok but underneath those comments is a question about honestly assessing health at advanced ages at a time when the u.s. representative body is getting older. jonathan: i thought tom might be here and ask the obvious question that is it like this in the u.k. and i was going to have numbers for him in parliament it's like 50 and the senate in the u.s. is the 60's and going in the wrong direction, getting higher. richie sumac is in his 40's in the present is in his early 80's. lisa: at what point does the u.s. shift and do start pushing back? they are consolidating around the known name which is taking priority over younger blood.

does that shift at some point? is there a pivotal moment akin to some of the things we've been seeing? jonathan: concerning step from both sides the aisle, an aging population and an aging senate. let's go over to london and catch up with the central bank story. janet henry at hsbc joins us now. we will not talk about the senate and capitol hill but we will talk about the european central bank. what are you and the team looking for later this morning? >> it's what we hear from the chief, no one will be surprised seemingly by the rate decision today. it's all about the policy guidance if there is any for september. the first point will be what we hear in the statement. do they change the statement rather than bringing rates restrictive? i would be surprised if there is any change given the statements because you have a half an hour

gap before the press conference. they really don't want to trigger any significant market volatility in the intervening time. i fear it won't be anymore exciting than the fed meeting was yesterday. at least yesterday, they change the description of first half growth from modest to moderate. for the ecb, the last couple of months have been some of the surveys on the manufacturing side. i think it will be very much stating the fact that it's all about inflation still and inflation while moving a little in the right direction is still stubbornly high. i don't think we want to change expectations here and we want to still think there is less likelihood of a further rate hike in september. jonathan: i don't think the data is a snooze at all and you don't either. you've got germany in recession, we talked about the survey data which is terrible and you've got

a situation where inflation is still sticky. what is the relationship at the moment between growth and inflation in the euro zone? >> the relationship is never perfect on a monthly basis. this is also the issue for central banks when they say we are data dependent and yet, most analysis would say a change in interest rates impacts the economy over 12 months or more yet we are going to set policy and what happens to data over the course of the next couple of months. inflation is too high and the labor market in the euro zone, they know once against built into wage pressures to the extent to which wages are linked to past inflation, it's much more difficult to squeeze out. a lot of what they are trying to do with policy is to influence expectations and not believe anyone in any doubt about their intention to curb inflation. i don't -- i suppose the

softening in the data has been more worrying than anticipated and now it's not just germany. we've seen some of the service sector and some softening in the service sector data from some of the other big for economies that have been somewhat more resilient. it's not really enough to stay the course of this point. it will depend on what they see in the next couple of months and for me, inflation will still be about 5%. the reason to pause comes after september when we think they will raise rates. lisa: one of the reporters yesterday asked chair powell how much of the inflation we see in the u.s. really can be controlled by interest rates like it has in the past. i would ask that of the ecb as well. if they raise rates and continue to hold them at a high level, how much control do they have over bringing down inflation which has remained stubbornly sticky even with the declining loan growth? >> what you have in both

economies is part of the economy is feeling the strain from higher interest rates. we know that. we know a lot of companies are feeling that strain and will continue to do so as those rate rises he threw but there are other parts of the economy that hurt feeling less strain. you see that in the u.s. because inflation at 3% means real wages are positive. you are seeing consumer confidence increased to some degree and was seen it better than expected. in many ways, the way in which they are using policy is to signal their determination to bring inflation back towards target. for a central bank where the goal is price stability, they are explicit in that inflationary goal, that's what they need to do irrespective of what it means for the economy and for unemployment.

both central banks don't always say explicitly but they know they will not return inflation firmly on a path back towards target without some significant rise in unemployment. the fed is seeing more progress on the wage growth numbers than the eurozone has. the wage numbers are still significantly higher in the u.s. that's why they are likely to go further than the fed at the ecb. lisa: how vulnerable is the euro region to another bout of concern on -- around the price of oil and natural gas heading into winter and during this hot time during the summer? >> yes, they escaped the impact of the full energy crisis because of a calm winter. gas prices i suppose are no longer falling.

they are in terms of storage levels still at a point where they are quite high. that is important. it's not just whether the spot price is moving up. eurozone consumers seem to be more sensitive to the fact that other areas of inflation are still higher as well. they haven't seen goods price deflation the u.s. has seen. they've seen an acceleration in service sector inflation and we know that food prices, while whole so have fallen back, actually we haven't seen that for processed foods. that will be an area volatility. the broad story in the euro zone is the idea that core is still above five and i cannot relax until it falls below that level which we don't expect to happen i the september meeting. all of that matters. it's not just the gas price and the energy story.

other areas of commodity prices matter as well. jonathan: janet henry of hsbc, thank you so much. 19 minutes away from the ecb decision. inflation is at 5.5% and i didn't think they could hike 400 basis points on the ecb. i thought they could do that during the pandemic but here we go. lisa: nobody thought they be able to get off negative rate policies without causing a massive debt crisis yet here we are. jonathan: it's amazing how fast this bond market has transitioned to the reality of 4% interest rates at the ecb. from new york city this morning, this is bloomberg. ♪

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across the board. i look at this is a 1995 moment, the biggest transformation we have seen in tech in 30 years. i think that's why this is what's going to lead macro. jonathan: last year was a big struggle but 2023, meta up by close to 150% year to date before these earnings and after, we will go through that level. they are up by close to 9% in the premarket after beating estimates and providing guidance that there will be more to come. mandeep singh joins us now. they got it done and the question people are asking, is it because control or is it a reacceleration in revenue growth? one analyst said we are expecting the latter? >> i think so, it's both. because control is the primary

driver of why the stock has run up so much because the margins are trending in the right direction. with inflation pulling back, it's good for ad spending. that's what we saw from alphabet and met it was no exception. the one thing about these companies are doing right is the pivot to ai and how they are using it to improve their ranking and recommendations in terms of the content that is being viewed. that's what meta called out yesterday. it's driving engagement in their blue app which everyone thought was there declining business. that is what ai can do in terms of driving that content engagement. that is what matters in and add business. jonathan: facebook is very good at copping other people like tiktok and reels. how sticky has that product become? >> one data point they shared is

reels is now a $10 billion business versus 3 billion last fall and that goes to show that 3x in a matter of three quarters, i think that goes to show the point that yes, they are very good at incorporating new features but i think it will cannibalize their existing ad inventory which is why the only negative i could find is the ad pricing went down 16%. we saw that from snap, down 12% and we got is a social media problem but in this case they are cannibalizing their own ad inventory because reels doesn't advertise as well as their other formats. lisa: if you own the world and you earn less off of everything, you earning a lot of money. how much do we see them consolidating market share for the add business versus simply organically growing? is there gain someone else's loss? >> look at messaging, no one was

able to monetize it until now. messaging is a $10 billion industry for them and they talked about incorporating ai agents. the customer service use case is huge. we are still very early on but the fact that they are talking about running digital storefronts, do their customer service through what's app ai agents, the market gets excited with these kind of things. lisa: i get really frustrated when you go to a website and you look for a phone number and there is no phone number, just chatbots and you discuss with the chatbot and they don't help you at all. then you can't find a phone number. >> buchanan talk to the channel on what's app -- you can talk to the channel on what's app. jonathan: i've got no time for that. i want to speak to people. lisa: i totally agree. with respect to meta going forward, how much of their earnings had to do with crushing it on the advertising revenue

and how much had to do with job cuts? >> job cuts was a big factor, 25% layoff so they have already reduced their expenses $7 billion and that shows up in the free cash flow and they cut nothing on the reality left side. they talked about raising their expenses on the reality lab front so they will stoop -- will still lose $15 billion and that's why the stock is not higher. i think investors would have cheered this even more. jonathan: you'd think -- you think mark zuckerberg's dreams are the metaverse still? >> he still thinks this will drive the next layoff growth but he has course corrected and pivoted to ai and rightly so in that's good for the stock. jonathan: what does he have in mind? what does he think this will look like? >> he thinks once he has the installed base any's focused on building the hardware where he

can have the content and control that ecosystem. he called out apple for thwarting their innovation and changing the rules all of a sudden which hurt $10 billion of revenue last year for meta. i think he wants to control that ecosystem. with apple vision prolongs, i think it has validated the market. i still think they are spending way too much without really establishing a business case for metaverse. i don't think it will be the next computing platform he thinks. it's probably too far out and losing $15 billion every year, investors won't like it. at the same time, he is growing topline by 20% so he may get a pass for three quarters. lisa: is he investing enough on the other tech issues like artificial intelligence? >> they are open sourcing their

large language modern unlike chatgpt or the other ones. what they are saying is since they don't have a public cloud, they will partner with microsoft and make that available for consumption. it's a good way to go about driving adoption but i still think with large language models and how they will be monetize, public cloud vendors are in the best position which is like microsoft and alphabet got a bum from that. lisa: in about a weeks time, we will hear from apple and amazon. is the expectation they will deliver the better than expected results we have seen for most of the other tech giants? is this a telltale sign that the rally has been justified by fundamentals? >> in the case of amazon, you can see ad spending getting a lift's overall ad spending has improved. because of the lack of exposure for generative ai and the expectations are low, you will see a muted growth on that front. we saw that from tsmc.

smartphone demand is down so i can't see how apple beats on the top line.at the same time, they can still control the ecosystem which mark zuckerberg doesn't like i think that's why they are where they are. jonathan: apple earnings are a week away, maybe this year is stable but average selling prices will go up. that's the hope. lisa: the hope for who? jonathan: i'm not upgrading my phone which is a few years old. unless they slow it down aggressively but i want nothing to do with it. what am i upgrading to? >> you want a large language model on your phone. jonathan: i'm not interested at all now. i am a late adopter. when it comes to technology. lisa: a lot of people were expecting that people wouldn't upgrade their phones as rapidly as the price went up. they have been proven wrong

every single time. how much was that by now pay later and how much was that fueled by some of the at&t and verizon's of the world and plans they had? we will have to see. jonathan: every luxury item on the planet has been reduced to a monthly payment and not the sticker price. pretty much everything over the last several years including luxury we talked about entry-level luxury. we seen a drop off, how negative it is to the buy now pay later phenomenon that exploded over the previous few years. how many people are able to go to gucci and say i want to get this thing that cost $5,000 and it will be $40 a month? lisa: many people associate apple iphones with luxury goods. our iphones increasingly stable? everyone is glued to them.

it's a computer in your pocket that people use for everything in their life. these are some of the vagaries around the data we've been getting from companies. jonathan: mandeep, thank you. this moments ago -- talking about earnings from the likes of meta and google, next week, apple and amazon, the runway through the rest of the year into september. let's go to september 20 and the next fed decision. august 4 is payrolls and august 10 is payrolls, september 13 is cpi and somewhere in between, i believe august 24, jackson hole. that's your one -- that's your runway into september. lisa: will there be big changes we hear from jay powell other than we are not sure? jonathan: we will speak to a former fed official to find out how boring he thought it was yesterday.

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>> it is possible we will raise funds again at the september meeting. >> the fed is going to have to be tighter for longer. >> the good news on inflation further emboldens the fed to get to the 2% target. >> it seems to be carefully put together so it is not to of this message. >> i'm not sure why they pause and what they hike -- why they

hiked and what they're going to do next. >> this is "bloomberg surveillance." jonathan: well rested after a nap after yesterday. good morning. chairman powell and federal reserve decision behind us. in front of us, ecb decision around the corner. tomorrow morning at is onto the boj. equity futures positive on the s&p 500. meta in the premarket. facebook earnings after the close tremendous adding to the gains we have seen so far. the stock is up to more than 150% year to date. what a month of gains. lisa: at what point do people hold their nose and buy even though they have missed the rally considering they are delivering? they are delivering above expectations at a time with the footprint is going and

consolidating market share. jonathan: more earnings this time next week from amazon and apple. meta up close to 9%. ecb decision is different to what the federal reserve is facing. lisa: we saw yesterday a lean into the soft landing narrative. we saw a fed move back from recession is best case and now we are going to avoid recession. earnings come out stronger than expected. the ecb does not have that luxury. they see growth is slowing and inflation remain a sticky and they something at a time they believe -- where do they believe in long convertible lags? what happens to the hawkish people have been saying dovish things about maybe they do not have to raise again after going to 3.75%. jonathan: the bank lending survey is concerning. we had a guest who said maybe it is happening too quickly.

hsbc out this morning characterizing the arms out of europe as the most disappointing of the first quarter. you member that. stateside you do not see much of that. disappointing of the firstmcdonald's out also. -- mcdonald's out a couple of months ago with sales up. lisa: in addition to the names like meta and google and many of the others. mcdonnell shares of as people continue to buy. it is on the lower end and higher and even as we do see signs of softening around the luxury players. i'm looking at the earnings. expected to show earnings recession. i've heard people trying to poke holes in the earnings season but the surprises have been to the upside repeatedly, particularly among the most resilient names. jonathan: mcdonald's a beat on the top and bottom line. the stock is up 2.4%. equity futures on the s&p 500

positive by 0.5%. lisa: ecb rate decision at 8:15 a.m.. the concern being core inflation remains at 5.5%. stickysticky, high regardless hr the ecb has gone already. 8:30 a.m. we get economic data. second-quarter gdp, durable goods orders, jobless claims. the data has surprise to the upside. is it a good think? may be at the fed leads into a soft landing and the idea they will not have to hike again. before the bell, cbre group. intel and forward after the bell. until she to watch as we -- intel is the key to watch. it is to be the biggest chipmaker and it is no longer. how much do they talk about resurrecting that role? jonathan: richard clarida,

global economic advisor at pimco and former federal reserve vice chair and a good friend of the program. wonderful to catch up with you. i was thinking back to our conversation when pimco put out there's outlook and you talked about with the fed tolerating to point something, did you hear that from chairman powell because i did? richard: well, yeah. they have had a lot to do. ultimately, they want to get inflation to two but they understand a year from now it is running in be to use it would've been a bigger accomplishment and they can adjust rates down. they did not want to tighten too much. two point something is kicking and alive. jonathan: it is worth going over it with their telling us, they're willing to cut interest rates with inflation above 2%. how controversial might that be? richard: i think they'll do a

good job of explaining. they will say as inflation falls, the fed does not cut rates, it is tightening policy because policy is the road rate. nominal rate is unchanged and inflation is falling, it would not think they'll need to add addition and tightening if they think inflation momentum is going the right way. that is the way they will explain it. lisa: the fed was talking about data dependency and how they're not giving forward guidance at this point. did you get a sense of which data could ship their views before september, even though we do get data, we have heard every time them come out and say one data point a trend does not make. richard: sure. they will have two more inflation prints and two more labor market prints but i thought for a long time that number important development they're going to be following is what is going on in the labor market. they like the fact that the labor market is going to wages are going up faster than

consistent with the 2% target so i do think they will look at labor market data wage employment cost index as well as the price inflation. lisa: what will they have to see it? how high is the threshold for them to hike again in september or november? richard: i think it is maybe a closer call than some of the market pricing right now. they did write down two more hikes in june, we got one of them yesterday. overwhelming majority of the committee thought june the appropriate policy would call for one more hike. one more hike is in play at some point in the fall create which said that explicitly and said when he was in europe a couple weeks ago. i do not think it is a high hurdle. i do not think they have to do it in september. whatever hiking they think they need to do, i think they want to get in this year. jonathan: why this year? why is that important?

richard: a couple of reasons. i think they think they are close to the end anyway and inflation is moving however slowly in their direction. i think they would like to see all the spotlight in an election year. we have had the fed hike in election years. they would do that if they think inflation requires a much higher rate path. but this cycle is aiming to finish up sometime in the fall. jonathan: this fed is always criticize. committee faces criticism for something. criticism we have heard for the news conference and after the news conference was how data dependent that is. they took a break from hiking, then they come back and hike again and in intermittent period we had inflation the improved. yet they hike anyway. how data dependent are they? richard: good point. data dependence elastic phrase which has opened various

interpretations. going forward especially after this meeting yesterday, they are data dependent. most of this rate hike cycle they have not been that data dependent in march of last year they knew two things, the funds rate was at zero and inflation was at 5% going to 6% and it is all the data they needed to set out the aggressive rate hike cycle. if you get close to the terminal rate, the margin is more data dependent but i agree and i said after the meeting it was an awkward pause in june. lisa: it is an awkward moment also right now given the fed is removing recession as the base case and are looking at a soft landing and get there is a question among analysts and real split among investors about whether inflation could re-accelerate as a result of the strength, resilience, wages. where do you fall on this? where do you think the fed falls on this, given they seem to be

taking a bit more of a dovish stance? richard: yes, quite frankly i was surprised in the press conference. i was not surprised to hear iteris say -- the chair say he thinks there is a path to a soft landing. that is ok. sure there is a path but i was surprised he invoked change in forecast. i do not think that was in the june minutes so he is entitled to do that but, yes, not my base case but there is a scenario where we get good news on inflation this fall because of ph -- because of falling rents. but at the fed finds itself in march 2 024 with employment rate -- unemployment rate of 4% and inflation rate of 4% there in a tough spot so i do think it is a risk. it is something if i were still there i would be assessing. lisa: what do you think is the bigger risk, the idea of

inflation re-accelerating and still being a problem, or the idea of recession and avoiding something more entrenched, which could happen if the fed moves slower? richard: personally, i do think, i miscue the private sector, i do think the bigger risk is for the fed to declare mission accomplish too early and find themselves next year having to restart the rate hikes. if i were there it was cute me to get in additional -- it would skew me to get in an additional hike. the other thing the fed on production which i agree with has unemployment rate rising by about a point by the end of next year. that would be modest. it would be probably the most modest downturn we have had. historically as we know whenever unemployment rate rises by more than half a point it is ultimately declared a recession. i think a truly not recession outcome without any rise in unemployment rate at all is

going to be tough. jonathan: it would be phenomenal if that materializes. no dissent. we talked about this yesterday and have been talking about it for a while. why do people, even when we know they might disagree with a decision, make the decision not to send? why does that happen on the committee? richard: the fed has been an institution around for 100 plus years and there are certain cultural norms. certainly, it is been a long time since you've had a governor dissent on the policy rate decision. the vocal years he had -- dissenting but since greenspan -- but the reserve bank presidents can endure a distance. we had three distance and we had several sand it have dissented if they had a vote. we've had a lot of turnover among the regional banks district bank presidents and

announcement of jim bullard and charlie evans. they have accumulated 50 plus years of institutional experience that is no longer in that room. think that is relevant. jonathan: richard, thank you for weighing in. let's check in soon. if you're just joining the program, welcome to the program. s&p 500 positive by 0.55%. coming up, we catch up with james athey looking ahead to the ecb rate decision. most people anticipating a hike from the ecb even with germany recession and the data this week looking awful. lisa: you pointed out how the earnings have been disappointed in europe and how different it is from what we are seeing in the u.s. crocs just upgraded their forecasts and evidently they are cool again and i wonder how you

feel about that. jonathan: i have no idea what is school anymore based on the things i am into. and the kind of things people are wearing these days. lisa: i'm just looking at that and it will be a field day event. jonathan: tk is more fashion forward that i am. lisa: is he wearing crocs? tom: -- jonathan: yesterday he came in with leopardprint doc martens. with a beige suit. his shoes are about 10 sizes bigger than mine. lisa: but you would not wear leopardprint. jonathan: not if you paid me. ♪ the first time you connected your godaddy website

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>> chair powell made it clear in the press conference he does not see the need to go that much further. the very fact that it is meeting by meeting now tells you he thinks walmart rate hike -- one more rate hike as we go forward. jonathan: maybe they will hike, maybe they will not. bloomberg opinion calmness moments ago we caught up with former fed vice chair richard clarida who presented in a clear way with the fed is telling us which is they do not think inflation comes back to 2% until 2025. you can have this dynamic which is reasonable where cpi is in

mid to's and they are reducing interest rates and the hope, the dream of the equity market is you can achieve that without unemployment spiking aggressively high and gdp falling off a cliff. lisa: it banks on the idea disinflation will continue and we are not going to see acceleration of inflation which people disagree with especially because of the strength that is leading the fed among others the call for a soft landing. this is inconsistent? richard clarida said he would err on the side of raising rates more time in the fall to frontload the heights because of that concern. jonathan: the data this summer it probably not address this debate. the data this summer people anticipate concludes with disinflationary trends come to the surface even the people who think it will reaccelerate expect that this summer. the real has his back end of the year when we also get student loan -- the real is the back end

of the year but we get student loan repayments and if that his economic growth in a way. you have to have some idea what you're doing. you cannot be hybrid and a dependent between meeting to meeting -- hyper data dependent between meeting to meeting create if he really was meeting to meeting, why did they hike this time based on where the inflation data came in? lisa: i also think you have different theories depending on which fed official and they are glossing over that by saying we do not have a theory and we do not have dissent or there is the appearance of that we have discussed that it is a valid discussion to be having. jonathan: interesting discussion coming up later this morning catching up with james athey to the ecb decision. the broader market looks like

this on the s&p 500, positive by 0.55%. there's a look in equities. a muster rally in meta close to 9% up. just adding more way to the europe rally for 2023. lisa: it is ridiculous. do you buy at this point? do you say, i am in? jonathan: we speak to analysts the bullish ones think a lot of the price appreciation we have seen this year's cost reduction and cost discipline and we could see acceleration in revenue growth. we saw some of that yesterday and the stock is up this morning. lisa: you have those that state rates will come down and you will get the tell went on the backend. it highlights -- people were saying tech will be the biggest loser this year. jonathan: and it has been a big winner.

joining us now is annmarie, chief washington correspondent create we have to start with upsetting images from yesterday. senator mitch mcconnell who appeared to freeze in a news conference in a briefing. it is been raising questions about the age of people in dissented. of course, not just senator mcconnell. how is this blank out down in washington -- playing out in washington? annmarie: you are right. he did essentially freeze, he stopped speaking for about 20 seconds and then had to be ushered away. the senator asking him if he is ok. they came back to the mic and said i am fine and i think in a political charge moment about questions surrounding individuals age but it is astute of senator mcconnell to say the president called him and he said

i told the president i got sandbagged. also pointing out yes, we are all in this vote together. we are older and we have this moments by raises questions about the older age, the aging elected officials we have when dianne feinstein came back from recovering from shingles, a reporter had this moment with her asking her how it felt to be back and she seemed confused as she had never left. she said what you mean? i have been here. there has been questions about the age of the officials. questions about biden as he seeks reelection and he look at the data and a lot of americans want to see upper age limits on elected officials. but at the same time a lot of americans say older individuals are very wise and they should be able to serve if they are healthy and be able to do that if they have the cognitive mentality to do so. lisa: given the voter appearance

of be ok with older politicians, how do you expect this to play out in voter turnout, voters pushing back at all in next year's election? annmarie: we are potentially facing an election where we have two very old candidates, biden is 80 years old create you have former president in his late 70's seeking reelection. poll shows there is concern about biden's age. earlier this year the nbc poll, 70% saying he should not seek reelection. the issue really the biden campaign faces and other elected officials face when you are in your 70's, 80's and potentially you are struggling, what happens in front of a camera? do you trip? is there a gasp?

question start to really rise and cannot derail a campaign? jonathan: we cover a campaign you focus on the politics but we have to focus on the legal issuesm not just around the president's son, but also around former president donald trump. with the respective develop in coming weeks? -- what do you expect to the develop in coming weeks? annmarie: we could get the third indictment from the federal special counsel jack smith and this will be regarding overturning the election results of two 020 and january 6. that could happen today. what it means for the election race he will be bombarded by illegal issues alongside the campaign trail and then of course, the president's son, hunter biden, yesterday had this plea agreement and it broke down in core.

the lawyers from prosecution and defense went away i'm a potentially there will come back with an agreement but this just keeps hunter biden's name in the press and potentially poses problems for the current president as he seeks reelection. jonathan: are you doing construction over there? annmarie: as above me -- it is above me. that to get me a new studio. jonathan: amh, thank you. lisa: real-time. jonathan: i wasn't sure if she was banking a table. lisa: somewhat were taking off their shoe. jonathan: you need a law degree right now to follow politics in washington dc. lisa: it is crazy when the headlines come out every day so hunter biden supposedly had a plea deal that may or may not have fallen apart. we are waiting to find out with the latest on that is and what

negotiations are there. the former president trump has said he is going to revive his complaints, his allegations of the election being stolen from him. if there is prosecution for january 6, all of this rhetoric taking the oxygen out of the room. jonathan: the season gets going next month when it gets quite in washington. you know when it starts to get crazy. then the campaign picks up and you have to talk about that for 18 months. coming up, christopher marangi. equity market doing well this morning. meta upside surprise, the stock up 9%. ♪ tant to get the hearing aids because of my short hair. but nobody even sees them. our nearly invisible hearing aids are just one reason we've been the brand leader for over 75 years.

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jonathan: equities this morning and good morning, positive on the s&p 500. and on the nasdaq too, up by 1.2 percent. meta getting it done in more ways than one. the stock is up close to 9%. in the bond market, yields lower down by three basis points. 4.82 on the two-year. 10 year unchanged at 3.87. following the snooze fest yesterday afternoon.

lisa: you can make of it what you want it given the fact that they seem to endorse the idea of a soft landing and endorse the idea that they were not going to hike again unless -- at least they weren't on a preset path. richard clarida thinks the market is too confident they will not hike again. i'm curious with a threshold is for deep summary data for them to shift away and surprise the market with another rate hike. jonathan: you heard from an official there who was burned by the inflation story and i would say chairman powell was earlier this year when he emplaced the is inflationary trends he thought was emerging and had to back away from the conversation -- deflationary trends he thought was emerging and had to back away from that conversation. lisa: people think they can make the opposite mistake by getting to hawkish by trying to correct the mistake they made earlier. tom keene would say it is the pandemic economy. jonathan: careful about

channeling tech. lisa: there'll be an issue going forward. how much do fed officials buy into the disinflation that seems to be underpinning soft landing hopes we hear from many economists and fed officials? jonathan: i'm sure they are hoping and praying probably but publicly think there will reluctant. the euro against the dollar 1.11 36. ecb rate decision to at 8:15 a.m.. the announcement coming out of the fed raises rates by 25 basis points. left the possibility open of doing more. in the u.k., going into the bank of england next week, advise to the chancellor are word bank of england it risked raising interest rates too much potentially pushing the economy into recession. we got boe next week. ecb around the corner.

boj tomorrow. boj is interesting because out of everyone, federal reserve, ecb, bank of england, they view the inflationary uptick as an opportunity to reset inflation expectations. lisa: they are people talking about abandoning the peg they have had. jonathan: report suggest they will not tomorrow. there surprise before but who knows. lisa: with the rest of the world join their view of things that if you let things take their course and play out, there will be this disinflation and allow yourself to have an economy that is not destroyed by deep recession. we were having the same discussion six month ago. jonathan: it is super transitory. lisa: the bank of england and then inflation surge higher and economy did better than expected. at what point do you take that

and say way, we need to pay attention, we are understanding the influence here that is keeping strength going and also, on the flipside, inflation. jonathan: it is not happen on eight straight line. what you do when growth is disappointing but inflation is still a problem? they have an inflation mandate. 2%, single mandate. they do not have the luxury of backing away anytime soon which is why most people assume they hike later this morning. lisa: how do guide forward when hawkish member saying maybe we should be more concerned about how much we've already done. jonathan: let's talk about the earnings this morning. upside surprise from mcdonald's. yesterday afternoon upside surprise from meta, the stock is up close to 9%. everyone is using reels which is the compete with tiktok but tech getting it done so far.

validating some of the moose based on what we have heard from alphabet and meta overnight. lisa: upside surprise after upside surprise. meta and we are talking about how they are good at copying successful technologies and taking advantage of technologies that have -- over them. tiktok, the question of chinese ownership, they get in on reels and they could get popular. then question around elon musk and guides and then they start threads and they are cheered for it. jonathan: you cannot stand this x thing. twitter was reporting earnings. that is the tech story. microsoft was the soft spot. biggest one-day drop on microsoft stock yesterday going back to january.

the final story, account carrier with nearly 4000 vehicles -- a car carrier with nearly 4000 vehicles is burning off the coast of the netherlands. the fire could last for days. the vessel twice the length of a football field and trying to invent it from overheating so it is not think and leak fuel. it is an amazing situation there. lisa: potentially an ecological disaster. i'm looking at the details and they say the cause of the fire is unknown. pretty horrific images at a time when car manufacturers are reporting earnings so difficult moment given the fact that the cars on this ship belong to companies who have been reporting earnings over the morning. jonathan: mercedes upgrading their outlook. this a year or so ago supply chains and would be talking about, this will get a brush

under the carpet but you're so ago, a car prices. totally change. christopher marangi joins us now. it is wonderful to catch up with you. can we start with something you have been doing but with, meta. talk about what we heard yesterday. did you like what you heard? chris: yeah and so to the market apparently. a pretty strong report from google and microsoft who had it -- a high bar to clear and we saw confirmation that users are returning and advertising is good, spending is under control. they took out some of the overhang of increase cap x in 2024. they can possibly earn money dollars in 2024 and that makes the stocks look cheap here. lisa: people pushback around enthusiasm around ais a result the have been positive in the tech names have come from the

nuts and bolts in the business advertising even called to spend was softer than expected. are you leaning into the artificial intelligence story? are you looking past that and saying these companies are still making money and that is what you want to lean in? chris: it is early for ai to have an impact but then i got in on the ai story as well. we probably not going to see that play out in earnings for some time but there's a scarcities -- scarcity of ways to play ai and it is why you see alphabet and google and meta benefit from the story. ai is going to change the world. not sure how we profit from it though. lisa: as we get a earnings can we get this backdrop of potential soft landing? chris: soft landing from the market sniffed that out in june. earnings have been confirmatory of that outcome. i think the market is reflecting that in broadening of

performance to be small caps which tend to be more cyclical. we always had a bias towards industrials and we are seeing and if it there. -- we are seeing a benefit there. jonathan: she walk me through the the decision to buy meta after the complete mess of the last quarter of 2022 when things started to look bad for that company? what did you see? what was the process you and the team went through to identify the name something you should buy? chris: we have been following the company for a long time. they're in many ways media companies. they eat advertising. one of the concerns we had was out-of-control spending when they talk about efficiency we knew even if we did hit air pocket in the economy, google and meta and others would have cushion and able to reduce their own expense to maintain margins. they have done that.

jonathan: there is hope revenue can reaccelerate and when people discuss taking cyclical exposure, he talked to me about taking cyclical exposure in the tech names? chris: they're going to be the beneficiary. there exposed advertising. or they have a is digital and most of that is control by two companies, meta and google, and they'll be beneficiary in cyclical upturn. core advertising remains -- we also saw comcast was put up good results although one of the things was advertising as expected down about 5% . linear television remains weak. that is what the turnaround at some point. that should benefit meta and google. lisa: meanwhile the need to consolidate around a number of names you know and have conviction in. how has that played out? how

much have you broadened that out versus continue to focus on a number of key names that do seem to represent the trend and strength of the economy now? chris: we've always try to stick with what we know. there are certain sectors we do not play in because they tend to be commoditized or we do not understand them. but we have enough we can understand and benefit from different dynamics in the economy. there are less cyclical components of consumer discretionary. as well as the merciful goals, metal benders -- the more cyclical's like the metal benders that go up and down with the economy. jonathan: when you have a monster when her, whether it is meta or another tech name, how do you make the decision to cut, to move away and lock in gains? after a short period of time? chris: we're always looking for a margin of safety and ideal case you have two lines, private

market and public market value and the gap between those two lines remain consistent with what we expect were happy to own forever. the margin of safety narrows, we will trader exit. in the case of meta, they have been able to grow earnings and multiple have expanded recently but is still earnings story. jonathan: is wonderful to catch up congratulations on a wonderful investment so far. meta up 9% this morning. lisa: when do you decide to cash in? that is the right question. chris had a good answer to it. i wonder at some time you hear people saying may be sell on the margins and shift into other areas. jonathan: cyclical is he? how much have we heard that all repeat? the -- if you are tuning into the program,

welcome to the program. it is the countdown to the ecb, about 30 minutes away from the decision. we catch up with katherine neiss. looking forward to the conversation on european central bank and wahhabist beyond the 25 basis point hike we expect from president lagarde in the next 30 minutes or so. lisa: i do wonder and we discussed earlier in the show about the loan survey that showed a steep drop off in loans and we heard about it probably was too quick for the ecb comfort. at one point do they highlight that in a meeting, there are signs of serious credit contraction making it difficult for them to get overly hawkish?jonathan: is that what they want to see? you can acknowledge the bank lending survey but it is how you characterize it. is it by design? is it the intended consequence of policy or the pace of which it is happening unintended and unwelcome, and maybe

nerve-racking for the committee? lisa: marlowe said it was too quick. at that is the case and they pause and they see if it evens out, maybe they opted for that thing but are we passed the point where ecb and fed officials want to communicate hawkishness in two make the market go to our response? that seems to be a key question. do they care about easing financial conditions? jonathan: you pick up on the right question. is it orderly or is it disorderly? will find out after the ecb decision in the news conference. gary gensler joining bloomberg at 11 a.m. eastern time. from new york city, this is bloomberg. ♪

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wouldn't qualify for an erc tax refund. you should get a second opinion from innovation refunds at no upfront cost. sometimes you need a second opinion. all these walls gotta go! ah ah ah! i'd love a second opinion. take the first step to see if your small business qualifies. >> there is some uncertainty on the side of the customers in inflation but do not expect recession in the next quarter.

i expect more growth, 45% for the automotive industry next year. many u.s. and europe and china. jonathan: the car earning so far, mercedes raising their outlook yesterday. europe at the moment not looking tremendous. germany in recession. pmi survey data you get on things like manufacturing and services we got earlier this week and the data did not look great but ecb still has inflation problem. core inflation still has a five handle. ecb wants to get that down to two. most people believe they will hike interest rates later. and 25 basis points. joining us is katherine neiss who writes the following, it seems too soon for ecb to declare the job done in bring inflation back to target. we expect a hawkish tone a couple with language that keeps all avenues open for september

and beyond. catherine joins us now. it's wonderful to catch up. let's start with the ecb decision. 25 basis points in 25 minutes most people anticipate. how difficult is the decision become as the growth outlook looks worse and worse? katherine: is going to be hard for the ecb to thread the needle. they have to acknowledge euro area economy is beginning. some of those recent data coming in, some have been weakening. yet the backdrop is inflation remains uncomfortably high. if i compare the euro area to u.s. we are just not seeing that consistent compelling message coming from the data that near-term inflationary trends are dropping off. for them, they're going to need to strike a balance between keeping their options open in september without sounding overly dovish. lisa: especially at a time where

we hear confusing rhetoric out of previously uber hawks on the board. how much is that colored your view in confusing the message a bit at a time when inflation is the preeminent concern for central bankers whose mandate is exactly getting price stability? katherine: i think it is a signal that the central bank is getting near to peak rates. whether or not they raise rates in september again, like others, and i expect ecb to raise 25 basis points today. it is what they have told us to do but whether they do so again in september, i think stepping back, big picture is that we are near peak rate based on what we are seeing from the data now. but the ecb is likely to hold rates at these higher levels for some time. perhaps it is that pivot point that is be reflected in some of

the changes in tone and comments you mentioned. lisa: were talking about the loan survey showing steepest drop off in decades in terms of loan creation in your region is potentially a problem -- europe region is potentially a problem for ecb to see an orderly credit tightening. how do you expect them to frame this? how do you viewed this as affecting the european economy? katherine: i expect it will be a key data point that will inform the decision today. that is what the chief economist mentioned in previous communications and it is a key input and telling us whether or not the transmission mechanism is working and these data do suggest it is working. if we do a backing out the pmi which are generally's a pretty good indicator of economic

activity for the euro area, were looking at a euro area that is stagnating. that is one thing. but is this potentially the beginning of a steeper and more marked contraction, and i think that is going to be the question over this ecb bank lending survey. that would be a concern. it is not the base case at the minute. the stagnation seems like the more likely outcome which is why i suspect that rates are probably near their peak but then stay at that higher level for some time until we see near-term inflation momentum come off. jonathan: when do you meet with u.s. colleagues and they talk about difference between u.s. and europe right now, can you run us through the unique underpinnings of eurozone inflation and why it might lead to a period of speculation? do you think it is underappreciated at all? katherine: well, i think one

thing we have to acknowledge is there is a war on the europe and further negative supply shocks are possible. it may not be the base case but i think it would be premature to roll them out entirely. europe is exposed in this way that the u.s. is not exposed in the same way. that is one think. a second point is throughout this period, inflation has been high everywhere, including u.s. and a euro area, but the primary drivers have been different. in the u.s. it is coming from a strong domestic economy so in some ways that is easier to address through domestic policy viewed with the treasury is doing with fiscal, with the fed is doing all monetary policy. in europe, big driver of inflation has been energy. that is not within the gift of

the ecb to control what is happening to wholesale energy prices. it is a more difficult task for the central bank there. of course, the ecb is ever present having to deal with the potential of fragmentation risk that sets it apart from the u.s.. it is just more of a challenge in euro area to get us back to a steady state. jonathan: if we could do more scenario analysis. if we went into a period of stagflation in europe, would the central bank be constrained by the fact that has a single mandate, inflation, and how would you play that through the bond market? katherine: the ecb's is different from the fed. they do not have the dual mandate as you said. they are only focus on price stability.

they can choose how price stability is obtained and there independence is enshrined in the treaty. in a lot of ways, people do say the ecb is probably one of the most independent central banks out there in terms of the governance framework and that will be reflected in be choices they are making in terms of policy. but that said, recently there was a wobble from the central banks but i think both the fed and ecb have done a good job in taking back control of the inflation narrative. markets are much more confident now that rates are near their peak and that central banks are going to deliver on their inflation targets over the medium-term. that is going to help reduce volatility and continue to support more generally this

pickup in research for yields we have been seeing recently. jonathan: thank you for being with us going into this ecb decision. ecb about 20 minutes away. the process of stagflation in europe is going to be a bigger conversation, particularly if inflation remains as sticky as it has been in the euro zone. lisa: you raise a great distinction between u.s. and europe with europe having a single mandate and u.s. having a dual mandate. i wish point they question whether they are effectively bringing down inflation with monetary policy? have we lost the transmission of some of the policies after so many years of terming out debt into very low rate type of instruments? jonathan: europe more dependent on the banking channel given the data we have had recently, you have to believe that would hit group and then bring down inflation. we have seen it hit growth. we are waiting to see if it brings inflation down in a sustainable way.

lisa: it is where perhaps the pandemic distortions come into play because the labor shifts and some of the demands on the wage side have challenged how quickly inflation can come down which is the reason why the bank of england has had the incredibly unsavory type of view to say stop asking for raises and that hit -- jonathan: how do you think that went down? lisa: come on, what were they thinking? jonathan: the way economists talk, does not resonate with the public. lisa: chair powell saying we actually like it the way which is increase because he did not want to cast in the same tone we see the bank of england officials being cast in they say things like stop asking. jonathan: there is a real dream, you want a stable prices but you want the pay rise. lisa: of course. jonathan: james athey of aberdeen of the european central

bank joining us next. european decision around the corner expecting another 25 basis points hike. ♪ somebody would ask her something

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>> the good news we have gotten on inflation recently further emboldens the fed to actually get to that 2% target. >> this seems to have been very carefully put together so as not to send a debit passage. >> -- a dovish message. >> i'm not sure what they are going to do next. >> this is "bloomberg surveillance." jonathan: the ecb coming up next. president lagarde expected to hide -- hike 25 basis points. that decision is 15 minutes away. live from new york city this morning, good morning, good morning. this is "bloomberg surveillance." your equity market is positive. meda has been up in the premarket from a percent to 9% much of this money. royal caribbean, the fifth-best performing stock on the s&p 500 so far your today.

that is up by 100%. came up with earnings moments ago, raising full-year guidance. full-year adjusted eps, six dollars to $6.20. $4.40. lisa: which is why you are seeing this stocks surge higher. it has come off some of the earlier highs. how much longer can consumers keep spending on vacation? is this a secular shift? we also saw hertz earnings beating expectations. have you rented a car recently? it is really high. and people are still paying them. i will point to people run out of cash? it is not happening. jonathan: royal caribbean, the stock is up 9%. we have touched on the most important theme, discretionary spending.

discretionary spending has been a massive theme for this year. the airlines are up big. american, united, delta. the cruise line operators, three of the top performing 10 stocks on the s&p 500, royal caribbean, carnival. there was a third in their -- a third in there as well. does that last beyond the summer? and as we get to the back end of the year, things like student loan repayments resume, do we take that hit two discretionary spending a lot of people are expecting? if we don't, that inflation story starts to bite back and we have a different conversation about the federal reserve. lisa: if you see that start to fall off, all of a sudden is recession back on the table? is the concept of soft landing not preeminent? which raises this tension at a moment where the fed was embracing the soft landing, saying we are seeing strength and this is a good thing and inflation should fall off?

is there an inherent conflict here as we look at these earnings come out shall consumers have not yet ran out of cash? they are still willing to pay prices that are substantially higher? jonathan: which is why you heard the chairman were aggressively trying to obtain optionality. acknowledging the improvement but saying, who knows? that's going to be the game for the rest of the summer, isn't it? lisa: i love that. that was the most diplomatic thing i have ever heard you say. maintaining optionality. he's going to do whatever he is going to do. they are not giving forward guidance. that is basically what we saw yesterday. maximum optionality, indeed. jonathan: isn't that what michael capon -- mike gapen said? the s&p 500 up by .7%. yields unchanged.

lisa went through some data you can look at a little later. labor market is going to be a big focus, because at the moment unemployment is at 3.5%. claims, we had the right kind of downside on jobless claims. much better than expected. doesn't scream recession looking at some of those indicators. lisa: it doesn't even scream any kind of softening in the labor market. yesterday we heard a different tone from the central bank. heard that maybe they could get to some sort of decline in inflation without losing jobs. we have gone to the no pain type of scenario, each brings us to jackson hole. are we going to hear any resurrection of, we need to take pain, this is going to be rough? is that what we are going to hear? jonathan: haven't seen that pain, have we? i imagine it's going to be a very different address. based on his comments yesterday perhaps he doesn't show up jackson hole. the ecb in 10 minutes time. after that decision, 30 minutes

later we will have the news conference. overnight enter tomorrow the boj. then next week it is the bank of england. joining us now for a preview, james athey, investment director at abrdn. the fed has the luxury of saying growth is good. labor market is strong. right now i'm not sure president lagarde can go into that news conference and say growth is good. is this a hard one for her? james: you could argue it is a little bit easier, because, again, the transmission for monetary policy to influence inflation is largely via demand. if anything the ecb is facing an easier task because they can see for demand through things like the bank lending survey are already softening significantly, which suggests their policy is further into restrictive territory, and maybe they can more convincingly consider the

end, whereas, as you guys were just discussing, if the u.s. consumer doesn't die down, if the labor market doesn't soften, it is difficult to believe they have found equilibrium. feels like they would have to come back to the table. the communication is difficult, because we are moving from this backward-looking policy stance something data-dependent. markets have a tendency to get carried away and they don't want that easing of financial conditions. that is a problem they cannot resolve. i think we will see a similar outcome today. noncommittal, not full of information. lisa: we have been talking about the bank lending transmission mechanism in europe. john riley pointed out it is more sensitive to this type of contraction, which we have heard and seen. what are you experiencing? what are you seeing on the ground in terms of how quickly credit is contracting in the euro region? james: that is difficult to say on the ground.

we all have to rely on the data as we see it. i look at the contents of the bank lending survey. and more pertinently on the demand side than the supply side. of course supply conditions matter. they always do. but what matters for judging the stance of and transmission of monetary policy is more about the demand for loans. does look incredibly soft across the euro zone. if you look at pre-pandemic estimates in europe and the u.s., maybe half a percent in the euro zone. there are 200 basis points between them. but there is only one part -- only 150 basis points between the cash rate. i do think we see that in the data. that is without even getting to the structural challenges in the eurozone. jonathan: we are going to talk about some of those challenges now. maria tadeo is outside of ecb headquarters. frame has difficult this is

going to be for the european central bank in 30 minutes time for president lagarde, she has to deliver that news conference. maria: this is going to be a very difficult communications exercise for the head of the european central bank. on the one hand we know they will hike 25 basis points. that was the guidance to the market. the big question is, what happens next? you have been talking about data, some of it very soft. it wasn't just germany this week. you had significant downturns coming from economies like france. we also had that lending survey. that core inflation is sticky. the market will be focused on any bias potentially in this decision. i'm not sure they want to do that. if anything, the european central bank wants to go for the most neutral possible the most options open. look at the data, say, look back in september and see where we are. there would be a lot of

questions to get an indication of where they want to go. but i'm not sure she wants to do that yet. jonathan: you follow the speakers. the individual members of the governing council, the traditional hawks, do you sense from them that even they are unsure about what comes next after july? maria: yeah, and remember, this was presented today as a necessity for the central bank. when it comes to september we have seen, maybe is now 50-50, maybe it is an open call, maybe we need to look at the data again. i think there has been almost a rethinking over the past two weeks. i'm also curious to hear about this idea of rate cuts potentially earlier than expected. that would be the worst case scenario for the central bank. have inflation above target and get chitchat about potentially cutting beforehand. i'm also very curious as to how

she will push back against that idea. lisa: we are about five minutes away from that rate decision. james, i love your take on the data dependency, the maximum optionality we are hearing from the fed, and as maria was suggesting, and the ecb coming up as well. what data are you honed in on? are you going to be trading more aggressively on data in a new way? james: that is unfortunately the game of investing. it is john maynard keynes beauty contest, as much as i would like to look more heavily at the most forward-looking data. fact is the markets are still somewhat focused on the most lagging indicators. that is jobs and inflation. some balance between the two is the right path to tread. i agree with maria completely. the ecb does not want to give a strong signal one way or another. there is definitely persistent weakness across the manufacturing sector. that is much more significant in the euro zone then it is in the

u.s. we are starting to see softening in the service sector as well. that is good news, but none of these central banks want to box them in. they want maximum optionality, so some sort of op eustachian, constructive ambiguity is what we are likely to see. once these risk events are out of the way the market is in the mood to run with the themes and trades it wanted to run but anyway. we saw that in the u.s. last night. weak dollar, risk on, probably lower yields for summer. that is what i'm expecting and i do not expect adam lagarde to put a hole in that. lisa: do you expect the euro to strengthen because of the u.s., or because of europe's actions? james: i think the dollar is weakening because it has become a bit of a self fulfilling prophecy. the market has a bias to want to weekend dollar because risk performs better in a weak dollar environment. market continues to love the carry trade.

that generally involves selling dollar as an intermediate step. i look at the dynamics currently and it doesn't necessarily look like a weak dollar environment to me. u.s. rates are higher than european rates. that looks like a reasonably solid dollar environment uses the euro. we are marginally long the dollar here. think already the market has got a little bit overexcited. what short-term the market tends to run with the themes it wants to. i think positioning is a bigger headwind idiom term. jonathan: [laughter] what is new about that, james? james: exactly. everybody sees what they want to. jonathan: investors would like a big easing program out of china. do you think that is what policymakers would like to see right now? would that be welcomed by them? james: that is a really good question. i'm not sure there is necessarily a huge supply-side stimulus from china easing aggressively, so that might actually complicate the picture.

i think the central bank would like to see inflation closer to 2% by hook or by crook, and then they can worry about the balance between supply and demand and how stimulatory or restrictive it is. i don't think china is going to engage in the massive stimulus we have seen in 2016 or 2008. i think there is fiddling around the edges. i don't think they are going to go back to the debt-funded infrastructure investment we have seen historically. i don't think there is a massive impulse for europe coming from china. jonathan: so for lots of people would agree with you. we are about 60 seconds away from that ecb decision. before i get to that, i think we have to talk about the prospect of a european central bank hiking into stagflation. we have a situation at the moment where inflation has a five handle, where the economy in germany is in recession, and we are having a conversation

about another interest rate hike. it is a much tougher environment. i think at the moment for the ecb, compared to the federal reserve, which is facing a situation of growth which is still ok, and employment which is low, and inflation which is heading in the right direction. lisa: that is why they are probably going to have a similar type of tone of saying very little and maintain maximum optionality as they try to charge forward. how does the market play that as we get data points? do the data really start to take on new significance? jonathan: i'm not going to take credit for maximum optionality, because i'm pretty sure i just ripped that off mike gapen. the decision is seconds away. sometimes it comes out a little bit after, 15 minutes past the hour. we are looking for a 25 point basis point hike, and you get a 25 basis point hike. the main refinancing rate goes

to four point 25%. the marginal lending goes to 4.50%. deposit rate goes to three point 75%. a 25 basis point hike for the ecb, as expected. lisa is going to work through the statement over the next couple of seconds. i want to work through the markets, tv the knee-jerk reaction to this information. two-year yields in germany lower by three basis points. the 10 year is down by about three basis points as well. the reaction from the single currency, not a big one. euro-dollar about 1.1125. just coming back a touch, lisa, what do you see? lisa: the ecb isn't saying inflation is expected to remain too high for too long, so really doubling down on that, saying they will continue to follow a data-dependent approach. there is that maximum optionality, potentially. he said also inflation will

further over the remainder of the year. basically the goal is to ensure rates are sufficiently restrictive. this ends up becoming a question around, what is -- what does sufficiently restrictive mean when the ecb is saying inflation is expected to stay above target for an extended two of time? is that meaning there is still sufficiently restrictive rates, if you have inflation that still is too high? jonathan: just want to work through the statement for you. a couple of quotes to share with you. the developments since the last meeting support the expectation that inflation will drop further stay above target for an extended period. some measures shows signs of easing, inflation remains high. past increases continue to be transmitted forcefully. financing conditions have tightened again and are increasingly dampening demand, which is an important factor in bringing inflation back to target. i think this is a subtle nod about the tightening financial

conditions in the bank lending survey, and endorsing and in many ways, because they need to get inflation back toward target. lisa: it is by design. that is the goal, to reduce some of this credit lending. some of the questions will be, is that enough? does that do for them in terms of suggesting how far that transmission mechanism is moving forward? right now looking at the euro, not getting that much of a reaction. this is going to be in the statement and in her answers to questions that are going to try to get some kind of guide forward that you probably will not give. jonathan: a slightly weaker euro off the back of it. that currency. is now positive just .2%. around the decision it was positive by .3%. the governing council's future decisions will ensure key ecb interest rates will be set at sufficiently restrictive levels for as long as necessary to return inflation to the 2% medium target. the governing council will follow a data-dependent approach

to determining the appropriate level and duration of restriction. in particular its interest rate decisions will be based on its assessment of the inflation outlook in line with the incoming economic data, etc., etc. the dynamics of underlying inflation and policy transmission. maria tadeo, your thoughts on what we have just heard? maria: you see little reaction because a lot of this is by the book. we were expecting this and the bank had guided that they would hike 25 basis points. when you look at the language in the statement, we have seen this before. they go back to being data-dependent, and they talk about being sufficiently restrictive. do you go into, we have done enough? to me the take away is, there is no indication about september. there is little guidance, which reinforces the importance of this press conference. again, the mistake, perhaps, or

biggest risk for madam lagarde is that the market perhaps could tilt one way or another if they want optionality but there is a perception that there is a tilting and bias here. they want to keep options open. she's going to have to read this carefully with the language and tone she uses. lisa: how can she justify not hiking further if inflation remains as sticky as it is? it is a fairly simple question given that core inflation is 5.5% and there one mandate is to bring down inflation. maria: it is a single mandate central bank. headline inflation because down as soon as energy prices go down, but they focus on core inflation. not a lot has changed on that. the fundamental question -- this is the biggest intellectual debate going on in this bank -- has to do with the transmission. it takes -- and we know there is a lag between what you do now and the implications you see in the economy.

not just headline inflation, but core inflation and dynamics there. they want to make sure what they have done is enough, or maybe it has not been enough. that is why september is still in play. that is why she will justify a hike today. the future path is going to be an open call going into this meeting. with the week pmi's we saw this week, that lending survey too, that trade-off between the economy and inflation becomes more difficult for the central bank. jonathan: thank you. i know you have a news conference to get into. maria tadeo at the headquarters of the european central bank. that news conference starts in about 24 minutes time for christine lagarde and the ecb president. 25 basis point hike from the ecb , and rather like the federal reserve, offering little guidance about the future. the praise of the last 24 hours, maximum optionality. that phrase, of course, applicable to the ecb this money.

the euro selling off a little bit. the euro still just about positive. we roll over there. a rally in the bond market in germany. the two year yield is lower by a basis points on the german two-year. james athey of abrdn back with us. do you get the feeling -- and i wonder if this is endorsed in the news conference -- that the ecb is starting to put more weight on the growth data and less relatively speaking on the inflation data? james: i do, and i think that is absolutely right. in the early phase of this process it was very much a case of central banks being in completely the wrong part. they had monetary policy which was effectively easier than 5, 6, 7 years of low growth, low inflation, and they were staring down the barrel of this wild money growth and incredible inflation dynamic those first

six, 9, 12 months or about catching up. the lady you get into that process, but later we get into the cycle, the more they have to be looking out the front window and less out the rear window, because as yourselves have just said, we know these policies operate with lags, the transmissions are not well understood. economists like to admit this stuff, but our understanding of this machinery is partial, indeed. at some stage you have to try and balance the various considerations, even if you just have an inflation mandate. again, the only way the monetary policy can influence inflation is the very blunt way of being a headwind to demand. it is natural and reasonable when you think you are getting closer to the end of that process to start to consider forward inflation, to start to consider your forecasts for inflation to a greater degree than data released today, which tells you more about where policy was a year ago. lisa: right now we are seeing little reaction, although on the

margins you are seeing a real --seeing a rally in german bonds. a bit of a softening in the euro versus the dollar. is this enough to really give you a sense that this is a more dovish, or less hawkish ecb, and give you confidence to lean into european sovereign bonds more? james: i think the problem, lisa, is data dependent means my forecasts for the economic data matter more than my assessment of the reaction function of the committee of the individuals on the committee. i did think -- and this was something you guys mentioned earlier -- i did think the speech by klaus was significant, because he has been a hawk and he did elucidate this idea of the risks of policy error shifting toward the hawkish round. if we are all wrong about core inflation, then it is no use

that we thought that the ecb was evolving in a dovish direction today. that is why there has been such a tricky market environment. it is actually the economic data itself has been rather volatile and difficult to explain through a kind of all-encompassing macro lens. that being said, medium term i do expect it to slow. jonathan: we have about 60 seconds. if you could, a question for lagarde? what would it be? james: i knew you were going to ask me that. jonathan: so you are prepared? james: i was thinking i would ask her about the balance sheet. lots of central banks the balance sheet is magic. but if the ecb is concerned about inflation, why it is they refused to engage with the idea of reinvestments, because they have concerned -- they have confirmed it will continue to go on, that seems a rather strange situation to be in. jonathan: i am not particularly these days. james athey of abrdn.

here is the guy through the next 10 minutes or so. in five minutes you will get some economic data in america. you will get some gdp numbers, initial jobless claims all affected stuff. lisa and mike mckee will run that down. going through the opening bell after that news conference wraps up, it will start with president lagarde in 20 minutes time. we will come out the other side and break it down with winnie caesar -- peter to cheer and dance salmon. a press conference with christine lagarde in 20 minutes time. we are positive by .7%. from new york, this is bloomberg. ♪ ♪ the biggest ideas inspire new ones. 30 years ago, state street created an etf

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lisa: welcome back. this is "bloomberg surveillance." 15 minutes away from christine lagarde's press conference, following raising rates by 25 basis of points -- basis point. economic data, including the gdp reading, as well as initial jobless claims, at a time where the federal reserve and ecb will be looking to maintain maximum optionality. they are not going to predict what they are going to do next. right now you are seeing the nasdaq leading the gains, up almost 1.5 percent following the results from me wet are seeinga

stability in bonds markets. -- meta. we are seeing stability in bond markets. its head over to michael mckee. mike? mike: we have a lot of numbers for you here. it is a better-than-expected gdp report for the second quarter. this is going to have the fed changing some of its forecasts. 2.4%, just what the atlanta fed gdp yesterday said we would see. one point 6% personal consumption. that is down from 4.2% in the final revision to the first quarter gdp. maybe that gets revised up. core pce, the price index -- i'm sorry, let's do price index. 2.2% on the quarter for the headline, and 3.8% for the quarter -- for the core. the fed -- they are still falling.

continuing claims, 1,690,000. that is down. so, not as many people getting jobless claims, not as many people filing for jobless claims. durable goods orders come up 4.7% after a 2% gain in the month of may. and capital goods orders, nondefense, sort of the core of this, up .2% after a .5% gain the month before. shipments were flat during june, which is kind of interesting given the strength we see in gdp. lisa, i will let you check the markets, because i'm trying to get the latest gdp markets and see what the breakdown is. lisa: i will let you do that. what we are seeing is not a lot of drama, we are seeing the yield shift up at the front and as people parse their what this better-than-expected data means. you are seeing stocks retained

their gains. again, not a massive reaction. especially given the earnings that are stronger-than-expected. the euro, weaker versus the dollar, continuing that trend. 1.1075 after the ecb raised basis point -- raised rates 25 basis points. the euro falling versus the dollar. mike, you have had a second to parse through some of this, and i do want to ask you whether this kind of raises a question about whether the fed can have its cake and eat it too? stronger-than-expected growth, yet when you dig under the hood it looks like the price index came in more than expected. jobless claims coming in. basically goldilocks? jonathan: i would quote jay powell and say i am reluctant to use that word at this point, but it does suggest the u.s. economy remains strong, retains strength even at 5.25% fed funds rate.

the consumer spinning was interesting, because it falls to 1.6%, but that got revised up twice in the first quarter. that might be revised higher. business fixed investment, business spending really jumps. it was negative in the first quarter. it was up overall. nonresidential fixed investment, which is kind of business spending, 7.7%, led by structures, up 9.7%. we knew that was happening. and equipment, 10.8%. so businesses spent a lot of money during the month, and that is good news for the overall economy. looking at the rest of this, i've got to scroll down here to inventories and see what happened with inventories. let's see if i can find it right here. not finding it immediately. lisa: why don't you take a

minute to parse through all of the data? it has been a massive amount of numbers. we will get back to you in just a little bit. right now i want to get through what we are looking at in terms of, is it a soft landing or head fake? i am pleased to say we are joined by vincent reinhart, chief economist at dreyfus melon investment. what is your take on the data we just got that highlights both the soft landing and on the margins, disinflation? vincent: we probably heard it from chair powell yesterday. importantly, he said that the board staff had taken out their forecast of a recession. mike noted that gdp was not a surprise to the atlanta fed, that had an estimated 2.4% growth this last quarter. board staff invests a lot of resources in doing the same thing. so i don't really think that this morning, certainly from the

national income accounts, was that much of a surprise. the question is, does it make it more or less likely there is a soft landing? it sure leans that way, it is one data point. that is what chair powell would say. lisa: what do you make of initial jobless claims? second consecutive month there has been an upside surprise. basically there are fewer people filing for unemployment than previously expected in the prior month. it this confirm with the idea that we need a loosening labor market in order to achieve disinflation? vincent: yeah, so the other part of soft landing is new productivity. very strong employment growth that is at least matching that in output. we are not gaining anything in terms of output. among other things that means wage gains are more serious, because there is no cushion

between what firms pay workers and what they produce. i think, among other things, that the main takeaway is tight labor market is fueling household income, and household income is supporting consumption. you will not get a recession that way. lisa: which is why some people are wondering that you are seeing strength in the economy, yet the fed is moving away from any forward guidance, further rate hikes. you think this is a mistake? that there was not a greater indication to markets that the fed plan to raise rates again once in this particular year, given that richard clarida said if he were still on the fed he would vote to raise rates again this fall? vincent: well, last guidance was that they would raise rates in the summary of economic projections.

chairman powell is pretty confusing. he wanted to assert very strongly that every decision is, every meeting is live, every meeting is made based on the data. but, in fact, they seem to be guiding us to a slower pace of policy, 12.5 basis points per meeting on average. that sounds like a committee that is, number one, divided, and number two, pretty close to the end. lisa: you get the sense that you -- that there is strength in the economy? that perhaps they are not watching closely enough? there does seem to be something that can reignite inflation later in the year? vincent: i think they are watching closely the data. they see the strength in the economy. if you are chair powell you are encouraged by it. he has never really had a hard landing in his outlook.

i think that the extent that the strong data is coming from the labor market, it's got to be troubling, it's got to be a reason why you have to lean toward more policy firming. and i think it does pose a fundamental challenge. lisa: are you concerned that there is not more dissent, at least publicly, on the federal reserve at a time it is confusing and there is a bit of a herding cats type of trend there? vincent: i think we saw the division in the committee just by the two press conferences in succession. in the june meeting the chair spent a lot of time talking about all they had done was slow the pace, slowing policy tightening, allows more information together. but this time he must have had a

yellow sticky note on his talking points saying, meeting by meeting, live, live, data dependent as often as you can. that suggests to me that he wants a slow pace of policy firming. so he has optionality. may or may not tighten in november, but he has enough rest of colleagues saying, nope, every meeting is live, go out there and remind everybody every meeting is live. that is the division in the committee. we will see probably better in three weeks when we get the minutes. lisa: in about five minutes time we will get a sense of what is on the sticky note of stanley guard. in the meantime i want to head back to michael mckee, who has been parsing through the data. what stands out to you in the details, the fine line items underpinning gdp, underpinning durable goods? mike: gdp, the interesting thing here is we have seen a couple of months where inventories and

trade really affected the numbers, but not in the second quarter. both subtracted about .1% from the overall number. it kind of offset each other and the real strength was in business spending, up 1%, and consumer spending, up 1.1 percent. that makes up most of what we saw during the second quarter, and it does suggest strength. government consumption was up 2.6%. that is down from 5% in the previous quarter. nondefense spending, which was up 10 point 5% in the first quarter, was down 1.1%. so, not a huge contribution from the government this time. it is consumers and business spending. in terms of verbal goods, it is just overall good news that there is some spending, but it did slow in the capital goods nondefense area. we will see what kind of contribution we get from durable goods when we go into the next

month. i think the fed looks at today's numbers and obviously has to change their forecast for gdp for the year at the september meeting. and the jobless claims numbers just tell the fed, we are not going to see unemployment start to rise in the near future. so they may have to adjust those as well. this is the kind of report, i guess, that keeps them on alert. not going to make a decision, because we are a long way away from september 21, but keeps them on alert for the possibility of having to raise rates again. lisa: incus much, mike. great synopsis there, especially as we start to see increasing momentum in the consumer. consent reinhart still with us. how long can consumers keep spinning like this when we are seeing the results of the likes of royal caribbean? that trend is still in place. vincent: a couple of things. they still have their retain

fiscal transfers they got in 2020 and 2021. they worked down a lot of that, but they still have that saving. second is, we are generating jobs, and wage growth is strong. that means they are getting household income. i actually see a lot of the government in the gdp print, and that is incentives capital spending. i think that is part of the reason capital spending was so strong, given all of the green initiatives. second thing, inventories on the soft side. the closest relationship of business loans to economic activity is the inventory component. some of the softening in bank lending we have seen might be demand, not supply and credit constriction. lisa: that is what we have seen in europe as well. it was a drop-off in demand, not necessarily on the supply side. are you watching things like the student loan repayments? is that going to play a role, or

is it going to have to come from tightening further in a way that might be disorderly? vincent: i think it has got to be the latter. at this stage of the monetary transition mechanism is the credit constriction that jay powell is waiting for going to be the cumulative toll of the earlier bank runs? by the way, quantitative tightening is only starting in earnest now. the first year of the program, when the fed ran off it securities holding, the treasury paid for by working out its cash balance at the fed. just moved money from one pocket to another. now keeping its cash balance at a wide level, the security redemptions the fed is doing are going to be coming out of the

assets the private sector holds. so, quantitative tightening is really kicking in now. lisa: we are minutes away from christine lagarde giving a press conference. however, there usually are a lot of photos and introductions, so it may be a couple of minutes after that. vincent reinhart with us of dreyfus and mellon. inevitably one of the questions lagarde will field will be gas prices, how that affects inflation, how that affects their role. as we talk about that we are seeing oil prices climb to the highest levels going back to april, and hitting $80 a barrel for the first time since then. vincent, how does potentially higher energy prices -- affect a debate that has been supportive of disinflation by energy prices? vincent: much harder for christine lagarde to answer that question can jay powell, because the u.s. is an energy balance.

we are a net energy exporter for the european economy -- exporter. for the european economy, an enormous importer, in which case an oil price shot is -- stock is nothing but bad. it pulls out income from domestic residents to the foreign sector. a good portion, as you know, of the favorable inflation dynamics at the headline level over the last six months have been the decline in commodity prices generally, energy specifically, and the repair of the goods market. the repair of the goods market is continuing in the sense of supply chains getting better. the reversal of energy prices is going to add to costs in europe, and is going to hit demand through income. lisa: vincent reinhart of

dreyfus and mellon, thank you so much for being with us. we are seeing pictures of christine lagarde walking out to the lectern ahead of her press conference, after raising rates by 25 basis points to three point 75%, the highest rate going back a very long time. we are expecting to hear her reiterate some of the maximum flexibility. they did talk about inflation remaining too high and wanting to hold rates at a restrictive level for a prolonged period of time. it really becomes a question, what does it mean to be sufficiently restrictive? let's take a listen to what she has to say. >> we are also joined, as always, if you wanted to ask a question, please turn on your camera and also the microphones. with that, i would like to hand over to president lagarde. please. madame lagarde: thank you, wolfgang, and good afternoon to all of you. the vice president and i welcome

you to our press conference. inflation continues to decline, but is still expected to remain too high for too long. we are determined to ensure that inflation returns to our 2% medium-term target in a timely manner. the governing council, therefore, today, decided to raise the three key ecb interest rates by 25 basis points. the rate increase today reflects our assessment of the inflation out look, the dynamics of underlying inflation, and the strength of monetary policy transmission. the developments since our last meeting support our expectation that inflation will drop further over the remainder of the year, what will stay above target for an extended period. while some measures show signs

of easing, underlying inflation remains high overall. our past rate increases continue to be transmitted forcefully. financing conditions have tightened again. and are increasingly dampening demand, which is an important factor in bringing inflation back to target. our fleet -- our future decisions will ensure that the key ecb interest rate will be set at sufficiently restrict the levels for as long as necessary to achieve a timely return of inflation to our 2% medium-term target. we will continue to follow a data-dependent approach to determining the appropriate level and duration of restriction. in particular, our interest rate decisions will continue to be based on our assessment of the inflation outlook, in light of

the incoming economic data, the dynamics of underlying inflation, and strength of monetary policy transmission. we also decided to set the renumeration of medium reserves at 0%. this decision will preserve the effectiveness of monetary policy by maintaining the current agree of control over the monetary policy, and ensuring the pastor of our interest rate decisions to money markets. at the same time, it will improve the efficiency of monetary policy by reducing the overall amount of interest that needs to be paid on reserves in order to implement the appropriate stance. the decisions taken today are set out in a press release that is available on our website during the details of the change to the renumeration of minimum reserves are provided in a

separate press release, to be published at 3:45 continental european time. i will now outline in more detail how we see the economy and inflation developing, and will then explain our assessment of financial monetary conditions. looking at the economic activity first, the near term economic outlook for the euro area has deteriorated, owing largely to weaker domestic demand. high inflation, and tighter financing conditions are dampening spending. this is weighing especially on manufacturing output, which is also being held down by weak external demand. housing and business investment are showing signs of weakness as well. services remain more resilient, especially in contact-intensive

subsectors, such as tourism. but momentum is slowing in the service sector. the economy is expected to remain weak in the short run. over time, falling inflation, rising incomes, and improving supply conditions should support the recovery. the labor market remains robust. the unemployment rate stayed at its historic low of 6.5% in may, and many jobs are being created, especially in the services sector. at the same time, forward-looking indicators suggest that this trend might slow down in the coming months and may turn negative for manufacturing. as the energy crisis fades, governments should rollback the related support measures promptly and in a concerted

manner. this is essential to avoid driving up medium-term inflationary pressures, which would otherwise call for a stronger policy response. we welcome the recent euro group statement on the euro area fiscal stance, which is consistent with this assessment. fiscal policies should be designed to make our economy more productive, and gradually bring down high public debt. policies to enhance the euro area supply capacity can help reduce price pressures in the medium-term, while supporting the green transition, which is also being furthered the next generation eu program. the reform of the government's framework -- covenants framework should be concluded before the end of this year. let's look at inflation. inflation came down further in

june, reaching 5.5% after 6.1% in may. energy prices fell again, dropping by 5.6% year on year. food price inflation continued to slow, but remained high at 11.6%. inflation excluding energy and food edged up to 5.5% in june, with goods and services, following diverging trends. goods inflation decreased further, to 5.5% from 5.8% in may. conversely, services inflation rose to 5.4% from 5% in may, owing to robust bidding on holidays and travel, and also reflecting upward face effects. -- base effect.

the drivers of inflation are changing. external sources are easing. by contrast, domestic price pressures, including from rising wages and robust profit margins are becoming an increasingly-important driver of inflation. while some measures are moving lower, underlying inflation remains high overall, including owing to the persistent impact of past energy price increases on economy-wide prices. although most measures of longer-term inflation expectations currently stand at around 2%, some indicators remain elevated and need to be monitored closely. turning now to our risk assessment. the outlook for economic growth and inflation remains highly uncertain. downside risks to growth include

russia's unjustified war against ukraine, and an increase in water geopolitical tensions, which could fly -- could fragment global trade, and thus way on the euro area economy. growth could also be slower if the effects of monetary policy are more forceful than expected, or if the world economy weakens and there by dampens demand for euro area exports. conversely, growth could be higher than projected if the strong labor market, rising real incomes, and receding uncertainty mean that people and business become more confident and decide to spend more. upside risk to inflation include potential renewed upward pressures on the costs of energy and food. also related to rush's

unilateral withdrawal from the black sea grain initiative. adverse weather conditions, in light of the unfolding climbed crisis, may push up food prices by more than projected. the lasting rise in inflation expectations above our target, or higher than anticipated, increases in wages or profit margins, could also drive inflation higher, including over the medium-term. by contrast, weaker demand, for example owing to a stronger transmission of monetary policy, would lead to lower price pressures, especially over the medium-term. inflation would come down faster if declining energy prices and lower food price increases were to pass through to the prices of other goods and services more quickly than currently anticipated. let's look at the financial and

monetary conditions. our monetary policy tightening continues to be transmitted strongly to broader financing conditions. risk-free interest rates over short to medium term maturities have increased since our last meeting, and funding has become more expensive for banks. in part owing to the ongoing phasing out of the ecb's targeted longer-term refinancing operations. the large repayment in june went smoothly, as banks were well prepared. average lending rates for business loans and mortgages rose again in may, to 4.6%, and 3.6%, respectively. higher borrowing rates and the associated cuts in spending plans to a further sharp drop in credit demand in the second

quarter, as reported in our latest bank lending survey. moreover, credit standards for loans to firms and households tightened further, as banks are becoming more concerned about the risks faced by their customers, and are less willing to bear these risks. tighter financing conditions are also making housing less affordable, and less attractive as an investment, and demand for mortgages has dropped for the fifth quarter in a row. against this background, the annual growth rate of lending continued to decrease in june, falling to 3% for firms and 1.7% for households. with annualized growth rates of 0%, and -.2% in the second quarter, respectively. amid weak lending and the

reduction in the euro system balance sheet, the annual growth rate of broad money felt .6% in june, with an annualized growth rate of -1.1% in the second quarter. to conclude, inflation continues to decline, but is still expected to remain too high for too long. governing council therefore today decided to raise the three key ecb interest rates by 25 basis points. our future decisions will ensure that the key ecb interest rates will be set at sufficiently-restrictive levels for as long as necessary to achieve a timely return of inflation to achieve a tom a return of inflation to our 2% medium-term target. we will continue to follow a data-dependent approach to determining the appropriate level and duration of restriction. in