>> welcome to bloomberg rockets. -- bloomberg markets. the cpi numbers came out this morning. just seconds ahead of the last major treasury auction of the week, we are still seeing gains although they are much more muted than they were this morning on the s&p 500 up .1%. the 10 year yield right now

4.0127. today's auction, the 30 year treasury. we will follow that as soon as the headlines roll across. bloomberg u.s. dollar index down today .1%. oil coming down as well. $83.14 per barrel. when it comes to the inflation data that we saw this morning, a blackrock representative gave us his take. guest: serious progress on inflation for now. that cannot be ignored. take a step back and this is what we will need to deal with over the next few months, this will be a roller coaster. matt: chief u.s. economist at t. rowe price joins us now. what was your take on what looks

like a pretty victorious number for the fed? guest: thank you for having me today. i would say there was a lot in this report that the fed and inflation forecasters will like. two months in a row where inflation was behaving like used to before the pandemic. in particular, i'm encouraged by the progress we are seeing in core goods inflation. deflationary momentum is continuing. it looks like it will be sustained. we sought before in producer prices and importer inflation and even in the improvement in supply chain measures but it had materialized in consumer prices because domestic demand had been so strong. the flavor market is slowing, consumer spending is following suit. we are also saying that in inflation data. as with any situation when you have had inflation so elevated

for such a long time, there's always but. in the service is of the inflation, the fed has not seen the kind of progress that it needs to relax and declare the end of the tightening cycle. matt: are there any data points that concern you in terms of inflation coming back? i thought consumer credit expanded by more than $18 billion and a lot of that was student loans as well as loans to buy new cars. >> this is a very good point. there are signs that the economy may be improving and inflation momentum could be sensitive to that. look at the housing market. it decelerated significantly. housing starts and sales collapsed. now home prices are increasing again. this could be concerning because

we know that rent inflation has not fully normalized and we don't want that process to stall. i think this would be a warning sign for me. what's going to happen with the housing market. matt: the average price paid in terms of rent new york city apartment $4400 which is shockingly high. in my experience of course it was much lower when i was a kid, but when we see house prices go up, doesn't that mean that rent prices will go up as well? that is what we are seeing. guest: the near-term correlation is not a straightforward. over the long time horizon, they tend to behave in similar ways. if you don't have excess capacity being created in the housing market and if you have home prices being unaffordable for so many households, what will they do?

it will increase the demand for rental units and in turn, it will support either high rent or higher rent and that leads to higher rent inflation. matt: what is your take on energy prices? we saw little inflation in this time but we know that gas prices are coming higher. we see crude at $88 and change for wti. does that continue to go higher as opec holds its cuts? can that spread out to the court inflation as well? guest: it's difficult to predict energy futures prices. we know how much uncertainty there is. when it comes to the fed and the monetary policy tightening cycle, they focus a lot on core inflation. at an annual rate, core

inflation was 4.7%. what happens to headline if oil increases by $10? second round affect the u.s. economy from higher energy prices have tended to be limited historically but i think the bigger concern is what happens to gasoline prices because that is an item that is purchased every day. we know u.s. consumers drive a lot more than their european counterpart so it affects inflation expectations and purchasing power. in turn, it lowers the probability that the fed cap achieve the soft landing or immaculate disinflation. matt: i want to get your recession call. when i look at this report, my concern is the other direction. the economy will do well and inflation will pick up again assuming the fed does little. what about the possibility of declining inflation, we see the

labor market start to loosen up and go into a recession? what is that likelihood? guest: this has been the most well anticipated and most postponed recession that many people have experienced in their careers. i would say that given where the economy is right now, it doesn't make sense to talk about an imminent recession. even when you look at the bloomberg consensus growth number for q3, it looks pessimistic. but i think we should not forget that on terry policy works with long legs and there is the possibility that if inflation doesn't continue to decelerate, the fed will tighten more than the economy can take and we will see the effects of that likely 2024. i think that's when recession probabilities become higher. >> thank you for joining us.

t. rowe price chief u.s. economist talking to us about the cpi release, the you s economy and the fed. we saw the treasuries $23 billion auction of 30 year bonds. our strategist joins me now. what did this auction look like? this was the one we were all waiting to pay attention to this week. guest: it wasn't nearly as strong as the last two-year auctions and tenure auctions. this one had the weaker demand for end-users than the last time a new 30 year was issued back in may. primary dealers, people who don't necessarily want the bond scott the most they have since february. it is the first time we have seen an increase by the treasury department in these auction sizes. we will get more increases in

auction sizes as the months continue through the rest of the year. maybe this is the first sign that there might be a buyer strike as treasury department issues more and more debt. matt: what about the direct portion? 20% taken down by direct buyers. guest: that's pretty standard usually between 18%-20% of the 30 year bond has been issued to direct. that tends to be investors who don't want to go through other primary dealers. a lot of times, large investors want to hide their bids. it is also dealers who are necessarily primary dealers. second-tier or tear dealers who want to participate in the auctions but don't want to apply to the fed to be a primary dealer. matt: at 4.1% and change, it is pretty high for the 30 year bond. when celeste time you had a 30

year bond auction at more than 30%? guest: there has been a few, but from a coupon standpoint this is the highest coupon we have had in a little while. 4% yield, 4.2% yield around where we are today, i think there's an interesting dynamic where some investors might find these kind of yields attractive. if you are an insurance company or pension fund, maybe you want to lock in 4.25% yield today because you don't know when the next time you will see that is and you have these long liabilities you are trying to fund. i can't say it is particularly attractive when you have two-year yields up at 4.75%, but it is relative to recent history yields a relatively high. matt: thank you so much, our chief rate strategist from the brig intelligence.

coming up, james gorman plan at morgan stanley or will there be none? this is bloomberg. ♪ ♪ (upbeat music) ♪ ( ♪♪ ) woah.

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matt: this is bloomberg markets. we still don't know who will replace james gorman at morgan stanley. we do know his successors long list of challenges for the company is long. >> i like real businesses real revenues real profits.

>> in may 2023, he said he plans to retire sometime in the next year. shareholders were disappointed, the stock fell on the news. the question now is whether morgan stanley's next leader can build on his success. the three internal candidates. the head of institutional securities, the head of wealth management, and the head of investment management. over the board chooses, analysts say the quicker the handoff the better. the next ceo skill set must include the ability to deal with liquidity that will likely be stressed and money that will cost more. regulators are monitoring big companies getting bigger. risk management will also matter. >> it was also his personality, he had the charisma to bring two sides of a bank with different cultures altogether. the next person will have to do

the same while setting the bar higher. matt: scarlet fu joins me now. there are three finalists we know. >> ted and andy, they are in charge of the bank that is responsible for 90% of the profits. they are saying the front -- seen as the front runners. it will be a tossup between them. dan is more of a third candidate option. he is seen as a polished leader. we know that james gorman has made it clear he wants a drama free succession. reportedly he had presented a succession plan three weeks after he was named ceo. matt: how will he achieve this bloodless transition and is there bad history? was the transition rough before? >> 20 years ago, the ceo was

ousted by a group of former morgan stanley bankers. he came over from dean witter, so he was the guy that represented the main street brokers. when dean witter and morgan stanley merged, you had brokers and bankers and culture clash. he was also a former consultant so it raised concern when james gorman was first floated as ceo that a consultant has come in here before in the past and it didn't work out so great. matt: the stock has done incredibly well. stanley has been incredibly successful. he would think that would be one way to solve the problem, to throw money at people who don't get the job. >> it works well because he has groomed this stable of executives and you want them to stay around. what tends to happen is the guys that don't get picked and up leaving. you saw general electric went

jack walsh was getting ready to step down, he had three candidates to replace him. once jeff became the ceo, the other two left and went on to run home depot and boeing. not to say there is bad blood, but you lose the talent after you have a high profile high-stakes succession battle. matt: some cases have been very successful. every member when general motors was going to name a new ceo, i thought it would be mark royce. mary barra took over, but they work well together and mark didn't go anywhere. >> that's a success story and i think james gorman is of the mind that he has given the market and his team's time to prepare everyone and create this smooth transition. think about at goldman sachs happened. david solomon and harvey schwartz were competing to succeed lloyd and they all look

alike. matt: you think i could be a wall street executive? because i am a bald white man in my 50's? [laughter] >> not quite 50. david solomon one and harvey schwartz ended up leaving. you have this not tradition but history of people who don't get the top jobs leaving for other places. matt: it will be interesting to see how it works out. congratulations to you for that. you can catch scarlet fu enter today -- later today. now virgin galactic carried its first private tourist to the edge of space. a long-awaited milestone for the firm. ed ludlow joins us now. i thought this was such a cool story mainly because a couple of space junkies from the caribbean got free tickets in a raffle.

ed: this is one of the stories were it's like finally we got here. virgin galactic founded in 2004 and they were saying by 2007 they would be taking tourists into space. what today's mission was was the seventh time that virgin galactic its unique, its unique launch system has taken humans beyond 50 miles beyond the atmosphere. there is a debate over the official boundary of space. as you point out, it was the first commercial trip for tourist. one of the passengers is an 80-year-old former olympian with parkinson's. the other two are a mother-daughter duo who won the tickets in a charity draw. they are from the caribbean. it is a beautiful story, but it has taken a long time to get here. matt: i don't think it really

matters the debate over is this not. you go out there and it's a cool trip, it's different than orbit, but still pretty awesome. will we see a lot more of this? ed: i was speaking to lauren are bloomberg space reporter about this. the target cadence from verging galactic is -- virgin galactic is monthly launch. last month they did a launch for the italian space agency. that was june 29. what they are saying is monthly. the same time, they are working on a new generation of spacecraft they plan to roll out 2026. this was one of those companies that went pilot -- public via spac. they raised a ton of cash, but they burn through it and they need to get that cadence up because if this will ever be a reasonably profitable business, you need high-volume launch. matt: spacex, a different cup

and he that has not gone public, they continue to raise money and higher valuations. ed: we broke that story about six weeks ago that they are raising through a secondary offering inside liquidity but $150 billion valuation keeps going up. spacex is space tourism ambitions, not quite the same. they are like a carrier for other companies that want to be the travel agent to space. they are doing completely different tech, vertical takeoff, old-fashioned rockets. they reached an altitude of 364 miles above the earth with the crew of civilians. again, virgin galactic is 50 miles. let's not debate it, look at the pictures of virgin galactic. the tourists who have longer hair than you or i, their hair

was floating in space. i think that's the threshold of you are in space or not. matt: that must've been awesome for them and i love to see these pictures. also awesome that we have katie on our team. i'm glad to watch her break news with you and thank you so much for joining us. ed ludlow anchor of bloomberg technology. still ahead, president biden's inflation reduction act will have carbon emissions over the next decade but that may not be enough. report details what we need more next. this is bloomberg. ♪

matt: time for bloomberg green. bloomberg nef has done a recent

analysis of the impact of president biden's inflation reduction act. what do we know? what is in the report that shows we still have to achieve? >> there's quite a lot left to achieve. if you want to think about the impact of the ira has been, it's often half-full or half-empty. as compared to 2021 levels, the bill helps us lower about half of u.s. energy sector emissions by 2050. that's great, that's a lot of progress because -- but half of u.s. emissions still need to be offset. voluntary incentives based bill gets us halfway there but there's a lot left to be done. matt: do you make any recommendations? >> one of the things we strongly

recommend is that while the ira is the first step in policy, it is an ambitious one, there is room for more mandates. if you think of carrots and sticks, the ira provided incentives but it will help the provisions to take effect if there were more mandates. stronger regulations, economy wide targets, stricter regulations on phasing out fossil fuels. potentially more adoption of carbon capture technologies. any measures that push reluctant sectors that do not have a pathway toward decarbonization already to consider that, that's where we should turn. matt: i want to tell our viewers you can type bnef go on the terminal to get the research that we get from new energy finance. the s&p 500 had been gaining this morning or gaining today i guess on optimism after we got the inflation data out.

however, it is briefly turned negative. we have lost the gains that we made. coming up, barclays chief economist shares his outlook following the cpi report. this is bloomberg. ♪

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you can see the u.s. dollar index now coming back up. it had been down, it is only gaining .3% -- .03%. nymex prude losing one dollar 27 per barrel. john, what are you watching? >> i want to circle back to a story the global markets were watching before we got the inflation data today and that was news around travel curbs in europe. lvmh shares up 3%. we will talk more about the luxury sector later this half-hour. you also had wynn resorts that has the key macau operation

chugging along with their exposure in las vegas. well received financial results there. within the dow, we have disney at the top of the leaderboard with a gain of more than 4% after the quarterly results last night. true, there are topline challenges but the bottom-line improvements have been well received on wall street. wall street is giving thumbs up to alibaba. the e-commerce giant which has been trying to win over investors again showing signs of that with her latest quarterly results. matt: you are wrapping up the stock movement. i want to get back to the macro economic data. more on the inflation report we got this morning. we caught up with neil on surveillance today. he said the fed and some economist might be celebrating too soon. >> i think the economy is growing above trend.

i don't think the fed has done enough, and i think the fed is enamored with this soft landing view. they are almost wish casting this outlook. i think there is a risk that the fed is patting itself on the back by the end of the year only to watch inflation potentially turn back up sometime next year. jon: let's get some reaction to that. i was looking at your note this morning in reaction to the cpi data and it seemed like you are in the camp that would believe there's enough of an inflation trend that would justify at the very least being on hold in september. is that fair? guest: that is a fair assessment. i think the soft landing versus hard landing can't debate might be simplifying the variety of views. our view is that yes, we do expect a recession to unfold

before the end of the year and that is precisely why we think that there is a strong disinflationary impulse in core inflation in the rest of the year. however, we see that there's a lot of potential at first -- adverse supply shocks coming in the fall. gasoline increase will cause the cpi headlined to be pretty ugly and also extreme weather in the fall could further worsen food prices. i think what we will see in the rest of the year is a diversions between headline cpi which may not continue the trend versus core cpi which will continue on at this -- disinflationary trend. i think they will be paying more attention to the core cpi. i keep going back to the consumer expansion story later this week -- earlier this week.

it grew $18 billion this month and that was driven in large part by student loans as well as car loans. does that matter because it have been stagnant for a while and now car loans are going up which means consumers are getting used to 7% rates. guest: i think the rising credit tells you that the excess savings are running out for a large proportion of the population. they are relying on credit for sustaining their finances in the future. given that interest rates for car loans, for new cars are averaging 8%. used cars t percent. credit cards over 23%. imagine a person who has thousands of dollars in bills paying 22% annually for the payment, it's not sustainable and that's why we are expecting the delinquencies on many consumer loans to spike

seriously in the phone as people start resuming the student loan payments. something has got to give in the household budget. matt: thank you for joining us, and along giving us a cautionary outlook. mark, we were talking about if you were a glass half-full or half empty person, you could read this differently. guest: my view is similar to anna. thank you for having me on the show. we think that as the fed has tightened rates and will maintain rates elevated, we expect them to raise rates a little further from here. we think over time, this will bite the consumer more and more and we see on the credit side from the survey that we got the survey of loan officers a few weeks ago, we saw some signs that credit conditions are tightening for banks.

jon: you have a pessimistic outlook for the u.s. economy and you think the fed will hike again. which means that things will get worse. what does that mean for the labor picture? here we are 550 basis points later and we are still at 3.6% unemployment. guest: the unemployment rate ticked down last month. we think that is not sustainable. labor market is too tight. jobs essentially are increasing at nearly 200,000 just below that per month. the private sector is very strong. we still have 1.6 job openings per unemployed. this is a very strong labor market and i think each month, we see this labor market generating a lot of income that keeps fueling consumption and the consumer turns around and buys all sorts of goods and services. i think this will maintain upward price pressure.

the fed wants to slow that down, so we think they will hike one more time in november. jon: against the backdrop, what kind of economic landscape do you see playing out in the united states heading into 2024? at a time when jay powell recently said his own team is not anticipating a recession. what is your view generally on the recessionary risk? guest: we expect slowing in the fourth quarter followed by a slight decline in gdp q1 q2 of next year. the first half will see a mild recession. with that, we expect unemployment rate to move up. to reach 4.5% by the end of next year. not too far from the fed's projection. then, this would be i think what's going to allow the inflation to decline slightly from where it is now.

jon: what becomes the determining actor from the fed on rate policy once people start seeing more signs that would indicate that we are in a recession? guest: here's the thing, i think the fed wants to slow down the economy. it will not cut rates as soon as it sees the unemployment rate move up a little bit on the economy slowdown. the fed is very much focused on bringing inflation back to 2% over time. it doesn't need to bring it down the end of this year or next year but it wants to bring it down over the next couple of years close to 2% again. for that, it will find all of the good news we have seen on the inflation side pretty suspicious. it will want to see a slowdown in the labor market in order to be confident that inflation is on track back to 2%. >> are you worried at all that

it will come back up? this was the great fear the jay powell seem to have earlier this year. the arthur burns experience that he doesn't want to repeat. now he keeps saying soft landing and although he indicated september is a live meeting, everyone, the consensus that they are done. guest: i think that they have welcomed the news we have had on the inflation. we had two great gains on inflation in june and july, but the way they think relies on seeing slowing demand in order to become confident that inflation will come down. i think the narrative of soft landing is taking hold. there's a lot of optimism out there that the economy will slow without bumpy landing, but i do think that chances are as they maintain tight policy for a long

time and maybe hike a little more in november as i mentioned, i think there's a good chance the economy will slow down a little more than what most people expect. jon: we are watching what's happening in the oil market as well. a lot of people looking at the potential inflationary pressure from gas prices in the next few months and you have fresh geopolitical concerns playing out with the russia ukraine battle. i wonder how that complicates the story as well? guest: i do think there are a number of sources of price pressures out there. you mentioned energy prices, the geopolitical issues as well. that should weigh on the headline inflation. i think the fed will fork us -- focus more on the core side. i think we will have little more firming as well on the services side in particular. we have had airline fares and

hotel prices and used car prices coming down all contributing to the low inflation prints we have had in the last couple of months. we don't think that will be repeated the same pace going forward so we expect to see firming on domestic services prices once you obstruct from energy and housing prices. matt: mark is chief u.s. economist at our place. coming up, the parent company of coach is one of the worst performers in the s&p 500 today after planning to buy the parent company of michael kors. this is bloomberg. ♪

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matt: welcome back. the s&p index dips down into the red and treasury yields spike after the 30 year auction that we just saw at the top of our. right now, the s&p is little changed. yields climbing across the curve. the 10 year over 4%. 30 year over 4%. it has come up since then and it traded lower before the auction as well. we are seeing the movement right now in the markets. jon: a down day for the s&p or at least around the flatline right now.

definitely down for our stock of the hour, tapestry shares taking a hit. weakest performer in the s&p 500 after a huge deal. the owner of coach and kate spade acquiring michael kors. plenty of consolidation in this sector recently but there are questions about the michael kors business and turning that around. matt: i think the appeal from what i have heard is the mass-market ability of michael kors. joining us is john edwards. talk to us about why make this acquisition. is it luxury or mass-market question mark >> the hope is that it is luxury and it will be

more as they go on. the key to making this deal work as we have been talking about will be michael kors. it's about 70% of revenue there and while the banks are ubiquitous, can't take a subway ride or walk through a business district without seeing them, they need to work on their brand positioning that they have gotten so ubiquitous and common that they are not selling at the kind of price point that you will see at coach. one of the things that tapestry will want to do in this deal is elevate the michael kors brand in much the same way they were able to do with coach. >> investors trying to assess how those parts will come together.

thank you very much for breaking it down for us. joining us on one of the big deals of the day. when we come back, our guest will talk to us about consumer credit and credit card debt topping $1 trillion for the first time. this is bloomberg. ♪ let innovation refunds help with your erc tax refund so you can improve your business however you see fit. rosie used part of her refund to build an outdoor patio. clink! dr. marshall used part of his refund

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a total $17.8 billion this as consumer credit card debt just top $1 trillion for the first time ever according to the u.s. federal reserve and a recent survey finding 47% of consumers are carrying credit card debt from month-to-month. matt: those rates are very high.

carrying that debt is something you don't want to do. our guest is the president and ceo of vantage score. i saw this story about expanding consumer credit. i'm not sure if it's a good story in that they are getting the lungs and able to deal with those rates or a bad story that they have to take those loans rather than savings. guest: we see it is good overall. we are in for a smooth landing. if you look at vantage score overall consumer credit utilization, is down one percentage point from december. 52.3%. we are seeing consumers managing their debt down. the numbers we talked about at the top are a little bit of a head fake because you are seeing credit card utilization spiking, but overall credit declining year-over-year. it looks like we're are in for a smooth landing. matt: you look at vantage score

credit utilization, you are saying how much credit consumers are using. that has fallen which is a good thing. what about how much consumers are using vantage score? i think it would be a good thing if more consumers are paying attention to their financial situation. guest: yes it is one of the most widely used credit scores out there. we grew 30% in 2022. it is broadly used and you are right, credit utilization overall is dropping. 100% utilization means you are using all of your credit. 52% means you are using half and we are saying that number dropped. one exception is the low income consumer. we are seeing signs of concern there. consumers in the low income category, $45,000 per year or less, we are seeing their credit card utilization spike. it grew about 6% year-over-year.

there is cause for concern especially if you look at the underlying delinquency rates to balls -- also spiked almost doubled year-over-year to 1.3%. last year at this time they were point 0.8%. consumers are overall healthy, but there is cause for concern in the lower income category were we are seeing delink 20 spike. jon: what do you watch? we started this half-hour talking about the jobs environment. if things were to cool down and that were to impact the employment picture, that coupled with people taking on possibly a sizable amount of credit, the math gets harder and harder. guest: it absolutely does especially in a high interest-rate environment. folks getting hit first are the low income consumers and we are already starting to see pressure there.

overall, i think we have a healthy consumer. you consider the average vantage score, that ranges on the bottom end of 350 up to 850. the average consumer was at 701. that's a very healthy score. we have been contrarian for most of this year because we keep saying that consumer is healthy because of high average credit scores and we are proven right today as we see that consumer being able to handle the increase in inflation. as we look forward, i think we will be in good shape. we have to give credit to the fed, they have handled the situation well. as we look to the future, we see a healthy consumer and healthy economy. matt: i was going to ask utrecht a metric at how often people look at their scores because

when i am looking to buy a new house and applying for a mortgage, then i will track it closely in order to make sure my debt stays down or delinquencies are dealt with and i can get it up. guest: you are doing the exact right thing. keep on top of your credit score. vantage was the first score to be made available for free to consumers. that is the key, staying on top of your credit score and monitoring that. i want to dispel a myth. a lot of consumers think that if you look at your credit score, it will make it decline. that's not true, so you should be checking it. matt, great advice. matt: i want to give our viewers some breaking news. the u.s. justice department wants january 2, 2024 jury trial on charges the former president donald trump criminally conspired to obstruct the 2020 election.

now we have a date. january 2. at the very beginning of next year. trump is likely to oppose the schedule, proposed by jack smith's office. his lawyers are ready signaling he will go for a longer timeline. this is bloomberg. ♪ health happens now. start your dna-powered health journey today with personalized insights from 23andme. you don't have to worry about things like changing tax rates or filing returns. avalarahhh ahhh

>> a somewhat definitive cpi report for a somewhat indecisive market. from studio two at bloomberg headquarters in ne