♪ >> we intend to a policy at a restrictive level until we are confident inflation is moving down sustainably. >> it is above target, so it makes sense to guide toward higher for longer. >> there is a concern on the underside of this that they are going to need a higher neutral rate. >> economy has changed and the federal reserve is still struggling to come to grips with that. >> the fed delivered exactly what they wanted to, provided a hawkish set that allows them to speak more dovish lead. announcer: this bloomberg

surveillance with tom keene, jonathan ferro and lisa abramowicz. jonathan: we are proceeding carefully. not us, this show is a mess. over at the federal reserve. this is "bloomberg surveillance" on tv and radio. the equity market negative, yesterday. equities down by half of 1% on the s&p. the front end cycle high. tom: a hawkish pause and cycle high is back to 2006. it is a whole new world after all. the real yield burst through 2%. the 10 year real yield, that affects everyone watching and listening. it affects big business, wall street, the fabric of the nation. jonathan: i thought he was tired in that news conference, i was

getting frustrated listening to him. i would say he is totally consumed -- confused by the fed projections. are you feeling mean or are you feeling kind? lisa: the data dependency means they have no clue, basically. they have no idea what is going to happen. they are basically saying we have a number of parameters of your going to go with this baseline. there is a question of what those parameters are at a time that they seek to emphasize inflation but still seem to be hoping for that soft landing. tom: we start strong, he is going to come in and explain this to us. none of this is in the textbooks on macro. jonathan: i can't explain it. in the projections as lisa was talking about, they are

forecasting a soft landing. then he says it is not the baseline. >> it doesn't make sense. he said forecasting is a difficult thing to do, it is hard to know. at a certain point, it is either forecasts are de facto wrong or he is not willing to accept the forecast. he is saying he is going to redefine it in a new way. tom: i was explaining to a young lad in tv today the collapse of disney. lisa: where you're the? tom: they've got to jettison espn. what are they going to do with hulu? jonathan: they are going to take outstanding shares. tom: the financing of all that, they have a new expense in the last three days because this real yield is popping and permeates from disney up with mickey mouse all the way across america. lisa: i take your point, i think it is an excellent one. if rates are high for the long term, suddenly companies that

have avoided paying higher expenses have a new record as suddenly, we have to look at a new parameter of potential damage. tom: the regional banks are a train wreck. and i'm sorry, this is directly down to the banking system. our interview of the day, we are expecting mr. dimon to move from detroit to london. jonathan: that is a conversation coming in later. the equity market is negative, down by zero point 5% on the s&p 500. yields on the 10 year. more dollar strength, a little bit of weakness here. tom: -- lisa: it has been a central bank bonanza. we've already heard from the swiss national bank. what has been happening over the

past couple of sessions after yesterday's lower-than-expected print is people are actually downgraded expectations for a rate hike. my focus is going to be on the two-year u.k. yield and the pound. u.s. economic data includes jobless claims, existing home sales, and former st. louis fed president jim bullard will be joining michael mckee on bloomberg television at 8:00 a.m. and today, the bloomberg credit forum will be happening in london. it's why we are here. tom: is he -- a soccer team? jonathan: i've already asked him, he is not. lisa: basically you can have a cheat sheet there. but to meet the big question is what is the new landscape for credit if you have higher for longer? how does that change the equation for people who have suddenly thought wait a second,

maybe rates are not going to go back down to where we thought they were? jonathan: starts to look a little bit more worrying. the head of credit research at morgan stanley. good to see you. can you square the circle for us? what are those forecasts about? >> i think this is a case of strategy and tactics from the fed. even if you ultimately want to pause rate hikes now and cut rates next year, which the forecast at morgan stanley, sounding more hawkish now, sounding more serious, more vigilant on inflation is the smart move, especially in a world of uncertain data and uncomfortably high inflation over the last 12 months. the fed would much rather be in a place where it could be positively supplies -- surprised, talk somewhat more hawkish between now and easily pitted to somewhat easier policy which we think is appropriate

given we think policy is quite restrictive. on the tactics that would allow that, some really interesting data at the end of the month. a big potential gdp revision. we think on a three-month annualized basis in a you -- is going to fall. that makes the fed's job a little easier. tom: do we get a center marking down the gdp and revisions? do we get a lower real gdp because the real yield is moving up into a level we haven't seen since december of 2008? >> i think that is part of the. i think the real core question haunting market at the moment is what is the neutral rate? his policy really restrictive? that has been a hard thing for central banks to determine especially because rates have risen so much more than anybody expected. i think we are seeing a lot of signs of that from job growth slowing to core inflation

moderating too growth slowing down rapidly. that is consistent with the idea that these are restrictive. lisa: if someone were to say to you what part of the forecasts are wrong, you would say the unemployment rate that the fed is projecting, is that correct? >> we think core inflation is going to fall in little faster than the fed expects, and that will allow them to ultimately start cutting rates by march of next year. it is in core inflation where we differ most. that is one we will know a lot more about potentially at the end of the month. tom: what do you think is going to be the consequence of the government shutdown were we don't get the data for a significant part of october, or maybe beyond? how do you handle that? >> that is a great question. a little bit of uncharted territory. we think it will be another reason why growth could moderate

some, and that is another reason for the fed to stay on hold. this will put the fed in difficult position, but we think it could be consistent with the idea of staying on hold. we don't have the fed taking any steps of action until march of 2024 and trying not to do anything significant if we don't think the data supports it or is available to support it. jonathan: there was a great question in the news conference. how many years do you need to be above neutral before we start thinking neutral is just higher? that is a pretty solid question. did you get the actual response? >> i think it is fascinating, the market is clearly assuming the neutral rate is higher. look at the 10 year yield, very consistent with a higher neutral rate over time. and i do think that that is one of the biggest surprises of the last two years. we've been in a decade where i think we were sold a story that

the neutral rate is incredibly low, and i think that is clearly different. we still think rates are somewhat too high over the long run, but we are clearly operating in a higher neutral rate regime. jonathan: i don't think we should have the federal reserve published the forecast and then tell us they don't matter. i these forecasts real projections, or aspirations? >> i think they are the best estimate of a very smart group of economists but they are ultimately still uncertain, like any forecast is. jonathan: their best estimate right now is that unemployment barely needs to rise to get inflation back to 2%, and the chairman totally fails to explain the underlying dynamics and why he has concluded that is the case. he's extrapolating down current conditions this year to the year after that. don't you think that warrants a bit more attention? that you can get inflation back to 2% without higher

unemployment? >> i also feel i need to justify that because that is very similar to morgan stanley's forecast. we also saw inflation spike much more than you would expect. i think we are still seeing some normalization of factors that were unusual over the last several years. we are seeing some healthy elements and things like shelter inflation that could suggest that even with unemployment preventively costing, other elements that are somewhat unrelated to the labor market, medicare being able to negotiate drug prices, that is a big part of spending and gdp. that could also be sources of disinflationary pressure. tom: i'm not asking you to do an m2 dissertation, but the bottom line is this cacophony of uncertainty is because of massive fiscal stimulus.

what is the tale of the biden stimulus? >> i think we can know one number for certain over the next 12 months, the fiscal numbers, because they are very important. these are hard numbers to forecast. if i look at morgan stanley, yes we have federal spending slowing, but state spending stays very strong. that is a reason why we don't have a larger dragged even though you see these very high deficit numbers. that is a big reason why we see a soft landing next year, while we don't think the fiscal reversal is preferable. jonathan: super constructive on risk assets given everything he just told us? >> i think it goes to the point that a real rates are higher, and that matters across asset pricing. we have a market with the s&p 500 has appreciated this year through higher expansion. at the same time, i think many

high-grade bond yields are getting kind of an average spread and an attractive real rate. both of those are good, and i think we have seen over time a pause from the fed has been very good medium-term for a buying opportunity. jonathan: thank you, sir, good to see you. one more decision to come today, the bank of england. from your perspective, we didn't give a satisfactory explanation from the chairman. did you get one just then? tom: no, except there's a lot we don't know and this time does look different in terms of the different aspects of the economy that have been moving at different paces, coming together in a sort of jumble of not screaming incredible risk appetite, but at least a steadying of inflation for solid growth. my question with that is when does evaluation concern become a fundamental concern when some of these businesses have to actually borrow? i'm thinking of high-yield and

then thinking of investment grade, ones that are at the bottom ranks. when does that become a serious credit problem that feeds into the economy? tom: it is like bond hawk. jonathan: is that like on the cusp of high-yield? tom: i was on the mayfair last night. looking at bentleys. lisa: of course you are. tom: i'm looking at the finance sheet -- jonathan: he's gone to look at bentleys. tom: i look at the real yield where it is, and those kind of transactions become difficult. i'm worth about $1 million. [laughter] ♪ discover the magnolia home james hardie collection. available now in siding colors, styles and textures. curated by joanna gaines.

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but it can be passed on to the next generation. (♪♪) >> after a decade of cheap credits, tom, john and lisa

address the risks in the debt markets and the opportunities ahead. tune in at 10:00 a.m. eastern for the special episode featuring an interview only on bloomberg. >> the committee decided to maintain the federal funds rate at 5.5% if appropriate. we are confident that inflation is moving down sustainably toward our objective. >> chairman pals down, governor bailey still. the bank of england decision a little bit later this morning. that decision about 40 minutes away. guy johnson is going to break that down for you.

we will catch up with him a little bit later. equities rolling over on the s&p 500, negative here by 0.6%. negative follow-through. this move in the two-year, let's just sit on that. at the moment, the two year yield is a little bit lower. the last 24 hours, a whisker away from 5.20. lisa: it is shocking how far we have come and how we are talking about 5% federate through the entirety of next year, or maybe a couple of months at the very end. what we seen actually trickle into the rest of the assets fear. i don't know the answer yet and i think that is a big question. jonathan: the conversation we had is whether we've really started to internalize that. i think the answer to that is yes, increasingly we are. tom: it is a whole new world after all. you see it in the real yield and

again, it is expressed in the two year yield and the idea that this doesn't have ramifications for u.s. 10 year or dare i say for japanese 10-year in 30 unhinged from why cc. jordan rochester is looking at 147, 148. jonathan: if we are in this whole new world and if you're going to support this stronger dollar for longer, the ua does not -- right now, that is for sure. europe does not like a weaker europe right now, that's for sure. and we are talking about pauses potentially at the ecb and the boe at the same time we are talking at the federal reserve. and yields are going to stay here for how long? tom: there's also breaching resistance and support. in terms of breaching resistance, that happened yesterday decisively. and i'm sorry, i can't emphasize

enough that most of the media has killed at the journal. most of the media has missed the seismic change over the last 48 hours. a professor from ucl, julie norman. she has agreed to be with us only because the baltimore orioles are this year playing 625 baseball. there can be things surprising like the baltimore orioles. what is going to be surprised in the next six months in the greater fear of international relations? >> i love that intro, it has been a good year for the o for sure. obviously all eyes this week has been on ukraine and that continues to be such a central point for so much of the way everything else we are seeing globally.

with the grain deal scuttled, that is affecting the global south. and of course, the u.s. and their ongoing relations as well. at the same time as always, we have china as the ongoing challenge which is really affecting how u.s. foreign policy, european foreign policy is playing out in so much of the world. tom: something happen, there was a french missile, and the rules changed. by the rules changing in combat and in international relations because of drones? >> i wish i could say yes. one thing we've seen from the war in ukraine is that conventional weapons are still so much of the forefront of that conflict. drones are obviously a part of it and ukraine has been obviously increasingly savvy with trying to get some access to those, but they haven't been a complete game changer for the tanks, the armored vehicles and whatnot. tom: there's a hot war going on

in ukraine and the cold war is going on in china and the rest of the world and increasingly, saudi arabia. saudi arabia is going to continue to produce one million barrels per day fewer output than it had previously until march of 2024. what is the political backdrop for that? >> we've seen saudi arabia being a key energy player obviously, but definitely during the ukraine crisis. we see different actors try to use their leverage with saudi arabia. we seen them trying to keep this production just low enough that it keeps profits high and different partners coming to them for different kinds of compromises and incentives. lisa: people would argue that this is the biggest tea leaf on china's economy, that china orders certain amounts of oil from them. they have insight that things are slowing as much as people

previously thought. how much is this increasingly alliance between saudi arabia and china? >> the u.s. is following this very closely as well. as listeners may know, the u.s. right now is increasingly diplomatic with saudi arabia, trying to get a deal worked out with normalization of relations there. that is partly for u.s., partly for israel, partly to counter china's influence in the gulf war more broadly. tom: we don't really know who is being booked because our team is so confident they just get out front and do it. it was brilliant that they brought in julie norman here in london. my book of the year is robert kaplan, the loom of time. you are the first person i thought of when i opened this tour de force and the heart of this book is the american certitude of the democratic party, of the liberal elite of washington, the democracy and human rights as a template on

saudi arabia. and on the greater mediterranean. when is the u.s. going to figure out that is not an efficacious policy? >> it is the question that each administration that comes in, especially democrats come in with these ideals of democracy, human rights and this plan to counter saudi. we heard that from biden during his campaigns but the reality is just you can't escape the energy situation and you can't escape saudi arabia because of that. i think the ukraine war definitely increased the necessity to have that reliance on saudi and a way that biden didn't anticipate. jonathan: is that relationship less important to saudi arabia? >> it's important because i think saudi has definitely diversify their partners. whoever is best for businesses where they are going to go and they are not just looking at this from a political lens. they have a lot of suitors right now. jonathan: it would be a decision that this white house likes. would you? >> for right now, they are going

to keep up their efforts, but it is one that i think is going to take a while there's a lot of trade-offs that i think would be hard to completely sell this. jonathan: bramo said something along the lines of saudi arabia has a tolerance for economic stress, that they were far more focused on the domestic finances because of the transitions that judy is talking about -- julie is talking about domestically at home. lisa: they won money and the financials would take precedence over anything. and you do wonder what this means in terms of the diplomacy and in terms of how independent different nations try to become. i think about the u.s. output and the move to evs and how uncomfortable that has been. it gets real complicated real quick. jonathan: big time. we are doing this with crude production of america pushing 30 million barrels per day. it's pretty impressive, tom.

we are facing record output in the united states. tom:tom: i believe tomorrow we have christian on from jp morgan, and his theme is em demand. jonathan: that conversation coming up tomorrow. crude pulling back by a little more than 1%. -- is going to join us in about 34 minutes. we will not be talking about -- what was that? orioles? we will be talking about the bank of england, next.

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♪ jonathan: stocks down yesterday, stocks down again. negative by 0.6%. on the nasdaq, down by about 0.8. a whole lot softer here across the board. higher for longer. stocks down, yields up. let's look at treasuries together. tom: somebody in the control room got the number wrong. jonathan: that is the big change we saw in the last 24 hours. lisa: higher for longer, the

message is getting very clear and people are producing rate cuts which is exactly what the fed said. the readthrough to that is really the question, can you see the rest of the risk as a complex hanging in there? if you have rates that are substantially higher at a time when companies have managed to hang onto the agreements and avoid that completely. >> i get a lot of criticism from people saying why don't you keep track of what they say? of what the track record is? can we stop right now and say bill dudley, mohamed el-erian and a good number of other people absolutely nailed this? if we were 14 months in the past, you look at that number on the two-year piece like you are nuts. jonathan: i would go back to the summer of 2021, and i just

remember walking away from it thinking wow, what they called for is basically what you see on the screen right now. lisa: but when you think that equities would be in a very different place? that credit would be in a very different place? to me, that is the big surprise. >> that is the bond market at the moment. let's turn to foreign exchange. 29 minutes from a bank of england decision, we look like this. the fed keeping rates unchanged, borrowing costs will likely stay higher for longer. fed officials saying they still expect to raise rates one more time this year and see fewer cuts next year than they previously anticipated. we took back half the cuts that were in the projections from last setback in june. lisa: this to me is really the message that they did manage to get across the markets, which is

higher for longer. the rest of the forecast i think people are shrugging off family shrugging off and say whatever, we don't really know. long-term, it is hard for them to give guidance at a time when data dependency is basically just "we don't know." jonathan: he basically said whatever. thank of england rate decision, 30 minutes away. trade will pause after 14 consecutive rate hikes u.k. inflation unexpectedly slowed the lowest level in 18 months. the boj expected to announce its latest tomorrow. we will have full coverage across bloomberg tv and radio. for the bank of england today, this is still pretty split, but i can point to goldman as seeing a hike this morning off the back of the news that we got yesterday for u.k. inflation. tom: you're missing the punchline here, i had the full english today. a thousand calories.

i have the sausage. the royal arcade and lisa, i'm standing there, i'm standing there and i didn't realize everything here is look left, look right. i almost got run over like three times. lisa: this is bank of england discussion. jonathan: how nice it was. lisa: the take away he almost got run over. jonathan: no one is really there anymore, and the federal reserve is down. tom:tom: i'm looking at 12.82 or something. other than that, it was successful. jonathan: we will just carry on talking. stellantis, a price increase.

failed to give workers a clear vision of the future they are seeking. the union said to hold a facebook live event 10:00 a.m. tomorrow where a lot of people are expected to announce whether morbid joined the strike. whether we get a sufficient offer going into tomorrow morning to step away from deeper, more pronounced strikes. tom: this is up, up away from the wage bargain. and i tell you with this uproar in the united kingdom, it is not that that translates over into the strike, but it just shows these other issues matter about new technology about innovation. jonathan: we will have that conversation later. tom: joining us right now, quite seriously, chris turner joins us. you've got a word in their, about just range-bound as well.

how can they shift the listlessness today? >> the market is very split whether we are going to go for the hike. we think it will hike. we think this is very volatile item, so perhaps the market is over it for the 25 basis point hike and probably taking that hawkish language. i think that will probably be a surprise given where the market is right now. tom: explain the u.s. 10 year real yield of 2.07% and way below zero taking out that huge u.k. cpi as a -2.74% real yield in england. powell and bailey, they have two different worlds, don't that? >> it's interesting to listen to chair powell espouse about the real yield. it was asked about that, the inflation that was going to happen later in the year would mean that real yield would pick

up. we didn't hear too much about the real yields in the u.k. tom: why not? >> i don't know. i think the focus is may be getting the message across in terms of trying to manage high inflation expectations, retaining rates staying higher for longer. core inflation in the u.k. above 6%, maintaining that hawkish message for longer. jonathan: they've been busy telling people how much they should ask for. we've got no mud to throw at the great institution across the road from this building. we've had two people sit in your chair who say the bank of england has a credibility problem. do you think the bank of england credibility problem? >> tough question to ask. i think probably last year when it blew out, there with this risk premium for u.k. assets, but i don't really see that now. i think that probably on the fiscal side for example, the

fiscal side has been marginally better than expected over the last few months. we don't see that really showing up, it is fair to say that at the moment. what will drive sterling will be all about will they remain hawkish and keep rates higher for longer? jonathan: we are going to catch up a little bit later on balance of power. joe mathieu, and reporter in. are we still tolerating a weak housing market in the u.k.? it's like the most political thing going. everyone around every table talks about the value of their house if it starts going in the wrong direction as well. does that happen? >> we haven't had too much pressure on the bank of england at all really. the focus you hear from the government is about fiscal rates, particularly last september. i think they are very much focused on that, keeping the public account in good order. tom: there's a question about

the sterling strike for the sterling weakness on a rate pause or a cut. i don't understand that. if the rate pause is coming on better-than-expected inflation data, allowing growth to continue, why would that be positive? >> we know what drives them. some currencies by rate differentials, they really kind of dominate. you would see the money market curve perhaps adjust another 10 or 15 basis points lower, and perhaps half percent to 1%. tom: lisa: we've been asking all morning why markets are not responding. the fact that a year ago we said this is where rates would be, everybody would sell everything they had. do you think this is a market that has already adapted to the rates, or has not yet seen and realized this might be the picture for a long time? >> i think we talked about

liquidity. during the pandemic, i think there has been a big surprise about treasury yields up above 4% in the short-term market. unless you see a very aggressive thing, presumably risk assets can continue. tom: what is the elasticity of the british experiment? it is just stunning the difference in real yield right now. >> one of the important things as mortgage rates. the average mortgage portfolio is about 3%. about 6% for the two-year, 5.5%

for the five-year. those rates were going to be rising. the average rate will move up to 4% next year, 4.5% by the end. tom: that is exactly what you are talking about. but it doesn't have the elasticity. we are probably going to experience some housing difficulties in the united kingdom may be much more quickly than we will in the united states. is that what you are expecting in the u.k.? >> i think there's very strong demand in the u.k. where we haven't seen those sharp corrections. we are not building that into the baseline but actually turning to the u.s., we are a lot weaker than consensus with u.s. growth.

looking at u.s. consumerism coming down a lot more than market prices on the end of the pandemic era savings being used up for student loans, and we are much more dovish on the fed and in general we are much more dovish on growth. lisa: particular focus on the u.k., there is going to be a rate that is substantially higher and is going to make the baseline cost that much more expensive. >> i think there is stronger demand out there. the housing sector, housing specialists here. lisa: it is a larger question. when will people actually have to pay them? >> those rate increases will be working through mortgages into next year, but the big thing is actually a lot more people own their homes. mortgages are only held on about one third of homes. so they are not suffering the higher mortgage. jonathan: rental prices in

london accelerating and accelerating. rental prices in london have something like 70% year-over-year. just brutal. lisa: many people own, they've moved away from this particularly because they didn't what to be subject to resets. that is why if you do own a home, you are in a good spot. jonathan: if you own a home in the city of london, you are probably doing ok and you are probably happy with rates where they are because you probably got a little savings. that is a different kind of trade, isn't it? that bank of england rate decision, about 20 minutes away. we talked about it, what does the height mean for sterling? negative, positive? lisa: what we were just hearing

from chris turner is that it is positive, because ultimately it does follow the rate hikes. at some point you have to imagine if you go back six to 10 months, you remember when that wasn't the case. one does growth start to drive the fx picture more broadly, especially when rate hikes might be viewed by some as punitive? tom: that is the heart of the matter, the u.k. economy's 1/7-ish the size of the u.s. economy, totally different makeup. to do growth comparisons is totally unfair. jonathan: it's true. bloomberg economics ahead on the bank of england rate decision. one third of the way through our central bank triple header. the bank of england up next. ...before you even step inside? ♪ discover the magnolia home james hardie collection. available now in siding colors, styles and textures. curated by joanna gaines.

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(♪♪) the first law of thermodynamics states that energy cannot be created or destroyed. (♪♪) but it can be passed on to the next generation. (♪♪) ♪ >> i'm not cracking the champagne open, inflation only at 6% in the u.k.

everybody is data dependent. maybe there is a little hike, but i think the base case is one more hike and they are done. jonathan: global market strategist looking ahead to the bank of england decision. that decision is about 15 minutes away. one of the few people sitting around the table with us this week that has actually been constructive. down by 0.6% on the s&p 500. down yesterday, down again today. and maybe even, i would throw this in there as well, maybe just a touch of confusion. that was the take away from the federal reserve because a lot of this just accelerated in the news conference. yields up by a couple of basis points. we had a little look at 5.20 on the two-year a little early this morning and we are pushing on a 30 year, pushing 4.50 or 4.47

currently. lisa: when you say confusion i think it is a really good point. how do assets trade on essentially faith and some sort of base case when you have the fed chairman saying we don't know? look at those forecasts, they are sort of a gas. we've been wrong before and you hear everyone saying that. the only certainty you get is higher real yields, higher yields, and markets don't do well with uncertainty like that. jonathan: we all agree it is right to convey a certain amount of uncertainty around any forecast. we all agree with that point. but i struggled with yesterday is when you put out forecasts like the ones they put out yesterday, you've made some assumptions that i think you discuss openly because essentially what you are conveying is that your baseline, because that is what it is, your best guess, is that you could turn inflation back to 2% without doing too much damage to labor market, which is basically the experience of the year so far. you can't say simultaneously we are putting that out there with

a great degree of uncertainty but given current dynamics, we think they can continue for x, y and z. lisa: he should have come out and said the baseline as you just seen is a soft landing. we don't know, but that seems to be what we are looking for. and the fact that they didn't race a some serious questions about the narrative he is painting around the forecast he is leaning on. tom: we have very little multi-decade experience of moving from some form of peaking rates down. we've had a 20, 30 year moderation. and as for the pandemic, we have something new here. the fact is none of us have any analog to fall back on with where we are right now. they are struggling with the language of it. i think it is a younger institution such as the bank of england and certainly the ecb, that is true as well. to give us a brief here, we are

11 minutes away from bank of england. jonathan: 11 minutes away. tom: bloomberg's senior united kingdom economist with us now. i was noting earlier the real yields breaking out today, positive 2%. you are doing work in -2%, -3% real yield. how artificial is the economy? >> it is a really difficult one for the bank. over the past year, the u.k. has barely grown. we've had extremely stubborn inflation, and that has really been the story. so i think moving into next year we are actually thinking the economy could move into a recession, and that is a reflection of what the bank of england is doing. it is lifting rates, he could well lift rates again today. for us, the economy needs to be we can further by what the bank of england is doing to get inflation back to 2%.

where we are now, very difficult decision today. we are starting with a hike, and it has made for a difficult decision. jonathan: so headline, recession is the solution. >> for us. please look at history and history tells you that you need to explain the labor market. a lot of economists talk about vacancies divided by unemployment as a measure of tightness. and a lot of economists are saying vacancies can come down, loosening in the labor market. we could get wages to come down that way. i actually think unemployment does need to rise a little bit. that soft landing narrative moves away and we move toward a hard landing narrative. we have had that unemployment which is different from the u.s. jonathan: some numbers a little bit higher. unemployment to where? how much higher does unemployment need to go? >> for us again, it needs to go about five.

we are at 4.3 at the moment in the u.k. we think the unemployment rate, maybe it higher in the u.k. than it was prior to the pandemic, that means a little more needs to be done to push it up. so we are looking for a number above 5% to actually push down on wage growth which is still extremely high. lisa: for the u.k., there's also the import side of inflation at a time when the pound is the weakest going back to at least march when it comes to the dollar and the euro has been bouncing around, but still generally weaker. how much of a concern is that for the bank of england? how much is that going to play into whether they will hike rates today? >> and the u.k., it is a small open economy. the exchange rate matters a lot. it is about 30%. it matters for the inflation,

one or two years ahead. i think that is their thinking going forward. lisa: a year ago there was a question about when rate hikes with the counterproductive for the pound and now we were just talking with chris turner about how a rate -- rate hike would cause a stronger pound. it is followed by the kind of weakness that would get you to the north of 5% unemployment rate. >> at some point this is about going away from a rate differentials narrative. i think sterling is going to take it of time off of a very weak economic outlook. tom: almost the elasticity of fiscal policy, tax policy in this united kingdom. for a foreigner like me, i'm stunned at the stratified structure i see in the u.k. is it just that simple, there is

a prosperous london booming and the rest of the nation's flat on their back? is that too simplistic? >> i'm not sure it is, i think it is a fair assessment and it is a lot to do with the huge differentials in the u.k. andy dick strategy here called leveling up. at the moment, the strategy is failing. tom: to me, the vitriol of the press is extraordinary. jonathan:jonathan: one way we are going to do this in very simple terms, really fast going from london right to the north of the country. the question now, can we cut it back even more because it is costing too much money? >> we are very fiscally constrained in the u.k. tom: this is critical. the gorgeous studios in the gothic tower, what i want to

know, is that fiscal austerity a cultural austerity or a policy austerity? >> policy austerity. that is exactly right. just imposed by markets after last year. the way it was last year, we are still getting back to a world of trying to get things into a normal place. yields are higher. that is the funny bit. yields in some places have been above where they were. this is important. lisa, should remove the show here permanently? because we can get up later. jonathan: i think that is the important piece of this. lisa: we will see.

jonathan: we talked about this a long time ago, about maybe moving the morning show to the afternoon in london. we will be season-ticket holders. tom: they can come talk to me about tottenham. jonathan: bloomberg economics, thank you for that rate hike in about five minutes time. bank of england rate decision just around the corner. i said it was a central banking triple header, and we are one third of the way through. that decision in about five minutes. and then tomorrow, it is the boj. stocks pulling back again this morning. equity futures down by 0.6% on the s&p. from headlines in the bond market, 4.40 in the 10 year. yields up a couple of basis point on the two-year, pushing 5.20, currently pulling back to about 5.15. the bank of england rate

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>> the intent of policy at a restrictive level until we are confident that inflation is moving down sustainably toward our objective. >> we are running above target so it makes sense to guide higher for longer. >> the concern on the others of this is that there will be a higher neutral rate. >> the economy has changed since the shutdown, restart and the federal reserve is still struggling to come to grips with

that. >> the fed delivered exactly what they wanted to, provide a hawkish message that allows them to speak more dovish lee. >> this is bloomberg surveillance. jonathan: there is a split decision. live from london for our audience worldwide, good morning, good morning, this is bloomberg surveillance. i'm not talking about the federal reserve. rates are not changed at the bank of england, the vote is split, nine members of the mpc, 5-4 in favor of maintaining interest rates exactly where they are at 5.25%. tom: it is interesting in terms of maintaining, that's the kind of tension may be obscured in washington. it's very visible away from our offices. jonathan: that's the decision and here's a signal they want to send. further tightening required if inflation persists.

it feels like the cpi print has been the game changer for this boe. lisa: i want to hear from the specific members. it's important that maybe some of the confusion we heard from fed chair jay powell trying to put a narrative around projections is displayed more here when you have a 5-4 decision where you had people lined up on both sides evenly split. will this be helpful for the bank of england to say we just don't know or will it be harmful in terms of credibility and guidance? jonathan: the pound against the u.s. dollar is $1.22. we are negative on that currency pair byte 0.6%. any similarities between this decision and what we heard from chairman pal yesterday? lisa: it's a completely different economy. all the central banks we've been tracking seem to be reaching the peaks of where they are going to

at least pause and calibrate whether they need to raise rates and that highlights what they talked about. the risks on both sides are becoming more evenly calibrated and that seems to be the message even though governor bally says test governor bailey says there is no room for complacency. tom: three of them voted to raise rates and the question for them is what was the single justification to raise rates that the majority pushed against? jonathan: maybe they didn't pay attention to the inflation report yesterday. they dropped their calls on a rate hike this time around based on the print this week. tom: i can voice the wonderful dr. m ona the real rate analysis, they have tonn jonathan: the policy must be

restrictively familiar. guy johnson is standing by outside the british central bank and he joins us now. what is your take on this one? guy: i think they are using the split as a mechanism and signaling it's difficult to make an accurate decision on where the economy is going. basically, we are looking at a balance between the inflation data we've seen this week and the wage data we saw last week. the wage data was strong and the inflation data wasn't but some of the things that drag this lower are quite volatile so we can't make an accurate call as to what happens next. the bank of england has made a decision that it can wait and see what happens with the economy and see what happens over the next few months. they have raised rates 14 times or money so will they continue or are the 14 rate hikes be sufficient to slow this economy

down raise unemployment and take some of that steam out of the wage debate they want to see at the moment? they have raised the qt target to a higher level than was anticipated. there is some hawkishness there and i wonder if the -- if that's what they will take away. they've gone to 100 and they were at 80. maybe that's where the balance comes in here. jonathan: i mentioned the cpi print that came out this week. a curious headline across the bloomberg from the boe -- policymakers sought u.k. pmi surveys due out friday. from your perspective, what would you expect to see friday based on that headline? guy: maybe some weakness. chris williamson and his data tomorrow at market, we will see what that tells us but that has been weakening significantly.

we have seen weakness within the manufacturing sector which has been there for a while but the last set of data tells us we are starting to see some weakness in services and that could have been the tipping factor that may be led to this split we've got. maybe we are nuts is balancing out the wage data. if you fold in the pmi data which may be they've seen, that could be what have -- what has tipped it to a hold instead of a hike. tom: you are knee-deep on this on a daily basis. how much are experts tilted toward a recession call in the united kingdom? guy: i think there seems to be a majority of people that feel a recession is coming or may already be here. recessions are usually only observed with hindsight. it looks as if the data are deteriorating here.

the u.k. economy is hard to call it the moment because they keep revising the data. it's difficult to get an accurate assessment as to what's happening but there seems to be some evidence this is an economy that's slowing down and may be relatively rapidly. there is a lot of policy tightening to hit the economy and that's the conclusion of the bank of england, that they are seeing some of the effects they want to see, that the slowdown is coming but maybe they need to see more of it in the wage data to conclude they are not at the top of the mountain, the top of the matterhorn. jonathan: thank you, appreciate that analogy. in the city of london on the bank of england latest rate decision, unchanged at 5.25%. we got to pick up on the growth profile. the outlook coming from the bank of england not exactly sending a positive signal about the outlook. lisa: is completely different

than the u.s.. they revised downward their third quarter gdp growth to 0.1% after it was 0.4% so they are looking at weaker growth and they are adjusting accordingly at a time to justify why they kept rates on hold for the first time in nearly two years. tom: asset managers will adapt. the growth issue there is absolutely tangible and germane to a shop like aberdeen. are you calling for a recession when you see the split 5 of the -4 decision. >> we are looking for a recession later this year and one that continues well into next year possibly the first two quarters as well. if we look at the data recently, there can be some revisions in the gdp data but they're still quite a contraction in july.

we are expecting perhaps some quirks in the data that we haven't seen as much industrial action lately and there could be technical issues but i think the outlook for the rest of this year is quite weak. we see that in the pmi surveys in manufacturing and services may be into contraction. lisa: you are seeing a weaker pound in response to this as many expected. at what point are they between a rock and a hard place at the bank of england. if they don't hi, the pound weakens and increases inflation as growth slows. how will this be a consideration going forward? >> import prices will be a consideration but what we saw yesterday in terms of the inflation data was very promising. one of the key metrics they focus on was the court services data. we saw a deceleration there as well. i think it is still very elevated. we are seeing another key metric of wages still very high and the

signaling through the split and the announcement of qt, something we've been expecting for a while is that they will increase the rate. lisa: what is the signal from the split other than they are divided? what can you take away as an economist? >> what we are seeing is they are worried about the recession. they are worried about weaker growth and they think perhaps going into the rest of this year, inflation is likely to continue to decelerate. we are seeing the lag impact of fairly aggressive monetary tightening and maybe starting to bite and they are probably thinking this is the time to pause but we don't want to get too complacent. there are still a lot of inflationary pressures ahead and there's a long way to go for we get near target. jonathan: help us understand the bond market move. the 10 year gilt yield is higher on the session. it's up about seven basis points , does that stack up for you? >> i think it's a knee-jerk reaction perhaps. the hawkish signal there is the

focus. what we will say is even though we are very close to the peak, we expect rates to remain elevated. we think more matterhorn -- more table mountain than matterhorn. really on hold, elevated for a long period of time well into next year. jonathan: do you think this might be a bank of england that starting to be more concerned about growth over inflation and the bond market is picking up on that? >> i think there is a shift. it was a very close call and i think that number tipped this decision. there are some other disinflationary pressures with prices likely to continue to drag down with inflation at year end. as you say, we are still nowhere near target and i think the growth priority starts to pick up. tom: do you find it more beneficial to have a highly

visible dissenting, nuanced split vote like at the bank of england or are you more able to make theory and forward-looking views over the we are in it together view of the fed? >> i think the split is part of the signaling. i think that's useful. you can see that in the bond market. they are taking this as a hawkish pause and that's what is necessary in a sense in order to continue on this path with disinflation. we need a recession unfortunately to correct some of the imbalances. jonathan: no change isn't boring in england? tom: i'm fascinated by it. to know the heritage of catherine mann at m.i.t., these are huge decisions. this is not a small matter and i go back to real yield. jonathan: thank you, sri of

aberdeen. equity futures are at session blows, -0.7%. a locked down this bond market, a little later today, jim bullock, the former st. louis fed president sits down with michael mckee. will we hear less from jim once he leaves the federal reserve and we happen to hear more since he left the fomc. lisa: it doesn't surprise me. i would be curious what he has to say about what we were talking about which is growth versus inflation for the bank of england. is it doing the same at the federal reserve and was that the subtle messaging behind not saying goldilocks. tom: it's un-american. he's gonna indiana user -- university phd.

the answer is jim bullock will tell you we will not roll over and die with high interest rates. that will be his core belief. jonathan: i wouldn't say growth is more important at the federal reserve this federal reserve based on these projections, you can pick up on the language that chairman powell used and they are forecasting the growth that has to. get them back to target lisa: and they are forecasting they will not have the difficult medicine of higher unemployment to face up with as they potentially raise rates further. jonathan: no change in the bank of england but plenty of changes elsewhere. and marie will join us from new york next. for our audience worldwide, this is bloomberg surveillance. ♪ ♪ is it possible to fall in love with your home... ...before you even step inside? ♪ discover the magnolia home james hardie collection. available now in siding colors, styles and textures. curated by joanna gaines.

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>> today, surveillance is live from london. after a decade of cheap credit,

we address the risks in today's market and the opportunities ahead. tune in today to this special episode featuring an interview only on bloomberg. context is everything. >> the committee decided at today's meeting to maintain the target rate for the federal funds rate at 5.5 percent and we intend to hold policy at a restrictive level until we are confident inflation is moving down sustainably toward our objective. we've covered a lot of ground in the full effect has yet to be felt. jonathan: no change of the federal reserve with a hawkish pause. that was chairman powell at the news conference yesterday. central bank decisions this week -- the federal reserve behind us

and the bank of england behind is in the boj in front of us. the bank of england unchanged but a 5-4 split and they voted to keep rates unchanged. the price action at the moment looks like this. equities are at session lows. the nasdaq futures are struggling, down about one full percentage point off of the back of this move in the bond market. very close this morning to breaking 5.20. we are down about two basis points on a two year yield. tom: we will do some careful real yield analysis later. the roulette wheel of the american stock market moved off the bank of england. we were down off that boe news. this has a global feel to it. i wonder what the knock on effect is on the fragile bank of

japan as well. that decision is tomorrow. jonathan: let's go straight to pound-sterling, just a little lower of the pound against the dollar. one dollar 22.70 one cents. we are still up on the session. the outlook is messy. it's not like the united states. the federal reserve says we can get inflation down but we don't have to see too much pain in the labor market for the broader economy. in the u.k., there is a concern what we might see in the pmi tomorrow. lisa: you were talking about the idea of growth trumping inflation. do we continue to see that in the u.k. which is maybe why there is this knock on effect. around the world, isn't there a sense that we will have higher for longer and the pain will come in? jonathan: higher for longer and similarities but different consequences.

tom: we will address this more in the coming days. is a recession in the u.k. like a recession in germany? i don't think so, i think they are two different things. jonathan: in what way? tom: they have a manufacturing /exporter relationship with china and england is unique. what do they do with their models here? jonathan: one dollars six could be the -- $1.06 for the ecb. tom: ann- marie or dern - hor dern this morning. are we going toward a washington shut down? annmarie: they have some time so i imagine they will be back in the government will be open. you missed our bilateral meeting

in manhattan. when they come back, i cannot say whether or not they will have an agreement. they probably will not. speaker mccarthy held a meeting last night for about two hours and it looks like he has been able to flip some members of the rebellious, if you will, right flank of his party who are refusing to sign up to the continuing resolution he wanted to put on the floor. he's still unsure if he has the votes yet. what he is doing is the debt ceiling strategy which is make sure he can keep his party together to pass a bill even though this is going nowhere with the senate which is controlled by the democrats. at least, he is able to show his right flank of the party that he has explore these options. even in that, there is a $64 billion cut to what was already agreed upon with the white house with the debt ceiling negotiation. then it potentially gives him some cover so that when a cleaner continuing resolution

comes to the floor, he's going to have to work with democrats to get that done. tom: civics 101 -- if the rebellious, as you call them, if the rebellious shut down in government, can the senate blocked that shut down action? annmarie: the senate can also work on their own bill. that will have to go to the house. there will have to be a conference and a dialogue at some point once everyone goes through these exploratory measures of their own kind of bills they would like to see in their respective bodies. they will have to come to some sort of agreement that gets to the finish line. the question is whether they can do that before october 1 or they will need more time and we will see you shut down. lisa: we will talk about this over the next 10 days ad nausea him. one of the things that's on the

table is funding for things like the ukraine war which has gotten increasingly controversial, not just in the u.s. but recently in poland with questions around arms deliveries. we know there has been discussions between volodymyr zelenskyy and president biden. what is the latest in terms of the pressure on stopping some of the funding of the support for ukraine in this war? annmarie: the funding for ukraine is not even in this continuing resolution. they will have to deal with that separately. while president zelenskyy is here in new york and i spoke to some of his aides last night, the big meeting for him is not the oval office meeting which he will ask for the army tactical missiles called attackums. they've been asking for them and potentially the white house is going to go ahead with those and maybe we will see movement on that today but the bigger meeting is when he goes to congress. one of his aides said mitch mcconnell and speaker mccarthy

will be in that meeting. for them, this is paramount because the white house has asked for more than 20 billion dollars more aid for ukraine and that supplemental spending package and there has been concerns from the republican party and also in some of the polls of the american electorate about where that money is going. you can see that in a wall street journal report that looked at this letter from some republican members of congress, asking the administration to explain what is the endgame when it comes to ukraine. that is truly the most important meeting president zelenskyy has. lisa: there is a question about wrangling the troops and washington, d.c. but how much is the u.s. still on the same page with its allies? there seems to be of broad splintering around the time when fiscal spending is constrained. annmarie: to your point, these questions are not just happening

in washington, d.c., they are happening in capitals across the western alliance, or so, berlin. people want to know what and we will continue supporting ukraine if we are dealing with our own problems at home, notably higher inflation. it hasn't cracked word anyone is saying this in the open in terms of the heads of state, but these are questions they are dealing with and countries like poland has parliamentary elections coming up. these are concerns that they have. at the moment, they still want to make sure they are projecting a united front behind kyev. jonathan: full of guys will leave and new york will get manhattan back. after they are gone, can we say this is a successful u.n. general assembly? annmarie: it depends on what part of the region we are talking about. was it successful in that we had

a netanyahu-biden meeting with normalization between saudi arabia and israel which the crown prince talked about with fox news last night? from the u.s. administration, that is quite successful. did zelenskyy make his point? yes, but at the same time, the only permanent member of the security council that showed up to the u.n. was joe biden. jonathan: amh, thank you, wonderful work over the last few days. out of new york this week, the general assembly on the bank of england rate decision. we will talk about the bank of england with the rate unchanged. equity futures not changed, from london, ♪ this is bloomberg. ♪ the biggest ideas inspire new ones. 30 years ago, state street created an etf

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jonathan connor -- jonathan: on the nasdaq, we are negative. losses yesterday, negative follow-through. blame the bond market and chairman panel. the two-year pushing 520 this morning. recycled highs. pulling back by a couple of basis points. it is amazing to see this. into the 40's.

morgan stanley thinks we can build -- we can break below 4%. yields keep pushing higher. please set, we are on a 30 year similar move. lisa: i did catch out of the corner of my eye. i asked if you are still 3% on the curve and he said yeah. you have to wonder when it is not temporary anymore for all the people out there saying now is a great time to pick up yields. why not? jonathan: sterling at the moment , we are negative thereby almost three quarters of 1%. tom: there is a lot going on. the split that is available is like the supreme court decision.

it is a five p4 decision. jonathan: leaving mates unchanged. it has taken a five p4 split. still pushing for another hike. it started all the way back in december of 2021. i had the day off work. lisa called me and got me to work. they started and i said on the phone, what is important? and they kept going. lisa: further than anyone expected. the key question is, can they pause? that is the question over at the fed and the bank of england. tom: the mistake is to compartmentalize this for the

bank of england. you could synthesize it into the american market. we see through equities as well. jonathan: let's get you an update on the latest with the strikes. a new offer for the autoworkers. failing to give a clear vision for what they are seeking. the union is set to hold a facebook live event tomorrow morning, where it will announce whether more plant will join the strength, ultimately. lisa: what does progress mean? the answer is, we do not know, but it is more than money. this is about what products that they will make. they said the holdup is product. how much is this direct

repudiation and the percentage of jobs for that area that are unionized? tom: colored by the massive debate this morning. it is front and center. i was wrong. i think this action is tangible. jonathan: you're not giving businesses certainty. the internal combustion engine, moving towards these -- i think he wanted to complement the prime minister who has been optimistic about how quickly we can make this transition and how many people can actually afford this transition and how they are going to finance it. when we are looking at the bond market, it is not as if this country can afford massive projects. tom: it is not a change in

policy but an extension. jonathan: looking to pass a short-term spending bill and avoid a government shutdown. we still need to go to the democrat-controlled senate floor approval. lisa is shaking her head. ultimately, we are going to keep doing this, aren't we? lisa: i do not see how we avoid a shutdown. kevin mccarthy has to wrangle all the members in the house. he can afford to lose four and a few of them are diehard, shutdown down the government until we pass spending bills. it is difficult to see how we avoid this. jonathan: i just drank out of

your cup by accident. what is that? tom: it is tang. tang lite. it gives you energy. this is a scheduled six to seven interview. chief foreign-exchange strategist. this is what i was looking at early this morning. that is the changeup. we'll yield backed away way was in late winter of 2008. things are moving. where are we going to be a month from now or three months from now? >> in three months time, we will have more. it has to stop at some point. the big difference between u.s. and europe is that we are all raising rates because we have an

inflation problem, but we cannot spend this money. we have spent so much money on covid and a war in crane. the u.s. can spend money because it is the u.s., unless the policy says it cannot. as long as the politics allows the u.s. to be exceptional, you will have high yields and a stronger dollar. tom: the bank of japan is a hat trick tomorrow. please see the end going through 148 and 149 weaker where the bank of japan is overcome by events? >> amp to do something extraordinary at the bank of japan to stand in the way. they will have to raise rates or intervene. jawboning will not get us fired.

jonathan: not tomorrow, but this year? >> i heard someone else on the board roll that back a little bit. they cannot just talk to the foreign exchange market. they have to decide what they want to do with monetary policy. it is a tough decision. but this is such like a 1985. jonathan: can you explain what a baby 1984/1985 is? >> i do not want to say joe biden is ronald reagan, but it is the ability to push the dollar higher. i know everything i thought about, everything i learned about in school was blown out of the water. trying to guess how far you can go at this point in the cycle is

crazy. lisa: we know some people i expecting over in japan -- they expect the bank of japan believe yoder control next year, possibly later this year. we understand what the knock on effects would be from a regime globally? >> generally it is behind everyone else that it is possible it does not rock all the boats in the world. it would start the process of investors with high yields. it has a knock on effect. not as big or important on a flow basis as they were 30 years ago. it does not necessarily have to start a new, long, dramatic rising.

it causes waves because it tightens monetary policy one step beyond what we are seeing. if you force the chinese to follow, you can take it further. lisa: we are talking about a stronger dollar and how far that can go. the u.s. can be exceptional, as long as lawmakers allow it to be so. how long before it becomes problematic for the rest of the world, in particular, u.k. and europe? >> it is already problematic. the chinese usually have control over their currency. if you send u.s. yields higher, you could reverse some of the wonderful progress that has been made in that in america. we are not far away from people howling about what this can do. this is the problem.

a stronger dollar would be less damaging for the u.s., in the short term. tom: what is important is the analysis between section 14 versus section 16. do you really need the elevation to see the spurs? should you go lower at section 14? >> i like to be able to see both ends of the picture at the same time. tom: this is where the spurs beat arsenal. jonathan: i think it was nine years ago or 10 years ago. it was a good time. i think arsenal crushed them. tom: how come arsenal has u.s. ownership that is successful and other teams do not? jonathan: when you say selected

teams, deeming chelsea? >> it took them a while to get good at it. they have a history of owning football clubs. tom: what about the saudi money coming in? will that change arsenal and the rest of this work? question changes all sports everywhere. the problem -- in that sense, there is an enormous amount of money that changes it for the average fan and recognizes the fact that they change. it does a bunch of things. there is a politicization of sports. but frankly, the change of manager was probably the big change that we made.

jonathan: yields are a little bit higher. if you want to talk about football, there is a big game coming up on sunday. tom: i was just to the left. lisa: if you had tickets to sell or give. tom: they are billed to you. jonathan: the chairman has been there for 20 years, the longest-serving chairman. tons of pressure. it was a different mood around the club with the appointment. you should listen to the song on youtube. this was a terrific amount of pressure.

they look at it as a success. tom: for an american audience, i am a dummy at a desk. what is exciting is to see them blow it up. a lot of new players, you do not see that an american sports. jonathan: you mentioned saudi money and how sustainable this business is. tom klein maybe if i call it. you could work it both ways. jonathan: i will bring you some of our conversation, up next. ♪ curated by joanna gaines.

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jonathan: my from london, welcome to the program. revealing he would be up into selling a stake in the club for the right person. i sat down for a interview. take a listen. >> he was going to stay but not willing to sign the contract. he did not say that he wanted to leave and he did not say that he would never sign a new contract. as a club, we are self-sufficient. we could not live in the dream that he would sign a contract. we agreed to a deal. jonathan: there is a buyback clause. that is getting a lot of fans excited. what is that?

>> the actual precise detail should remain confidential. if he wanted to come back to the premier league and -- we would have the ability. jonathan: we talked a lot about saudi arabia and this transfer window for the whole of european football. are you getting players knocking on the door now saying, i want a slice of that? has it changed things for you? >> it gave a huge influx of money into the market. the market is particularly tough outside of london at the moment. i do not think it will have any direct bearing on player contracts. it is another market. not every player -- not every

player must to go to germany or france. jonathan: we understand the dynamic and how things have changed on that front. technically, that means he didn't -- you no longer have that billionaire backing. you need one? >> the ownership has been of no relevance. it has always been self-sufficient. as i said, the new rules will be engineered to session extent that hopefully, you do not -- jonathan: would you be open to selling a stake? >> we 30,000 shareholders. we run this club as if it is a public company.

if anyone wants to make a serious proposition, we will consider it. if we feel it is in the interest of the club, we would be open. over the years, many people have made offers. jonathan: where did they come from? >> middle east, america -- but nothig as een puton the table that has been an interest to shareholders. jonathan: other people are starting to copy you as well. how do you think it will underpin success? >> people do not realize how big of a project it is. i think you have to take a long-term view. it obviously has an impact on

the club. you do not build a stadium for nothing. jonathan: it is not just about football anymore. it is everything else and above. >> in our case, -- i think it would be well over $2 billion. you have to weigh -- you have to find ways to pay for the asset. jonathan: what does music bring in? how much money can you make from something like that? >> every concert is different. it is all sorts of events. you are not going to justify spending the money. they make contributions.

i would say we may make 20 to 30,000,000 pounds. jonathan: how does it compare? how does it stack up? >> over 100,000,000 pounds. jonathan: can we talk about dealing with difficult characters? what was that like in the end? >> i had a good relationship with them. they are different. as i said last night, i said, i made a mistake. they are great managers, they just were not right for the club. the way that they want to win is different. jonathan: what does that mean? >> it means a couple of things.

we want attacking football. if that means winning for p3, so be it. i think their style of football is, they did not mind being defensive. we were in a situation where we were so desperate to win. when i got back four to five years ago, i think we were the ones looking win. you get a disgruntled fan base. jonathan: i was listening to the recent fan forum and he mentioned certain players wanted a certain manager. i am paraphrasing to some extent. do they come and knock the door and ask for that? >> they wanted to win just as

much as i did. we had gotten close to a great manager. and we got frustrated. i think we went through a phase where we said, let us try something different, and it did not work. jonathan: what is success for you this year? >> that is a difficult one for me to answer. there has been unfair pressure on my new coach. for us, we want to play football where we are entertained. we want to look forward to coming to a game, where we believe we have a really good chance of winning. jonathan: and to win? >> of course to win. jonathan: we will put out the full conversation over the next week or so. a great conversation. tom: absolutely brilliant.

there are so many ways to go but i will contact -- i will compare and contrast them with the maple leafs. you've nailed that at the end of the interview, reggie said he wanted to entertain people. that is why harry kane left. jonathan: he has not been a popular chairman over the years. there was a moment in the conversation when i asked him, what is it like when a certain section of the fans are cheering. that is a first. but it is not nice when your families years it. tom: they had to go along to get through covid. 1.2 billion to build that palace. i had the honor of being there. great. other sports teams are always looking for a bailout. can you build a stadium they did

it by themselves. jonathan: 30 million for concerts because you have the ability to have that retractable football pitch. tom: it was outrageous. lisa: he said it is supplemental. it raises this question of sports is entertainment. i point to a couple days ago where the saudi soccer league is drawing fewer fans. it highlights where we are. tom: i love that. it is not entertainment.

jonathan: some news on that conversation. at the st. louis fed. ♪

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>> intend to hold policy at a restrictive level until we are

confident inflation is moving toward our object. >> we are running inflation above target so it makes sense to guide towards higher for longer. >> there was a concern on the other cited this that they will need a higher neutral rate. >> the economy has changed and the federal reserve is still struggling to come to grips with that. >> the fed delivered exactly what they wanted to, provide a hawkish set that allows them to speak more devilishly. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning. jonathan ferro, lisa abramowicz and tom keene from london. an extraordinary set of days, 48 hours of history and monetary theory. the bank of england in violent dissent, says we will not raise rates. less violence, jerome powell, everybody in agreement, we are going to stand still, unlike what jim bullard would have

done, raise rates. jonathan: i cannot wait for the conversation with jim bullard. he left the federal reserve, not like he needed un-leasing anyway. you remember that almost protest at the bottom of the s and p dot plot many years ago? i would love to hear what he has to say on the projection from the federal reserve. if you can prescribe a narrative to that projection, to use some of chairman powell's language, it's cream soft landing with the chairman says, that is not a baseline but the objective. i am trying to work out, what is the forecast? lisa: and if they cannot forecast it with accuracy, do they have a thesis about it is a worse prognostication, inflation or a recession? they are saying the words they care more about inflation but their actions are leading some people's a lot of questions. tom: state with this right now, michael with jim bullard in a moment. i would say the gentleman from indiana university is in purdue

and west lafayette, un-american right there. how does that work? boiler up his purdue, and indiana university, basketball. he went to school in indiana. he has migrated to purdue. he is boilering up. jonathan: ok. tom: the heart of the matter is this is the one guy who said we should not fear high interest rates. jim bullard says we will not roll up and die, and a high interest rate regime, and right now, we are at the cusp of that. jonathan: at his own colleague, waller, was the one really offering up the idea a year or so ago that perhaps we can get inflation down without too much pain in the labor market. what is the consensus for you at the moment? tom: tom belzer inventing the modern st. louis fed, and this is research i can is, do your work, roll up your sleeves, look

at the real economy out of the st. louis fed, and that is the heritage of jim bullard. lisa: it is hard enough to understand what it means to raise rates to certain level for the broader economy but what i am curious as to here, when you keep them there that long, what you understand to be the implications when the effects have been so delayed with rates that have been so low effectively for so many. tom: speed data check, i will look at the real yield, the 10-year on 2.08%. jonathan: normal is 4.5, absolutely amazing to see the treasury curve right now. the 30 year just short of 4.50, the two-year, 5.17, yields unchanged but recently at cycle highs the last one for hours. tom: in conversation with james bullard, the former st. louis fed president, michael mckee. michael: thank you very much. we would like to thank jim bullard for running us, i would

have called you mr. president, but now we call you dean bullard. dean bullard: you can call me jim. michael: thank you for joining us. i would like to start with the dot plot. i think we have a picture that we can put up. for those on radio, you can look it up on the fed's website, but, basically, in june, the last time he put out a forecast, there was one lonely dot at the top saying 6.25%. you left, that dot is gone. how would you have voted if you are there yesterday? dean bullard: i thought this was a pretty good decision on the part of the fed. the higher for longer message i think is consistent with the rhetoric we have in hearing from the committee. earlier this year, there was widespread prediction that there would be a recession in second

half of 2023. that recession is that interior lies in, so to the extent that you thought a recession would produce extra downward pressure on inflation, that had to be taken back out. you ended up with a higher for longer message year. that makes a lot of sense. michael: so we do not need higher rates at this point? dean bullard: well, the committee left the additional rate hike this year in the dot plot. i think that may be a good thing to do as insurance to make sure that core inflation, especially, continues to come down at an appropriate pace of the committee can get back to 2% inflation in a reasonable timeframe. i think the risks are building that inflation could hang up at a higher level or even go higher based on the idea of a re-acceleration in the u.s. economy.

you have to take account of that probability when you are making policy. i think the committee has done that. michael: one of the interesting questions is about the forecast, john was just talking about it. you have the fed saying their growth forecast has doubled, their unemployment forecast has been cut significantly, yet, they are also predicting that pce core inflation is going to go down. how does that work? dean bullard: i think you will get dis-inflation with that is the base case. the question is how fast will that dislike and inflation occur? if it is a very slow dis-inflation, you will want to keep policy rate higher to put more pressure on so you get back to 2% sooner. a little bit of probability that inflation would stall out completely at the current level, which would be an acceptable. -- which would be unacceptable. core inflation, depending on how you measure it, has a handle in

the four range and it is still more than double the fed's target. you have a long ways to go here. i think you want insurance on the side of aching sure that you get back to 2% inflation. on the real side of the economy, things look pretty good. you have some re-acceleration in the third quarter, it looks like. we have talked about it before, and unemployment at the three handle looking good. michael: jay powell would not say the words but it looks like the forecast is saying soft landing. dean bullard: i think the prospects for soft landing a very good. but you have not landed until inflation gets back to 2%, so you are only partway through the process, but prospects look good. michael: if that is the case, the question becomes, higher for longer, how much longer? the fed took away 50 basis points of cuts from their forecast for next year. how long do you think you need to lean against inflation to have an effect? dean bullard: well, it will be

data-dependent on that, but i think this idea that you have 5% policy rate or higher over the next 18 months or so, i think that is significant and shows you resolve on the part of chair powell and the rest of the committee to get inflation lower. that is quite a while. i think once you get out the on that, the end of 2024 into 2025, nobody knows at this point. michael: that raises the question of lags and how long the lags might be if it takes 18 months to bring it down? dean bullard: yeah, i do not know. i have not liked the long invariable lags story for the modern era as much. i think a lot of the transmission of monetary policy occurs pretty rapidly through financial markets in a way that was not the case in the 1960's and 1950's, that when freemen was talking about long

invariable lags. i think the economy has changed and information moves much faster. decisions are made much faster than they would have been and the world is much more forward-looking than they would have been in the 1960's and 1950's. i think you look for impact today or more impact today then you would have in that earlier era. so, by keeping the policy rate high right now, i think you can get disinflation to happen right now and it is not so much two years from now. michael: what kind of economy will we have two years from now? we have the pandemic, distortion outs, and supply and demand may become back into better violence, but do we have a new economy? do we have the old economy? re: going back into a -- are we going back into a rate regime that is higher than we were used to the 2000s?

dean bullard: we have talked about it before, but one of the historic examples you want to look at is the 1994 tightening cycle, which was not as big as this one, but set up the u.s. economy for a stellar second half in the 1990's, one of the best periods in u.s. microeconomic history. if you can get inflation to continue to come down with a pretty strong economy, you could set the economy up for productivity boom and a very strong period in the 20 20's. hopefully, that is what will happen. i think we are only partway through the process at this point. if you do get a soft landing, then you could look at a period of good growth, strong labor markets, high productivity growth. i am not saying that that is definitely going to happen, but that is one of the possibilities. michael: we have one question

left, but what happens with the labor market going forward? are we going to see ongoing wage pressures because there are not enough people to fill the jobs? dean bullard: i think labor supply has somewhat diminished from where it would have been pre-pandemic earlier. i think you have workers less willing to come back into the workforce, so they are a marginal worker type, and they are not coming in as much. their bags are pretty robust here with high housing prices and relatively high equity prices, so, i also think that daycare has been kind of decimated by the pandemic, so this has changed arrangements for parents with young children, so you have a subdued waiver supply to what you would have had pre-pandemic and this is

leading to continued tightness in the labor market. michael: thank you. we will send you back down to purdue to graduate more engineers to fill the empty labor slots. thank you for joining us today. back to you in london. jonathan: can you squeeze one question in, can you ask if there is no value in the forecast, where they still producing after that performance from chair powell yesterday? michael: if there is no value in the forecast, then why do they keep producing one? dean bullard: it is what we do. [laughter] forecasts are useful, but only up to a point, there is a certain amount of ambient noise in the economy. you cannot get away from that. you cannot live with them and you cannot live without them is the way you would say that. michael: thank you. i hope that answers your question. jonathan: thank you. just about. appreciate it, fantastic. one of the best, brilliant performance in the news

conference for mike mckee yesterday, down with jim bullard. tom: my view on this is this guy is courageous and there something about the different fed presidents and their geographies. he is steeped in the real economy, and he understands that if we have higher rates, and the real rate moments ago going to 2.09%, we will survive. there is a lot of o.m.g, we are going to die, but he is not on that team. lisa: exactly. how did you read my mind? i was just thinking about that. others would disagree. he is saying it has an immediate effect. jonathan: ed morse coming up next from london, good morning. ♪ ♪ discover the magnolia home james hardie collection. available now in siding colors, styles and textures. curated by joanna gaines.

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debt markets and the opportunities ahead. tune in at 10:00 a.m. eastern, 3:00 london time for this special episode featuring an interview with jim zelter, only on bloomberg. context changes everything. >> average of $92,000 for the price to go to 100, we are putting out a piece later today which is calling for $100 by halloween for brent. this is a trajectory. at this point, it is not going to average about $100, but critical above for a bit? absolutely, yes. jonathan: by halloween, that was the call from the founder and director of research from energy aspects. 93.43 right now, down .10%. someone has taken the other side

of this, ed morse, who will be joining us next. bonds are having a difficulty at the long end of five basis points on the 10-year in the u.s. and the u.k. up by almost 11 basis points now on a u.k.-10-gilt yield. the 10-year in america, 4.46, to-year, through 4,50. lisa: they are being driven by the real yields. i wonder with the shift has been and if people are getting their head around higher for longer versus lower for longer 10 years ago. there was a question about whether this is a tacit acceptance of a higher inflation rate, of a higher benchmark neutral interest rate and whether that is getting out into markets more broadly? tom: and you bring it over the real economy, and you bring it over the idea of recession fears. we had a number of guests today modeling in german reality over to the united kingdom recession, and then you go on their around

the world when you see elevated real yields. jonathan: have you got the -- tom: we are right here. we designed this set here. this is the saudi arabia here, nice, wide shot. jonathan: the saudi royals. tom: there you go. lisa: i have no idea what that is. tom: stretching out. we do this to go over what happens. an expert on saudi arabia, ed morse at citigroup, global head of commodity research. he has been brilliant over the last two years of singing, everyone, calm down, we will see lower oil prices, more sustained, $70, $80 prices, and then things have changed. ed morse, what changed to elevate oil to $100 a barrel? ed: quite simple, a bunch of

countries that had a lot of surplus capacity decided to rein it in and pulled back. if you look at the oil market, there is no more oversupplied rocket in the world based on supply and demand. those who have the supply have pulled it back because they do not like the revenue they were getting. there is a big difference between oil and copper and oil and a lot of other commodities in terms of the fundamental availability of the supply and demand market. tom: we were making fun of the orb, and that is president trump visiting saudi arabia. what is the u.s. relationship with oil-producing saudi arabia? has it changed? ed: it certainly has signed dramatically. part of the change is the geopolitics of the area. one element of the change was at the g20 meeting when a number of countries that include india,

countries in the middle east, israel, the european union, decided to build physical, their own initiative, and they excluded china and russia from that, but the u.s. is very much a part of it. we are talking about westinghouse technology going into saudi nuclear power. we are talking about the security side. we are talking about oil markets and differences among them. it is a different relationship from the more sour one for which the biden administration began. lisa: earlier in the year, you were the loan caller -- lone collar for lower oil pricing and you are correct. now you are pushing against people who are upgrading their forecasts in light of the saudi production cuts. how can you be so sure this time around if this is essentially saudi arabia searching for $90 to $100 of oil a barrel for

their financial well-being? ed: there are three or four factors that are overwhelming. one happens to be the fragile countries, iran, nigeria, venezuela, iraq. the countries were growing rapidly in the production of people thought they would add one million barrels a day, a year. five years after 1998, they produce less on the world scramble to find new supply in the price of oil went up. these countries are adding supply at surprising rates. if you look at june versus june, 20, 3 versus 2023 -- june, 2022 versus 2023, if you look at iran and iraq, the chances are that the two of them together will be at one billion barrels a day of production between now and when year from now. that very much, that big change, and the changes not just among the two. if you look at nigeria since the recent elections, they went for

the monthly average of one to 1.2 billion barrels a day to 1.7 billion barrels a day. they are 1.7 right now. so those fragile five countries are not under the control of the leadership of opec-plus, and they intend to put more oil on the market. the second massive factor is china. china has, yes, an economy that is more commodity dependent than any other country in the world, but what china has done since the great financial crisis, and consistently, is buy low and sell high. so they accumulated an incredible amount of inventory. the inventory they have grown has been from under one billion barrels at the beginning of the pandemic, not long ago, to 1,000,000,400 with the capacity to go to 2 billion barrels. that means they have 130, 140 days of forward supply and their

inventory system. the ipa in its wisdom says 90 day supply is ample. so they are in the position to buy less oil in the market. they had four months in which they were buying 12.5 million barrels a day. they have 4.5 million of their own production. they had 70 million of supply. they don't refine more than 14.8, 14.9 and they put it in their inventory. now that prices are very high, what are they doing? selling. and they are selling an awful lot of diesel into the market, which is diesel poor where they are overwhelming, so they are making money by not buying and by selling high on the product side. i'm very have ample production growth from non-opec. our judgment is that demand is going to be slow because of what you have talking about -- what you have been talking about the last 15 minutes, don't think

demand will go to more than one million barrels a day next year. and they can feel that without even thinking about the fragile five or without what china is doing. it will be looking at a weaker market. lisa: in the interest of time, you basically said china is holding its own spr and it is much bigger than the u.s.'s as they treated their own spr. how much is saudi arabia going to keep production low because they know china is not going to be a big buyer? ed: i don't know. i don't know how to read the tea leaves. there was an article involving conversation between the prime minister of india at the g20 meeting, and the crown prince was quoted in a saudi newspaper, therefore, intentional, that of oil sustains above a certain level, they will put more oil back. that was not an accidental story. we do not know what the pressure

point is. they don't like 8070 as much as they like 90, -- they don't like 80 or 70 is they like 90 and they are fearful of what happens at 100. jonathan: thank you for the update, ed morse. not as bullish as some. looking for triple digit crude by halloween. we are pulling back to about 89.60. wonder how much this high for longer message filters through the commodity market, as well. lisa: if you have money coming into real rates, are people going to want to buy and own a physical product? jonathan: kallum pickering joins us next. we have had the federal reserve and the bank of england, it is the boj's turn tomorrow. ♪

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jonathan: economic data incoming, jobless claims about 20-seconds away. equities lower on the s&p 500, down by 0.8%. the nasdaq down by more than one more percentage point. the yields are a whole lot higher, your two-year through 5%, looking at 5.20. 10-year, 4.50, up by six basis points, gilt yields up by 11 basis points. with your jobless claims data, here's mike mckee.

michael: jobless claims data is right, 200-1000 jobless clms filed last week -- 200-1000 jobs comes filed last week, an extraordinary low number given the situation we are in. it looks like companies are just holding on, holding onto workers. 1,662,000 continuing claims. that is lower than the previous week, but i don't have the revisions yet. they might try to load up these numbers here. here we go. last week, revised only by 1000 to 221,000, so a drop of 20,000 in jobless claims. last week's 1,000,683 goes to 682. the philadelphia fed business outlook is a bad number, -13.50, down from 12 the prior month, so

business conditions in that area on the philadelphia front not as good as they had been. one thing i would note here is the united auto workers strike began last friday, so there would not be time for auto workers who are laid off to have filed, so next week, you can start to expect some really distorted numbers in the jobless claims numbers. if you are on strike, you are not eligible, but if you are laid off because your plant shut because some are on strike, you are eligible. we can expect to see filings for next week. this 201 maybe the less clean read in a while but it is a pretty low number. jonathan: tom has questions. i want to return to the session lows, down about 1% on the s&p 500, 1.3 on the nasdaq and cycle highs in the bond market. can we turn to the 10-year briefly? at the moment, coming really, really close to4.50, the

10-year, the higher the session, 4,4820, at the moment, 4.4738. at the front-end of the curve, we have seen new cycle highs pushing higher 5.20. we are getting closer again, 5.18 on a two-year this morning, what does this might mean for foreign-exchange? if yields are higher like this, everything else is weaker against the dollar right now, including the euro, the euro dropping to 1.0 630. -- 1.0 630. tom: what is so important about this with you wonder full conversations yesterday, mike mckee, is the fed aware that these levels are getting back to dare i say 2008, 2007, 2006 levels? michael: well, they are. i think that is why you saw them

go on hold for an indefinite period. my guess is that they do not raise rates again going forward. the fed sees what is going on in the economy and they have adjusted their forecast. our discussion with jim bullard was about that. they are looking at an unemployment rate of 3.8% at the end of the year, which is historically very, very low. there is almost no comparison to how long we have been at that level so far in this recovery. so they know that there is very strong economy out there. the question has to be, is that going to produce additional inflation? they do not want to say soft landing because they do not want to jinx it or get the markets in a roil, but they do anticipate a soft landing but does that bring inflation or do they need to keep pushing because inflation goes up? jonathan: haven't they just told

us if those forecasts are worth something, haven't they just told us that actually it does not matter the price pressure? can we really sit here and say that this labor market data has been deemphasized by the federal reserve the last tony for hours because they now believe -- the last tony for hours because they now believe based on the projection that you can get back to do percent without damaging the labor market? are they deemphasizing the importance of the river market -- the labor market over price pressure based on what you saw in the forecast yesterday? michael: you have to wonder, but i would say they are not deemphasizing it as much as accepting reality. they cannot explain why at this point the labor market can be so tight, and we don't get ongoing wage pressures. wages are still higher than they need to be, but they have come down. so what is going on around here? that is the question for them in the relationships they depend on

and they don't seem to be holding, so they are accepting reality but i think that is one reason why they are leaving in the idea of a possible rate increase by the end of the year. just in case they are wrong about that. that unemployment doesn't start to get lower and push up wages again. tom: michael mckee, thank you, and congratulations on that important interview with mr. bullard earlier today. it is a jumble today. you are really seeing the markets moving and it sets up nicely our credit seminar that you are going to see here later this afternoon. jonathan: perfect timing. tom: we need to combine the belief year of what we see from the bank of england into the fed action yesterday. kallum pickering is more than qualified, senior economist at berenberg. what is even more important is you and kallum survived thursday nights at the university of ward student union. [laughter]

he survived the party scene. why don't you bring in your fellow colleague? jonathan: i am so happy, i have a quote ready to go. good morning. the fed is projecting inflation to steadily cool while the labor market stays tight, but in citi's you, they believe -- view, they believe that it will be stuck above target. it is the fed's projections argue with citi? kallum: i am fairly sanguine about it, and i am on the fed's side, but do we trust the phillips curve models on the conditionality? this is what we saw in the 1970's, inflation expectations are very high. we then factor in the wages set in and that becomes embedded and then you get the spiral effect. inflation expectations are fairly well behaved for consumers. basically around advanced world.

it shows us that we want a position. --javier blas comp --want compensation. live wages should follow inflation down and that is what we saw in the u.s. and that is what we should see an europe. tom: is it your thought that the pandemic took us away from court. now that we are beyond it, phillips curve dynamics come back into play? kallum: i think so, i think normal business cycles come back. the curious thing about the pandemic is that perceiving the pandemic fundamentals, it more or less was defined that we were in this chronic funk of sluggishness and pessimism. it locked the economy, and very at least an almighty amount of economic energy. and things now start to look normal. in markets we see all the time, what do high bond yields main? from an economist perspective, we should say, why our bond market sizing? what if the world is returning to normal? then the bond numbers make sense. lisa: then why should

unemployment rise and you should have that increasing slack in the labor market that would lead to wages not driving things higher, given the fact that if you look at bond yields, you look at jobless claims, what you see is what you get to read we are seeing a lot of strength -- get. we are seeing a lot of strength. kallum: the strength is the reason for the higher bond yields, if we have higher bond yields, because inflation is running high, that is a problem, double whammy. higher interest rates are telling you the economy is strong and that is in a big deal. if we have rising unemployment, modestly rising unemployment in a growing economy, it could simply be that firms find it too expensive to hire, they can easily expand production through investment, so they do that. lisa: do you buy into the idea that jim bullard put out that he does not buy long and variable lags that basically monetary policy is coming through as it is, if they hold rates higher, it will be because things are responding in suit, and the strength has continued? or do you think we might get a bigger whammy than we expect as companies and consumers have to refinance? kallum: i am with the former, i think we roughly know about the

impact of monetary policy so far, and interest rates remain higher for longer, the bank of england will call it the table mounting, it is because the economy deserves higher interest rates. if we do not have supply in the world, it is because demand is strong and that is a good outcome. jonathan:jonathan: the federal reserve was market to market. growth figures are better than expected since june. that extrapolated current dynamics into next year and the year after. we could have a long debate on whether they should or not but i would like to talk about the reality of u.k. growth now. it was pointed out to look at this line that they see in the pmi's. the link of england ahead of the pmi's tomorrow, how bad will they be? kallum: they will be quite bad the second half of the year but i would be aware replacing too much weight on them given the fact that they provide recession signals more recent years, which we have not got. the key issue for the u.k. is monetary policy. there is a risk of a recession and winter. i don't see the ingredients for a severe recession or anything

like a significant crisis. economic cycles turn bad because you build up excesses that central banks then pop simultaneously. in context of this whole argument, how long will monetary policy take before has an effect, it is not as if the central bank does something and then it is two years later that some thing happens, but in accumulative effect. monetary policy is weighing on economic activity, and economic activity is resilient. we get a technical recession, we just cut interest rates. jonathan: we always hear that there are excesses and there were excesses. strong balance sheets for consumers and corporate got hold of that, but there was a transfer. you know where i am going, and it came from the physical side. we are sitting here saying there were no excesses on sovereign balance sheets the last three years but there certainly were. kallum: there were two excesses on the major ones sit in the u.s. commercial real estate and

physical -- fiscal. i see the evidence from policymakers that they will at any institution failed, and therefore cause systematic crisis. that is a concentrated problem that we can discount to read when it comes to fiscal, the only thing the u.s. needs to be concerned about is whether or not the bond market thinks this is an inflationary policy at some point, in which case, individuals say you need to raise taxes and cut spending. sort of that, the u.s. can get away with a lot of borrowing. liquid markets, robust economy, fiscal policy supplying growth. by as an investor would you not buy into this? jonathan: and the u.k.? kallum: no. jonathan: that is a problem. kallum: u.k. does not need it. they have political uncertainty and pent-up demand. as long as the bank of england does not cause monetary policy accident, things look better next year. i think it will be difficult. i think 2025 is when we see growth, but we have yet for the

winter, and they should be ok. jonathan: t.k. is not buying it right now. tom: you know what i am thinking, overtake, every time, 10-year real yield at 2.10%. we will have a mickey leavy world of we don't watch it. jonathan: good to see you, kallum pickering. if you're just tuning in, welcome. equities near session those, down by 0.9%. big moves in the bond market, up by eight basis points on a 10-year. 4.4820 on the 10-year, amazing, pushing 4.50 on the two year. phenomenal, to see a getting closer to 5.20. tom: for the non-sophisticates, we are seeing dynamics and changes. the way we look at this is from negative and low rates we saw ages ago. we have migrated sharply up, back to november and december of 2008 levels. when you begin to see us back to

2005 and 2006 levels with some of the rights, that is a changed economy for everybody watching and listening. jonathan: we have had this conversation for the best part of 18 months. one of the number one questions we asked was can we live with it? we are living with it, aren't we? right now. lisa: we are, we are living with that, but are we? if you look at the rates people are paying, who was paying these rates that people are quoting? this is tammy the real existential question. if you have to pay 7.5% on house, are you going to buy it? jonathan: the great refinancing is still to come on the horizon. maturity war and high-yield. all of those worries. lisa: all of them. jonathan: not quite all of them. you can have some of them back. the uaw strike up next with craig trudell. ♪ discover the magnolia home james hardie collection. available now in siding colors, styles and textures. curated by joanna gaines.

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>> it is what we do. i think, you know, forecasts are

useful but only up to a point. there is a certain amount of ambient noise that you cannot get away from. you cannot live with them and you cannot live without them. that is the way you would say that. jonathan: the brilliant jim bullard, the former st. louis fed president, speaking with mike mckee. sometimes twitter gets it done. now known as x. there are great people out there, particularly for the twitter community. this firms to hampton on twitter this morning -- this from stu hampton, could these hawkish forces be interpreted as tacit admission that stagflation is a very real possibility? i will share that again, could these hawkish pauses be interpreted as tacit admission that stagflation is a very real possibility? lisa: the idea that if they do not raise rates further, they are going to tolerate a higher inflation and slowing growth, and that is the preferable recipe for them, which is otherwise known as stagflation. maybe we kind of heard that a little bit in the u.k. in

particular, and that is kind of why you are seeing bond yields in the real and could prior. jonathan: can you get it back to 2% with 4% unemployment in the u.s.? we are answering that question today. lisa: if you billing long and variable lines is outdated and what you see is what you get, there what they are basically doing is allowing things to be where they are as things work into the system and they are talking about stagflation. jonathan: it was interesting to see the gilt market selloff after the bank of england decision. almost 13 basis points in the u.k. on the 30-year, about 11 basis points. just to give you an update on the treasury market, 10-year short of 4.50, two-year short of4.20. tom: we are supposed to be measured and not go omg, but this isan omg day. .9% in equity markets. that really has not moved like maybe it should, but the answer is, bonds are speaking with a

vengeance, and they are buttressed up against breakouts, which everywhere you look at it in the series. jonathan: we are softer here, the s&p 500, negative by 0.9% on the session. lisa: there interesting stories, fedex reported earnings, and you can see those shares popping up this morning after a pre-market trading after those earnings came out. why? cuts to costs, and because they were getting business and able to raise prices because people were switching away from ups because of the strikes, and they were getting some of that business back. i thought that was interesting. up about 5%. again, what are the ripple effects of the strikes? we will talk about that later. we will look at broadcom, cisco buying slunk, basically artificial intelligence, cybersecurity, their bigget acquisiion to date. jonathan: stock does not like it. lisa: no because it is their biggest acquisition to date. they are using their cash.

chuck robbins does. we are going to do to great. jonathan: it has been a long time. lisa: broadcom is interesting, also but is thinking about dropping them as their chip supplier for ai. so the chip wars continue and you can see the ripple effect with broadcom shares down. amazon is a really interesting one to me, those shares lower by 2.7%. nasdaq shares, in general, are lower because they had one of the most inflated by rates, but they are scrapping a planned fee on merchants that do not use their shipping serve -- shipping services. they were under scrutiny for antitrust. they will not charge merchants 2%. which stock investors do not like because you don't get the revenues. at the same time, how much is this going to be a steady push toward amazon to stop monetizing some of their dominance? tom: this strike in america, and it is sobering in london to see a true strike of doctors really clicked in today at the nhs. it is different in america, it is about automobiles.

i find there is a lot of mythology involved. we are not throwing mythology out the window. craig trudell lived the mythology and knows a 1948 fleetwood 60, it is what you bought when you made it after world war ii. what i have learned in the last 48 hours is this has nothing to do with my grandfather's uaw. what uaw are we observing into the weekend? craig: we are observing a uaw that is trying to get its mojo back. this is a union that has given up a lot of concessions over the last couple of decades to try and, you know, get these companies back on their feet and driving. -- thriving. we talked about the car-apocalypse days of 2008 and 2009, the union gave up a lot to help these companies to have a future out of that crisis. you know, putting their

retirement benefits and health care benefits either doing away with them or putting them on the union's, you know, making them union liabilities. we now have a union that is trying to cost some of that back, and companies using this massive transformational change coming to the industry as a wedge to resist that after four years of very strong profits for them. tom: what is the singular power in negotiations that the uaw has right now? craig: we were talking just a few minutes ago about how tight the labor market is in the u.s. i do think the fact that, you know, we are regularly still hearing about, you know, challenges on the part of these companies with finding skilled workforce, i think it is going to be something that we will hear more and more about as we are hearing about thousands of workers being hired at battery plants across the country to

meet biden administration's objectives to go electric, to make this transition from combustion engines to batteries. you are going to need a lot of people for that, and you are going to need people who know how to make stuff. that is what the union has in its favor. a lack of many people left anymore who have that experience. lisa: there are hundreds of cars not being produced right now, cars and trucks, because of strikes. how much will this jack up our prices? craig: it will depend, of course, on what we hear even just tomorrow from the union in terms of what their next move is. at this point, we are hearing about three plants that have gone down about a week now. that is not really going to be enough to meaningfully change things. you also have working in the company's favor the fact that over the last six months to eight months or so, with the chip crisis easy to a significant degree, they had a lot of inventory going into the strike versus what they would have had one year ago. lisa: a lot of factories outside of the u.s., in particular in

asia, have significant proportion of robots doing a lot of the work. is the u.s. moving in that direction, and is this basically accelerating those's questions behind closed doors amongst executives? craig: you see a trend toward automation, but i think it is also the case that you're going to need a lot of labor, even to do manufacturing of batteries and electric vehicles that, you know, have fewer moving parts. even tesla has an awful lot of people at their plants in california and texas and in china. you still need a lot of labor to put these vehicles together. is there a sort of ever moving change toward more automation? absolutely. are these companies still going to need a lot of people? that is still the case, as well. jonathan:jonathan: let's finish on u.k., prime minister sunak pushing back the date for the transition from edie's to 2035 --ev's to 2035.

is that electoral strategy or a reality check? craig: very much the former. i think if you look into the fine print of what boris johnson announced just under three years ago, this was the plan all along. it was always going to be the case that petrol and diesel cars are going to be allowed, they just needed some lecture occasion -- electrification from 2030 22035, so this is the doing away of an announcement that was misinterpreted and misunderstood the last three years. it is a lot of theater. what we see in the next day or so, as the ft reported today, we will get a zero emission vehicle mandate particulars almost into october and we still do not know is an industry how many eva's we have to sell to comply with rules of the u.k. it is a mess. tom: i am asking for a friend, can i take a london taxi and bring it to america? can you bring it over? craig: i learned the reason for the design of them, the top hat.

the reason was for gentlemen to be able to keep their topcats on. tom: i do that -- top hats on. tom: i do that. jonathan: craig trudell of bloomberg, thank you. we still have a lot to talk about today. one hour from now, we will be sitting down further bloomberg credit forum in london. we will catch up with jim ze lter, joining us in the city, and what a time to have a conversation. just amazing with the 10-year pushing 4.50 and the two year getting closer to 5.20. tom: can we be sure we have a moonshot in the 10-year real yield? we can do that. lisa: not just that, but does this change anything for them that people do not expect him to go down anytime soon? jonathan: a bloomberg surveillance special, live from the global credit forum, hero bloomberg, coming up in about one hour from now. from the city of london, good

morning. ♪ ♪ explore endless design possibilities. to find your personal style. endless hardie® siding colors. textures and styles. it's possible. with james hardie™.

>> good morning from new york city. i am matt miller in for jonathan ferro looking at futures that are substantially down and rates off to the races. the countdown to the open starts right now. >> everything you need to get set for the start of u.s. trading. this is "bloomberg the open with jonathan ferro. matt: futures fall