>> there is a risk that inflation may become sticky. >> it's going to get very messy to >> read the inflation data. >>there is some concern over inflation until that crystallizes, consumer spending looks pretty solid. >> the u.s. consumer is a standalone is very strong right now. >> this trend is not completely drought. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. >> live from new york city, good morning for audience worldwide.

bloomberg surveillance starts right now. looking ahead to cpi data. your equity markets shaping up as follows. equity futures negative in terms of 1% on the s&p. the nasdaq 100 going nowhere. shaping up as follows for the big data points around the corner. after that is chairman powell volume two on capitol hill ticking off at 10:00 eastern time. we do not need to be in a hurry to adjust our policy stance. dani: we have that in bold which is why people are looking at the cpi report we get today as really confirmation, the nail in the coffin of an rate cut anytime soon. it's what you feel in markets leading up to it that cpi print, the 10 year treasury auction and then chair powell reiterating they have no need to move anytime soon. manus: it feels like the hurdle for -- jonathan: it feels like the hurdle for rate cuts has gone higher. the dam is kind of breaking in

corporate america. the ford ceo, what we are seeing is a lot of cost and chaos and that it was ken griffin at citadel, that voice carries a lot of weight in washington dc with republicans he was pushing back big time. annmarie: saying the bombastic rhetoric, the damage has been done. talking about how the threat of tariffs are really unhelpful for multinational companies. what's important is ken griffin voted for trump trade he is a longtime republican donor so this carries a tremendous amount of weight. the ford ceo talking about how terrace coming critically damaging to american auto companies and could actually help companies coming from germany and auto manufacturers and those costs from south korea and japan and yet ford is an iconic american brand. that will also carry a tremendous amount of weight. >> i keep saying take a step back. take a step back we are only in week four. but we spend months talking but

a progrowth administration coming into power there was going to do things we needed to see from the previous ms. ration was not doing. back in still all happen over the next four years but the way it started is a bit of pushback. >> and it has happened with respect to the cfpb. but going back to ken griffin, he didn't just talk about what tariffs do when they are enacted. he also talked about the threat of tariffs even if they are never enacted he said they are a bad negotiation tool because they so permanent mistrust with allies and degrade the terms of engagement. there's a big question where if you use one tool for a whole host of economic purposes. it can really cause messiness that leads to none of those purposes being accomplished. >> more balance than the headline suggest. celebrating the work that doge is doing which is something we've not seen enough of in the past few weeks in the media. annmarie: deftly not yesterday when he was getting questions

about what they are doing and talking abut the fact he is writing and willing to share what some of doge is doing great a lot of corporate america likes to see that. they like to see the six 5000 people have offered to resign do so. but there's can be a lot of questions on capitol hill on the extent of what elon musk is doing especially in the courts and also when it comes to the pentagon jonathan and those contracts that his companies hold. >> the average american is happy to see some of this as well. the average american pays about half $1 million in taxes. when you break it down to that and you hear numbers that one to 2 million is going here or there and you're sitting there thinking that is a total waste of the money that i'm handing over to the federal government. i thing a lot of people would be happy that they're doing something about it. >> every business executive has talked about that. it is so important to run it like a business in the sense you go line by line and go through what's necessary and what is not. the method is leaving a lot of

people unnerved because there is a lot of back-and-forth. people getting fired and then getting fired again. talks about how it's completely transparent and yet a lot of people don't have a clear sense of the accounting exactly how they're going about creating efficiency and what their parameters are when their allegations of fraud. jonathan: we will head down to the nation's capital to get the latest on that story. right now equity futures softer by not even 1/10 of 1%. coming up we will catch up with jeff ahead of fresh u.s. inflation data. terry haines of pangaea policy and robert sockin as chairman powell signals more passions. u.s. cpi at 8:30 eastern time. you've been writing survey and market expectations reflect tariff risk. we think the fed will look through the short-term inflation , welcome to the program sir.

what would constrain their ability to look through it? would inflation expectations pushing higher change their story for you? geoff: absolutely. it is about expectations not just in the u.s. but globally. what i am more interested in is let's assume hypothetically you see it coming through inflation expectations. what is the reaction function. here you can get some interesting divergence. if you look at those exporting to the u.s. they're worried about the demand loss, respectively stronger dollar generating inflation risk they will probably be inclined to cut rates. in the u.s. how do you respond because it's not necessarily a demand shock. it will be a short-term inflation shock. or realize to actually hold steady or do you try to lean against it and that will be part of the internal policy discussions globally. lisa: it's also a question of where inflation expectations are rising. if they are rising over the next two years, over the next three

years, does the fed take notice? annmarie: i think -- geoff: i think they will whether there's a gap with the short-term and medium to longer term and if i try to translate that to the fx market, for volatility if i look at short-term has been higher. dropped a bit but it's elevated. medium to longer term. not far for we were last year. so we get a sense the markets don't see too much permanence in the tariff impact yet and that's why we feel there might be a bit of a miscalculation. >> on the part of the market, that people are taking it seriously and that it should be transmitted more significantly in currency markets? >> i think in terms of global trade we are not going to see that great moderation moderate -- globalization which is a d amplifier or something that depressed volatility structurally over the past two decades or so. that is going to start to pick

up. and you are seeing i don't want to use the word fragmentation per se. it's not going to be smooth in the past. if you look at how supply chains are changing. trade is a share of growth has been staggered for several years now. that has to be appreciated across asset classes into various forms of risk premium. i don't think that's been reflected yet. >> are you talking about you could see stock setting off more significantly and credit taking more of a hit or are you seeing this play out in other asset class. >> i think we need to be very sector specific and sometimes even company specific. if you're a stock index that exposed to globalization the needs to be a higher premium and were talking but the exporters in europe and asia where is in the u.s. one aspect of u.s. exceptionalism which we still believe in is the u.s. is less exposed, essentially self-sufficient economy, though there is a bit of a swing there.

in that sense probably the u.s. is less exposed so is incumbent on them to price into that as well. let's see how this goes if this is just short-term. but i think there is a structural risk premium that been reflected especially in currencies and also within equity markets as well. >> since you think the fed will look through any short-term inflation pop from potential tariffs what happens if this is now short-term. we've been hearing is this is more pervasive because trump wants to use tariffs as a threat and negotiating tool potentially for the next four years. >> let's see if it's a supply shock or translates into demand shock. higher prices, does that because a pullback in spending or due to a reassuring back into the u.s. does that actually generate more and real incomes continue to rise enough to offset that supply shock from higher inflation. that is still a possibility for the u.s. sprayed we will have to wait and see.

if you listen to the central bank and member's of the european bank for example there outright dismissing the upside inflation impact and no matter what happened, tariffs will result in a demand shock and you need to offset that with rate cuts even if a lower currency high dollar will import inflation preyed the demand shock will be more than enough to offset that. so there will be very different reaction function, the fed versus elsewhere. >> let's stick with the potential supply shock we could see. does that have to be paired with tax cuts? >> so for tax cut that brings in the official angle as well. if you are group tax cuts could happen along the lines of fiscal consolidation the u.s. which there are attempts at engagement within d.c.. but i think the market will take that if it's done without the medium to long-term fiscal, i think there will be a term premium attached there as well.

we look at the flows not just onshore but offshore. it doesn't seem to be too much concern with respect to the u.s. bond market right now. so fiscal credibility, u.s. as reserve currency. treasury is a reserve asset that still very much in place. if there is fiscal headroom to borrow u.k. phrase. there might be tax cuts that can still be pursued. especially for generates the growth to keep economists sustainable and pay for liabilities. >> i think a lot of people might say the economy is still ok. gdp between two and three. beyond that earnings are pretty decent jan just big in america's things seem to be ok. what i do need is to know that the fed is there to respond to downside risk. if we believe the hurdle for cuts is because of policy uncertainty. i want to know whether you think that's their ability to respond to downside risk in the short-term. if the bar is higher now is the

data now that would've generated cuts three or four months ago but doesn't anymore? geoff: i think on a forward-looking basis they will need to incorporate more variables and x-ray get to the point about you need to insert an element of premium risk premium into the asset class. fx markets higher volatility it costs more to hedge your risks. i think that's pretty straightforward and you'll see similar aspects. one interesting challenge the u.s. exceptionalism is maybe there's good news elsewhere as well. it is not just good news. a rising tide lifts all boats. see the flows going into asia where global plans are very much under positioned and maybe that is a challenge to excessive allocations in the u.s. but that is not in a bad way. if there is value to be had elsewhere outside of the u.s. spread the portfolio can grow, i think that can happen in a positive environment as well. that's potentially a challenge

but not in a bad way. >> good to see you as always. if you want to see that moving away from u.s. equities international. growth differentials need to narrow. the u.s. can underperform or you can see some good news from abroad. i don't see much of that right now. kind of seeing that in a big way to start the year. we've seen that sustainably you need growth differentials to narrow and better news from elsewhere. >> we were focusing in terms of the surprise. they are flat on their back but to move the discussions whether it was byd yesterday coming out saying they would put automatic driving and lower the price point, tesla shares got hammered. tesla shares a been hammered all year. you've increasing corporate competition from china. a lot of people are making note. >> a second day of testimony

from fed chair jay powell on capitol hill. equity futures in the s&p negative by 1/10 of 1%. it's your bloomberg brief with dani burger. >> president trump and elon musk appeared together in the oval office yesterday where trump signed an executive order providing new guidance for federal agencies to implement his initiatives. trump said they had resulted in the discovery of millions of billions of dollars. han high says it's opening to buy nano stake in nissan offering the japanese carmaker a lifeline. the taiwanese company has approached nissan and honda about potential cooperation after the two said they are thinking of ending their alliance talks. goldman sachs ending its policy of not taking, based public that have all white male boards. they would only if it included two diverse board member's include one woman. goldman the latest of many

companies rethinking di -- d.e.i. policies of the trump election victory. that's your brief. >> appreciated. up next on the program. elon musk in the oval office. >> transparency is what builds trust. not somebody just asserting trust. not summary saying they are trustworthy. you can see what's going on. and you can see it doing something the benefits when my companies were not. it's totally obvious. >> terry haines a pangea policy live from new york city this morning, good morning. ♪ ♪♪ only servicenow connects every corner of your business, putting ai to work for people.

pfft ... every corner? every corner, nick. ow! so kate in hr ... hey kate. can focus on people, not process. oh actually, i have a question ... keep up, nick. do you have to be sick to take a sick day? patty in it is using ai agents to deal with the small stuff, so she can work on the big stuff. agents like secret agents? secret agents i control. with your mind? you know ... i played a secret agent once. - we know. - oh gosh ... i liked it. over here, ai gives tina the info she needs to get the job done. nick, what did we say about touching? no touching. good. ai helps jim solve customer problems before they're problems. for reals? for reals. for reals. servicenow is the only platform that connects every corner of your business, putting ai to work for people. oh, so we all work better, together! my work here is done. excuse me, which way back? uh, follow him.

you know what's brilliant? which way back? boring. think about it. boring makes vacations happen, early retirements possible, and startups start up. that's why pnc bank strives to be boring with your money. the pragmatic, calculated kind of boring. jonathan: equities just a little bit softer here down by 1/10 of 1%. totally unchanged in the market

on the 10-year at the moment. 4.5373. elon musk in the oval office. >> transparency is what builds trust. not summary simply asserting trust. so not somebody saying they are trustworthy. you can see, doing something the benefits my companies were not. it's totally obvious. >> if we thought that we thought that we would not let him do that segment or look in that area. a lack of transparency or interest. jonathan: president trump and elon musk defending their cost-cutting efforts doubling down on efforts to slash the government workforce preyed ordering agencies to work with the team and limit hiring. terry let's talk about policy. from your standpoint the things that they are doing right now led by elon musk, are they pushing the limits of authority or do you think they're able to do the things they wish to do. >> i think the absolute can do

that and good morning to everybody. the situation is pretty simple really. trump has got an that has gotten elected twice promising to break things in washington which he and now the majority of the country judged to be broken and in dire need of improvement. most of the country sees this is an improvement and among other things he's enlisted the very successful businessman to help and is there any sort of constitutional crisis here in a situation where there's a credibly president muska don't think so at all. >> the washington journals reporting the trump administration is talking about whether to potentially collapse the fdic to the treasury department. at what point does congress need approval of what they are doing. annmarie: congress will end up having to approve a lot of this

stuff for trump is going to on reorganizations. or face rejection by federal courts. going down. constitutional lane for one second here. what this is really about it's not a constitutional crisis but a struggle between the president and the legislative branch about exactly what the president's powers are and how much power he has over the executive branch. all these departments and agencies, the fed and the sec exercise presidential authority yet the president is hamstrung on how he can organize the executive branch and make it run in the most efficient manner. that's really what's going on here. and it's going to take some time to play out. >> the president speaking alongside elon musk saying if i need a vote of congress for fraud and abuse, it is easy. you been in d.c. for decades but is it fraud and abuse what they are finding.

are we just looking at a bloated bureaucracy. >> looking at a bloated bureaucracy and certainly the stuff that's come out in public from usaid and the like. certainly there was a lot of abuse there i think. fraud is probably going to be somewhere. but we haven't seen that yet. i think at root the -- what's going to happen is in a practical sense answer your question, trump wouldn't be pushing as hard and fast as he is if they really thought congress could get that vote and approve it easily. you need 60 votes in congress in the senate to do most anything. they do not have 60 votes so therefore what they are down to now is having to kind of break some things and move in this relatively unconventional way because they are judging that conventional ways of doing this quickly and well aren't open to

them. lisa: ken griffin represented a lot of people right now saying he is grateful there is a review and that there is some sort of effort to make the government more efficiency. elon musk said is the most transparent effort ever. it's been complete a aboveboard print do you agree it's been transparent completely going about creating these efficiencies? terry: it seems to have been so far. we have the presidents word, the secretary of the treasury's word. i think we have, i don't want to put powell in the crosshairs but we have his word and from yesterday in the sense that he testified that the fed continues to work with the payment system and the like. and that that is going as it has. beyond that, there will be some concerns. the government is going to be in multiple courts now talking about exactly what they are

doing, why they are doing it and putting themselves on the record. there's going to be another shoe to drop. we will see if that confirms what they've said or not. lisa: there's a philosophical discussion about how much you can treat the government like you would a corporation. one thing elon musk said yesterday was i am not 100% right. if i make a cut that wasn't necessary i will hire the person back. he says some of the things i say will be incorrect, nobody is going to bat 1000. can you run the government that way where you can lay people often bring them back in. is it advisable to try and create more turn and less of a sort of legacy bureaucracy. >> i think it is not optimal in a broad geopolitical sense. two of the biggest things that are going on right now are this kind of efficiency push and both in terms of what's being spent and in terms of the personnel

needed to execute policy. on the other hand what we need is a very strong focused bureaucracy to support geopolitical goals of all kinds including foreign policy as well as economic policy. so i guess i urge them to understand the break just breaking china imperative. at the same time owed urge them to look a little bit more strategically to make sure that what ends up happening is strong support for trump's actual goals. >> appreciate your time there sir. the latest effort down in washington dc. there's a lot of people sitting there saying this is what we voted for. if you take some time on blue sky it's a constitutional crisis every day at the moment. we have to find some common ground. if people are going to lose their job it should be done with dignity. there's also a lot of waste. when we find that waste we should all get on the same page and say it's not the position of government to be spending our money in the way it's been

spent. there's also a lot of hard-working americans that don't work in government. and what the government has been able to do in the last three to four weeks is demonstrate how some of that money has been wasted. lisa: it is never popular to cut people's jobs and that's why this will get passed through congress. a lot of special interest people don't want to get cut which is a reason why it's being done in this manner. you are correct. just do it with dignity. that's one area people have been pushing back on. i am struggling with that point. we read different media and it is polar opposite views of the world and you just wonder how you can come to some consensus where don't you want to cut waste. >> republican say we are cutting waste and making the government more efficient and through trump's exec in order they can do this with more of a find. chuck schumer described them as an unelected shadow government conducting up hostile takeover.

so it really depends on who you ask. terry made a great point. this will be held up in courts and the courts will be able to decide. jonathan: you have to be able to accept that some of the things that have been found over the last four weeks it's not the role of government to be spending money on certain theater objectives in certain countries and a think nowhere am going with this. it's not the role of the u.s. government. it's not how taxpayers want to see their money going at the moment. lisa: when you move this fast you can come up with a counterexample to everything. this is why it's been so difficult to get our arms around it and characterize it. jonathan: we will talk about the banks and just a moment. chris joining us on the big outperformer of the year so far pretty this is bloomberg. ♪ no. i can do some research. ya know, that's backed by j.p. morgan's leading strategists like us. when you want to invest with more confidence... the answer is j.p. morgan wealth management

jonathan: it has been a total snooze in the last 24 hours. equities yesterday totally unchanged. s&p 500 down by about .1%. lots of talk about. the upper performance of banks in a few moments. meta, what a stand outperformer. 17 consecutive days of gains for mark zuckerberg's meta. lisa: yesterday with a 0.00%. basically flatlining. snapping the longest streak going back to the 1990's for a mega cap company of this size.

how much this has to do with messaging and how much is a reward for telling how you can use ai in a monetized way. jonathan: talking about kevin gordon of charles schwab. tesla has been held back, really underperforming. remarkable what we are seeing. lisa: these are different stories. tesla has the ability to talk about how self-driving is the way to go. they have one hiccup. china is a major competitor and they are leaning in hard. how do you become friends with a country that was to kick your legs out from under you financially when it comes to the pricing but also when they want to dominate the industry? jonathan: it's a diplomatic dance. that's for sure. equities. bonds look like this. $42 billion of 10-year notes coming up a little later. big debate about how that cash is used. 10-year at the moment, 453.94

. lisa: yesterday's auction was fine. no drama. 10-year will be interesting at a time when you said it well. the bias is maybe inflation is creeping higher. concerns are more prevalent and a fed chair saying we are not doing anything. we are in wait and see mode. that raises the question about what fair value is for longer-term yields. jonathan: 10-year yields retreating. let's see if they retreat later on with the cpi data. i want to talk about the euro. hanging over the currency still is the threat of reciprocal tariffs. we are still waiting. there's a possibility or potential the announcement comes this week. 103.84. lisa: if we get reciprocal tariffs, this does not go on until march 12. at what point does the tit for tat for discussions hamper business appetite if they don't

get put on? that is what ken griffin put out there. i'm interested in the longer-term potential ramifications of the threat, even if they don't go on. the only thing we have right now is rhetoric. jonathan: we talked about the degree of confidence coming into 2025 skyhigh for consumers. consumer confidence is a little softer. business confidence is still elevated but there was some clarity and they wanted fast. they wanted to hit the ground running. they got a sense of that at the world economic forum. the confidence from american executives was palpable. they wanted to make hiring decisions, decisions -- capex decisions. they can't until the have clarity on the monetary policy. lisa: there will be that clarity, the dealmaking. look at banks. how long does this grind on before people challenge that? annmarie: i don't think they

will get clarity. we have been talking about it. going back to the idea of dealmaking, m&a, animal spirits. this january was the lowest convective 2015 when everyone said this was going to be the year of doing deals. everyone is on pause until they get clarity, which might not be coming. jonathan: welcome to the program. equity futures down by about .1%. some of the top stories. jay powell telling the senate banking committee the economy remains strong and he's in no hurry to cut interest rates. powell heading back for day 2 of his testimony. lisa: i wanted to dig in more on the banking sector and regulation. he talked about how it's important to take a fresh look at regulation and they can go too far. he leaned into a more pro-deregulation point of view. senator warren cannot and eviscerated him and said that cop is out of the building. jonathan: some good one-liners.

lisa: she does. jonathan: the constituents, that is all this is for. lisa: social media. annmarie: it's already on x. for powell, it's a master class of not how to answer questions if you want to punt. two things that caught my eye. we will make better policy and get inflation lower if we stay out of politics. aka, stop asking me about donald trump. he said -- this was a nudge and momentum for the fiscal hawks. there is no time like the person to start working on this. he was talking about the federal budget on this unsustainable path. that will be important when they talk about this reconciliation package. jonathan: later on the program, congressman french hill, who will be leading the effort to grill fed chair jay powell later on this morning. he will join us at 7:15 eastern time.

jim farley heading to washington to deliver a warning to lawmakers, saying 25% tariffs on canada and mexico would be devastating for u.s. automakers. ken griffin also criticized tariffs as a bad negotiating tool. lisa: he talked about how ford has skin in the game. they all must have nothing to lose by coming out and aggressively lobbying this administration against going through with this. ken griffin is more interesting. he doesn't have the same skin in the game. he talks is a global statesman type, a global investor. his concern about threatening tariffs and with the does to undermine some of the credibility with allies, katmai take notice in more places. annmarie: we have mr. farley going to washington, d.c. to have that out with these members of congress. he's not just talking about the fact it is a global street fight. you mentioned byd, what's happening with china dumping another markets and how he wants

to preserve the supply chain they have. making forward pickup trucks in mexico, engines and canada, and bringing the cost down for american consumers. he will be lobbing congressman about keeping some of the provisions in the ira. they put so much money -- when they thought the direction of travel was electric vehicles. jonathan: more on that later in the day. i wanted to squeeze this in. elon musk making a rare appearance in the oval office alongside president trump, defending their cost-cutting efforts with trump hoarding federal agencies to work with the doge team to slash their headcount. effective financial markets. the sector outperforming so far this year, the banks. chris marinac writing, "there is sincere optimism among major regulatory reforms, sparking lending, more profits, individually more mergers." good to see you. does policy uncertainty hold any

that story at all? chris: i think it's a faded complete. if you go back to 2017, it took six to nine months to make an impact and that is the zone we are in. june and july will look a lot different. most banks are talking about the first quarter. it gets stronger the second and third. we are teeing up exactly how we thought it would play out. jonathan: chairman powell was talking yesterday and said the capital levels are about right. that is a change in tone. there was a fear this could get a lot worse. what is that change in terms of capital return programs? chris: buybacks can be more popular. stocks are getting more expensive but there's room for the stocks to run. you will see dividends go up but you will see companies using capital to expand. more external acquisitions. it can be a very healthy environment. lisa: is a good for banks because it's going to be -- it will juice activity more

broadly? is it good because it will allow them to take back some activity that has left the center -- sector and gone to the shadow banking sector? chris: i think it is both with the second point is important. leaving the marketplace has been traditional on loans that are going to private credit. they are funding through the balance sheets. it would be profitable to lend it themselves then put it through the shadow banking market. lisa: can you give us a sense of how much the banks of business? what margin of that could potentially come back? chris: in terms of the last three years you have seen about 20% of the lending done outside the industry. i think you can see a third of that come back, maybe more. i'm thinking in terms of 2025 to

2027. it's big numbers. the traditional banks, it was difficult to do that from a regulatory standpoint. when you unwind the regulatory side, business can flow back to the banks will step annmarie: gemini. -- back to the banks. annmarie: m&a. everyone was so excited. chris: there's a confidence level when you get the case files at the end of february or early march. to some extent the uncertainty of knowing the clarity of what will happen with the deportations, the tariffs, some of the regulatory collapse, it takes time. march, april, may will be stronger than you had in february and january. annmarie: what you you do when you have to live with the uncertainty? it is pervasive for four years. chris: you always expect the unexpected with this administration. i think they are trying to do

good in terms of making it easier for businesses to lend and do what they do. we will head in the right direction. it happened the last time. ultimately there is a tone out there that there is less combated agencies. there will be a more pro-business tone. that will make an impact on how businesses conduct themselves. thanks lend -- banks lend. more deposits in the systems. i think it helps the midsize and small banks more. jonathan: what? -- white? y? chris: they have seen a tight grind down of regulations. then they can grow at 5% to 7% instead of 2% or 3%. growth was limited in the fourth quarter. there's more capacity for the midsize banks to lend. jonathan: what consolidation would you anticipate in the sector? chris: we have 4800 banks in the

country. i think we will go down to 4000. we probably see fewer regional banks over the next two to three years. i think a few regionals will marry. it healthy for everybody. if you have a truest type merger, it will lead to other lending in the midmarket. that will probably play out and you see this moving of the shells among the midsized and smaller banks. lisa: there's a question about how much of the rally is the beginning of the financial sector or how much is playing out this optimistic story for the rest of the year. come much more oxygen is there? chris: thanks traded at 15 to 16 times forward earnings in 2017. we are at 12.5 to 13 today. there's a multiple point extension still at -- expansion still out there. , more lending activity, particularly when you think

about the second half of the year and comparing it to 2020 six. 6. jonathan: that pitch is what every american banker at davos is as confident as they were. lisa: not only the tailwind of deregulation but a lot of companies with a lot of money to spend who have been on the sidelines for quite a bit of time. you have the other aspect, the efficiencies from different machine learning programs. that's another kind of cost savings center we have seen. jonathan: bank stocks up on the s&p 500. chris, thank you for stopping by. equities now on the s&p still just a little soft. down by .1%. with your bloomberg brief, here's dani burger. dani: president trump hailed the release of american mark vogel, a schoolteacher detained in russian since 2021. he said he hoped it would allow the russians to work towards ending the war in ukraine.

the president hinted at another release, saying somebody else very special is coming home on wednesday. according to reporting from bloomberg, the small business termination notices to probationary staff members, then told him the notices were sent in error. only for some of the staff members to be later informed they were indeed actually fired. shares of heineken are surging in the dutch trade, up more than 12.3%. they reported strong sales and announced a buyback. the rise in volume is driven by strong demand for premium brands and on echo holly products, all beating analyst expectations. that is your brief. jonathan: more from dani and 30 venice. no rush -- in 30 minutes. no rush to lower rates. >> inflation remains somewhat elevated. longer-term inflation excitations appear to remain well anchored. jonathan: that conversation is

up next with robert sockin of citi. you are watching "bloomberg surveillance." ♪ actors. we can make you believe we know what we're doing. when, in fact, we do not. whoops. i have no idea what these buttons do. i've never driven a stick in my life.

but my hardest role yet? small business owner. because i have no idea what i'm doing. but godaddy airo does, using ai to build a logo, website and social content... for walton goggins' goggle glasses. because if your goggles ain't goggins, they don't belong on your noggins. with godaddy airo, it's like you know what you're doing. ♪ three little birds ♪ ♪ (steel drums playing lightly) ♪ (♪♪)

(♪♪) (♪♪) (♪♪) (♪♪) (♪♪)

jonathan: inflation data at 8:30 eastern time. a snapshot of the price action. equity futures down by about .1%. just about unchanged on tends. -- ten's. no rush to lower rates. >> inflation has eased significantly in the past two years performing somewhat elevated relative to our 2% longer-term goal. longer-term inflation expectations appear to remain well anchored with our policy

can significantly less restrictive than it had been. the economy remaining strong. we don't need to be in a hurry to adjust from a policy stance. reducing too fast or too much can hinder progress on inflation. jonathan: investors bracing for january inflation data have additional testimony from fed chair jay powell on capitol hill. robert sockin writing, "good inflation is likely to remain modest but take up later in the year if trump's 10% tariffs stick." based on what is on, the 10% tariff on china, how quickly will that show up? robert: we could be getting more news this morning the way things have been coming in. if it is just the china tariffs, that probably shows up in the spring. probably going to be worth ten

on inflation. if more things announced have yet to start, steel and aluminum, mexico-canada tariffs, you get into bigger numbers. jonathan: do you think expectations ultimately to what's about to happen? robert: that's the challenge. right now it is fairly mixed. you had a big jump in the university of michigan survey. only short-term expectations for the most part. some other measures have been more quiet. the new york fed has a shorter-term inflation expectation measure that was fairly contained on the month. it is unclear if consumers or businesses are getting worried about large pickups in the short-term. that is what we have to monitor. i would describe the data as concerning but not overly concerning. lisa: let's talk about the data we will get through today. an increase in consumer price inflation would mark the fifth

out of six straight readings of cpi that are stuck at that 0.3 level. it raises the question of how sticky things are. what are you seeing that persistence in inflation in the underlying composition? robert: the key there is one we look at the good side of things, you look at cpi, pce, not much to be too concerned about right now as we talk about the tariffs. it's on the services side of things. you have had very high, sticky shelter inflation. that has come down more slowly than most people expected, including us. it is starting to come down. you will see more that in this report. he will be gradual but you will see more of it. i'm fairly confident that will continue to fall. for me, gets concerning with the non-shelter services which have been sticky throughout all the inflation data. those are going to come down

given the labor market stabilized around solid levels, including wage growth stabilizing as well. lisa: if you put those ideas together it goes to the psychology of the consumer and how they might be more acceptance of prices that are more fungible. it's one thing if you know you always get some bread for $2.99. if occasionally it is $3.50 and and then he goes down, you care less. does that set of this economy for being more susceptible to an inflationary shock because people are not as sure the prices as they were five years ago? robert: absolutely. on the flipside, even though we saw enormously high inflation throughout the cycle, consumers cap spending. the surveys were not happy but they kept spending. i think the economy has proved resilient, particularly the consumer. this is a new type of shock. especially on the tariff side,

the type of goods you could see increase could be substantial. on the one hand you have seen this resilience. on the other hand, given we have not seen these tariffs for a while or a large shock, you can get nonlinear behavior from the consumer. annmarie: powell was asked about this. he said it could be a possible outcome that tariffs could mean more inflation. we are talking about the tariffs the united states will put on. what happens when you add in the retaliatory effects of other countries? robert: we have done a few pieces looking -- modeling out tariff scenarios. i key message is the outcomes for the u.s. and the world are much worse than a retaliatory environment. we have seen that when tariffs were announced on canada and mexico. they were preparing retaliatory tariffs.

it's realistic other trading partners will sit by as the u.s. puts tariffs on them. you can have those effects magnified on the growth side so the negative effect is larger and you can get a large spike in inflation as well. i think basically you could get magnifying effects from retaliation. annmarie: we have not talked about the labor market. what happens with deportations? do you see higher wages? robert: this is the real challenge. what powell was dancing around is there's a lot of inflationary risks. right now what we have seen is a tightening of the southern border, which was happening in the biden administration. that was likely to continue. we are likely to move back 2019-2018 migration flows. what happens with those deportations? the risk is if you have it on a large scale, especially in certain industries that rely on

this labor like farming or restaurants or construction, you could get a significant tightening in the labor markets, boosting wage growth and prices. we have a lot of people still permeating into the labor market from the last two years given how high the immigration flows were. that doesn't happen. right now it's only a few weeks into the administration. the other key inflation risk we are watching. jonathan: i will make an observation. the bond market can do the talking. is it an inflation story or demand story? the sequencing is different. in the short to medium-term it could be an inflation story. further out it could be a demand problem. that is why we are seeing a flatter curve in the last four weeks. just an observation of what's happening in fixed income. lisa: i'm curious how jay powell things about short-term inflation excitations rising, even if it doesn't mean longer-term inflation echo vacations and growth rise. do they look through that? it's a temporary blip for five

years. jonathan: inflation excitations beyond just a year, that matters. that's why the market was spooked on friday. we need more than a survey for the federal reserve to make a change. the federal reserve cares about you mitch. lisa: you look at breakeven rates reflecting the same thing. you can say it is just university of michigan. traders are pricing in the highest inflation in the next two and five years going back to 2023. it is taking notice across other instruments as well. jonathan: and casey go to the university michigan, we care about your school. we care about the survey. lisa: i know some people over there. jonathan: you should ask. robert, good to see you. robert sockin of citi. up next, we catch up with congressman french hill, bill dudley, and kelly and shaw. --

kelly ann shaw. the next hour of "bloomberg surveillance" is up next. ♪ i headed? am i just gonna take what the markets gives me? no. i can do some research. ya know, that's backed by j.p. morgan's leading strategists like us. when you want to invest with more confidence... the answer is j.p. morgan wealth management

the way i approach work post fatherhood, when has really trying toith understand the generation that we're building devices for. here in the comcast family, we're building an integrated in-home wifi solution for millions of families like my own. in the average household, there are dozens of connected devices. connectivity is a big part of my boys' lives. it brings people together in meaningful ways.

>> it is going to take a very strong inflation report to push the fed off the cutting expectations. >> we are not at the peak of inflation. >> the ability to cut deep into 2025 is going to be limited by this inflation picture. >> inflation is coming down. the fed does not need to do anything for as far as i can see. >> it is hard to know is

happening with inflation until you get a little more clarity on all these uncertainties. >> this is "bloomberg surveillance." jonathan: doing ok? lisa: what do you do when you're on air? it is water. jonathan: it's just water. you are good. lisa: let's move on. everybody, let's move on. jonathan: cpi 90 minutes away. she's ok. equity futures on the s&p 500 look like this. negative by .1%. just about unchanged on the nasdaq 100. firmer on the russell small caps. inflation data at 830 eastern time. -- 8:30 eastern time. this could be the difference between this newsfes -- a snoozefest and not. we could get information from cpi. lisa: 0.3% per cpi month over

month, the fifth out of the six past readings that were at .2%. that is -- .3%. that is sticky and problematical people exciting -- for people expecting it to be different. the fed is becoming desensitized to the possibility of cutting rates this year. annmarie: one catalyst for inflation risk is this policy uncertainty when it comes for tariffs and how tariffs are being used as a tool for national security, realigning global trade. we are hearing that from corporate america and from jay powell yesterday. he was pushed about what this means and finally got to the potential. it is a possible outcome. jonathan: the incoming administration pro-business. getting just a little bit of pushback. sensing frustration. it is still early days but this is what we are hearing from the ford ceo jim farley who will be

in the nation's capital later today. a lot of cost him a lot of chaos. from ken griffin, the man has given a lot of money to republican causes. "from my vantage point, the damage has been done." lisa: you can make an argument for tariffs. they do rip up a lot of the past normal. it's been a globalized supply change for auto manufacturers. this is what ken griffin is getting at. , of this is telegraphed in a sequential way to understand what we will end up with in the end? annmarie: what ford needs for a branding perspective for someone like donald trump who wants to lean into american first. a 25% tariff across the mexico and canadian border it will blow a hole in the industry you have never seen. when he says there is a global street fight going on when it comes to global automakers. jonathan: you cannot judge the

policy platform when it's incomplete. the problem is it is drowning in tariff headlines, which is not helpful. the regulatory efforts will continue -- dereg of efforts will continue. -- deregulatory efforts will continue. lisa: howdy look past something if you can't understand the end? the ceos are feeling it. jonathan: feeling the heat. s&p 500 just a little softer. lisa: i'm not feeling the puddle. i was going to unplug my thing. really? what else have a going to talk about. i have a little itch here. there you go. jonathan: coming up, lisa shallett, congressman french hill, and former nec deputy

director -- was that real? kelly ann shaw will join us a little later. let's begin in washington. jay powell kicking of day 2 of testimony. he told lawmakers the fed is in no rush to cut. chair powell: inflation has eased significantly but remains somewhat elevated relative to our 2% longer-term goal. longer-term inflation quotations appear to remain well anchored. with our policies and significantly less restrictive than it had been and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance. we know reducing policy restraint too fas could hinder progress on inflation. jonathan: joining us now is mike mckee. welcome to the program. was there any difference between what we heard from chairman powell in the news conference and will be heard from him

yesterday? michael: there was not. that is part of the reason people are confused about what is going to happen next. everybody is confused. it is not as business people. it is the fed. they don't know what the trump policies are going to be. they can't really plan for what the impact of the economy is. you mentioned down the road we will know more. we go from tariffs into the government shutdown, and to the debt ceiling, and as you said, taxes. none of that is easy for the fed to figure out what the impact is going to be. the one thing powell said was we are not going to -- he went back to the phrase we love. we are not going to guess what happens. we are going to rely on the data to tell us what the impact on the economy is. lisa: he said the neutral rate was substantially higher. that made people take note. why that is different in terms of how he's characterized it in

the past? michael: mostly in the past he said we don't know what the neutral rate is. he's made the accurate observation that you can't really know until you are looking backwards at it. the fed has come to the conclusion the economy is able to grow faster without serious inflation that it had in the past. we've had over 3% growth for the last year, year-and-a-half. if that continues, it tells you you will need a higher interest rate to slow demand and bring inflation down. that is what they are working with now. the flipside is, which he did not get into but said at other times, if the neutral rate is higher, how long does that last? is it just temporary or a permanent condition? jonathan: michael mckee, appreciate it. torsten slok is made that k 70 times? -- made that case how many times?

lisa: the market is pricing at the possibility of rate cuts this year. you can see it day by day with the possibility creeping lower by a percentage point and percentage point. lisa shallett, good to see you as always. is this distracting from fundamentals. lisa: i think it absolutely is. they are the biggest thing distracting everybody but the pace and the chaotic nature of the announcements are distracting to everyone. we know markets love certainty. they love predict ability we don't have that the minute. jonathan: is it a justified distraction? lisa: i think so. our perspective has been to pick and choose your spots. expectations are key here. our preference is to go where we think companies can beat

expectations and they had not gotten too ahead of themselves . lisa: we talked about the long invariable lags with benchmark rate. we don't talk about them cutting by 100 basis points starting in september of last year. how much is that driving the optimism and dealmaking and activity everyone is expecting from corporate america? lisa: one thing that's interesting is i think, you know, rate cuts are driving the animal spirits. we have not seen year to date the level of dealmaking i think a lot of people were hoping for. that is still a bit to come. the 100 basis points helps. it is getting sentiment juiced. we saw small business optimism soar following the election. part of that was i'm going to

get some rate cuts and am going to get some progrowth policy out of washington. it remains to be seen. to jonathan's point, some of the chaos in the headlines is starting to cool some expectations. we saw the small business optimism come off the boil. we saw ceos say whoa, whoa. let's cool or jets. lisa: there is a tension between there needs to be rate cuts, additional rate cuts for the broadening out story to make sense, or whether the 100 basis points we got last year actually was plenty to get this sector driving. which is it? lisa: it's interesting. our thesis is we are in a bifurcated economy. for the most part the large cap universe, the mega cap universe has not needed any rate cuts. they have locked and loaded their cost of capital back in 2021.

i fundamentally believe the mid-caps smaller cap companies, the lower end venture capitals and private equity portfolio companies do need more than 100 basis points. we will see. we are going to see with this goes. annmarie: you are watching for a rotation of stock indices. what about the uncertainty of tariffs still lingers? won't be the most hurt? lisa: the mega cap and large caps are so much more exposed to the tariff conversation. this is where the mid-caps and small caps actually can get life. if in fact the rate cuts do flow back to them, if we get bank lending in more of the regional banking system to accelerate to those pools of companies, i think they can actually, you

know, have a better year relative to mega and large-cap companies that will have to struggle with their china exposure, with their exposure to global trade and to dealing with some of the constraints of tariffs and the cost of restructuring supply chains if it comes to that. annmarie: something else you like is gold. lisa: we are adding to gold. our perspective is that what is going over the gold has to do with folks around the world questioning the privacy of the united states -- supremacy of united states dollar. central banks have begun to diversify their reserves. i think that has been one element. i think a lot of the enthusiasm, believe it or not, rn cryptocurrencies -- around cryptocurrencies made people think about if this is digital gold, what is hard gold? maybe i need some of that too.

our perspective is that given where we are with debt and deficits, given the extreme bifurcation of global fx markets, gold will continue to outperform into a 30 year. lisa: even wearing something to represent your strong feeling of gold. your gold blazer. i'm curious if you see that questioning the the dollar shifting to the overweight you have seen at the beginning of this year in european and chinese equities. are you leaning into that? lisa: we are 100% leaning into this mean reversion trade. the massive underperformance of non-us equities. we believe it has reached extremes. our best guess is that the current administration is not helping, right?

while it is great to pursue an america first policy in america, if you're not in america there are all kinds of incentives to find ways to protect yourself. that may mean creating trade arrangements with other countries and each other where america gets locked out. our perspective is that this is a time when not only the combination evaluation, extort nearly low expectations -- extraordinarily low expectations for regions like europe and potentially china, the potential to surprise on the upside and potential for some of these countries to actually stimulate, have more proactive central banks. lisa, you talked about the fact the fed may only cut one or two times this year. it is highly likely the ecb goes more frequently than that.

it is possible the central banks in latin america where inflation had run hot will go more often than that. those are the kinds of things that create this relative catch of trade. -- catch up trade. jonathan: they might do things that are good for them. lisa shallett of morgan stanley, thank you. an update on stories with your bloomberg grief. dani: president trump backed off the rest of from jordan after king abdullah agreed to accept 2000 bill children from gaza. trump had threatened to withhold aid ahead of the king's visit to the countries did not except. palestinian refugees trump reiterated plans for the u.s. to take ownership of gaza. a check on lyft shares lower by 12% after a disappointing outlook for fourth-quarter growth profit -- bookings rather. cold-weather hurt the demand. they pledged to by as much as

$500 million worth of shares. apple has reneged the gulf of mexico to the gulf of america and its maps app. google did a similar thing early this week. the white house barth a press reporter from covering an event. what the newswire said was a punishment for the style guide not adopting the new level. jonathan: more from dani a little later. a seida relief on wall street. -- sigh of relief on wall street. >> the level of capital and the largest banks is about right. it will shake out somewhere in that area. i'm optimistic we can do that fairly quickly. jonathan: up next, congressman french hill of arkansas and the chair of the house financial services committee. from new york city good morning. ♪

jonathan: equity futures on the s&p negative. bond yields a little higher. up a single basis point. one hour and 12 and its away from the cpi report. a big sigh of relief on wall street. chair powell: we think it is good for u.s. banks and good for our economy that there be a global standard beneath which foreign banks can fall. it will shake out somewhere in that area. i'm optimistic we can do that fairly quickly. jonathan: jay powell wrapping up day one on capitol hill. day two kicking off this morning in front of the house financial services committee. now the chair the committee, arkansas congressman french hill .

i'm sure you have followed that testimony yesterday. kai asquith stood out for you and what you and your committee would like to follow up today? rep. hill: good morning, jonathan. i think over the four years of the biden administration, chairman powell and the board of governors deferred too much to former vice chair michael m barr. the basil three in game is a good example of that where the policy was to be capital neutral and aligned those interests between america and partners abroad. michael barr turned it into a fiasco of raising capital on banks, making it hard to access capital for loans and small business here. i was pleased to hear the chairman said they would proceed forward in the event of capital and the banking system was about right, which signals he supports a basil three in game that is capital neutral -- endgame that

is capital neutral. annmarie: we're hearing voices whether it is forward or can griffin about how tariffs, the uncertainty is a problem for doing business in america. are you concerned with what you are hearing out of the oval office when it comes to tariffs on monday, off the next day and it seems like a lot of confusion? rep. hill: i think you have three issues the trump administration is grappling with in their trade policy. first, using tariffs as a tool to compel reciprocal treatment with our trading partners. both adversarial partners as well as long-standing partners in europe and japan and elsewhere. we want to make sure our market for our services, our product going abroad is getting fair treatment in those countries. tariffs can be used as a negotiating tool just as we did in the reagan and bush administrations to compel market opening. secondly, i think you see the

issue of using tariffs as another form of sanction to compare -- compel behavior from other nations that are not going in the right direction. columbia was a good example of that recently. third, the national security element president trump is trying to encourage production of badly needed goods and services here like steel and aluminum in a way we protect national security. all those things could potentially have inflationary impact, employment impact. that is why i say all three are important strategies but they have to be implemented in the right way and over the right time period and achieve results. annmarie: i would love to get your sense because this can be expanding of the fiscal deficit, which we saw jay powell said no time like the present to tackle this. the house and senate are going to be working on very different potential budget resolutions. for markets, both resolutions

will signal how big the tax cuts are and whether or not the core of the trump economic agenda is going to happen or not. what do you make of the different paths the upper and lower chambers are taking? rep. hill: from the beginning in january as a relates to the house, i have supported one reconciliation bill where we can accomplish president trump's goals of additional funding for order security and national security -- border security and national security at the pentagon in strategic areas that have been underinvested in, and extend the growth aspects of the trump tax cuts and cut spending using budget reconciliation. it is a tricky proposition. i think one big bill in the house, the strategy we talked about here in the leadership with mike johnson, would yield that result. i think we can get tax policy and budget policy and seven president trump's priorities for security done in one bill and hold the republican coalition

together. lisa: how important is it to move quickly on getting a bill passed that gives a sense of how the progress aspects of the president's agenda will come into the market when people are focused on tariffs as being a hindrance to growth? rep. hill: lisa, it's important to move quickly. for two reasons. we talked about economic uncertainty. this provides certainty. in the private sector and the economic policymaking, making those decisions is smart economics. it's also smart politics. in the 2017 tax cut we waited to get the bill done after trying to deal with health care. the results of those tax cuts and tax incentives were not really felt in the 2018 election cycle. people in the house are sensitive to the two-year cycle and what to move quickly for political reasons. lisa: i want to finish up with

the idea of the banking sector going back to your home industry. we have seen a host of deregulatory efforts so far. have you gone far enough? are you looking at other areas and how so to deregulate the banking sector? rep. hill: we are looking at tailoring regulations and deregulating along the way without compromising safety. that is the balance of our economy. i believe the doge effort for efficiency in government, reducing the headcount and deregulatory efforts will have a positive impact on our economy and growth and shifting resources to the private sector. i think it is understated as we talk about tariffs and taxes how much economic growth we can have from a solid deregulatory effort . that will be good for the u.s. over the long-haul.

we can do it in a safe and sound manner. jonathan: congressman, appreciate the powerful arguments you are making this morning. congressman french hill, chair of the financial services committee. look out for that hearing with chairman powell later. really powerful argument, particularly on bank regulation. how nice it is to see someone chair the committee with financial experience. lisa: we were talking about that. i want to see what he's going to ask jay powell. maybe he can tell us over the break. jonathan: kicking off at 10:00 a.m. eastern time. up next, bill dudley on submitting dollar dominance. that conversation is of next. -- up next. ♪

-honey... -but the gains are pumping! dad, is mommy a "finance bro?" she switched careers to make money for your weddings. oooh the asian market is blowing up! hey who wants shots, huh?! -shots?? -of milk. the right money moves aren't as aggressive as you think.

the way i approach work post fatherhood, has really trying to understand the generation that we're building devices for. here in the comcast family, we're building an integrated in-home wifi solution for millions of families like my own. in the average household, there are dozens of connected devices. connectivity is a big part of my boys' lives. it brings people together in meaningful ways.

jonathan: this is the sequence of events throughout this morning. about 60 minutes from now the cpi report. one hour after that, the cash open. then you will hear from chairman powell, day two on capitol hill. 10:00 a.m. eastern time. equity futures just a bit softer by not even one 10th of 1%. with your morning movers, here is manus cranny. manus: alibaba doing a little better than ok.

it is a confluence of the association with apple nai. their own -- apple and ai. their own ai. the momentum in china tech. the hang seng is now a bull market. there you go. a lot of people did not get long journeys in their lyft ride. this is traditionally the slowest quarter. no joy from half a billion dollars worth of a buyback. cvs. the adjusted earnings per share about 19. way better than the expectations of the estimate. it's the biggest beat since 2020. cost coming in much better for this stock. jonathan: dear member the tube strike? manus: i do. i think that was the first time

we try to post something online. thank you, by the way. you can livestream on twitter. i think it was periscope. it was a tube strike. manus and i needed to get to west london. like a lot of people that did not grow up in london, you know london by the underground but don't know where you're going when you walk around. we try to get an uber. then we got a series of buses across town and it took about two and half hours. we could have walked it. annmarie: the traffic is insane. jonathan: you cannot move. lisa: bike. i did that when we had a strike here. stay tuned. jonathan: eight people watched that string. -- steam. lisa: i think i was one of them. jonathan: jay powell set to

testify before the house financial services committee at 10:00 a.m. eastern time. he told the senate banking committee the fomc is in no rush to cut interest rates. today he goes in front of congressman hill. he made a very powerful argument about what he did not see over the last four years under the biden administration and what he would like to see going forward. lisa: the regulation. -- deregulation. he's been a leader of a small and medium-sized bank. a question about how the townships from fed chair jay powell given we get cpi data 90 minute before he begins his testimony. it should give fodder to the discussion. jonathan: this is sometimes stale. we are looking to freshen this up. i agree. was there a difference between the news conference a number of weeks ago and the federal reserve decision and what we heard yesterday? not really, but a few little

pockets. on the neutral rate it was relative. lisa: he basically said it is a substantially higher neutral rate today. p did not go into whether it will stay that way for a longer period of time but that was different from the past. jonathan: big development for this country. mark vogel is back on u.s. soil after three and half years in a russian prison. he was greeted by president trump at the white house last night. trump saying fogel's release could be a big important part of ending the russia-ukraine were. -- war. annmarie: he was left out of the mass prisoner swap last year. the kremlin is saying there would be a russian that will be released. we don't know the individual's name. i wake up early for the show and it spoke to mark fogel's lawyer. they said this could be positive in terms of new chapters when it comes to russia-u.s. relationship.

maybe this is part of a broader peace agreement with russia invading ukraine. this is just the start of that agreement. lisa: to comes as scott bessent is heading to ukraine to get some sort of sense of rare earth minerals agreement on behalf of the u.s. in return for certain support. there's a lot going on. watch this space to understand how this intersects. it is like a puzzle but i have two pieces and they don't go anywhere near each other. jonathan: the president has made controversial statements over things like gaza. there's been some really positive developments very quickly in the first month. it's only been three or four weeks. this is one of those positive developments. annmarie: he promised mark fogal's mother that he was going to work to get this individual back. if you have not seen the video of him at the white house and this emotional appeal he was talking about, he dealt with while in russia, go watch it. this is only three or four weeks

in. steven witkoff is in moscow. we have not seen that since bill burns went, former cia director. he took his private jet. we were able to track it. we did not know if it was just a meeting. he came back. fantastic this he mark fogel back on the jet to the u.s. jonathan: we want to seem on that front. president trump backing off threats to withhold aid for jordan after king abdullah agreed to accept 2006 children from gaza. -- 2000 sick children from gaza. annmarie: two things that were interesting. he did soften what he told our colleague jenny later that he would conceivably -- jenny leonard that he would conceivably withhold aid. king abdullah saying we will take into thousand children.

you did -- in 2000 children. where is the plan? jonathan: waiting for the plan. you can criticize the sitting president for the plan he offered but we want to see a plan offered from others. annmarie: he's forcing the countries nearby who say there will be no normalization unless there's a two state solution, but they don't go further in terms of a plan. he invited the president of egypt to come to washington. let's see the plans from the other countries that want to support the palestinians. jonathan: foreign-exchange. bill dudley making the case for king dollar. "america directs immense benefits from the dollar's dominance, a position countries such as china and russia are seeking to contest by addressing cross-border payments. the u.s. could boost the global economy and submit its central

role therein." bill, welcome to the program. lots of topics to cover. you started with the premise. the immense benefits from the dollar's dominance. what are they? bill: the dollar is the linchpin of global financial markets. we get exorbitant privilege of people wanting to hold dollar-denominated assets. the mix the cost of funding in the u.s. less. that is not necessarily forever. there are steps we can do to make that more likely to be sustained in the future. one thing is to make progress on cross-border payments. payments across borders are expensive. maybe as much as 6%, 7%. this will be brought down tremendously if we developed instant payment systems nationally and weave them

together. a number of countries have good payment systems. the u.s. is nowhere. we have two systems but nobody uses them. everybody uses cards, venmo, paypal. once we have that, we need to take steps to link it together with other instant payment systems around the world. if we do that, we can lower the cost of payments dramatically and cement the dollar as the key reserve currency. lisa: do you see the fed getting on this in the near term considering they have their hands full with their mandate and the controversy around it? bill: you need some support from the administration and congress. the countries that have been successful have basically had mandate. they said you need to actually offer this service to your banking customers. the united states, it is completely voluntary. the two instant payment systems we have, fednow and rtx are not

used by virtually anybody. they exist but if they are not used, how can that be advantageous to link that to an international regime? lisa: hopefully we can catch up on this as it progresses. in the meantime, the focus is on inflation and how the fed will be responding at a time when we get cpi at 0.3% month over month, the fifth out of the six latest readings. how concerned are you about the stickiness? does it surprise you we still not seeing the disinflation 70 people were expecting? -- so many people were expecting? bill: the last mile is sticky because we are operating at full employment. they will not be a lot of downward pressure on inflation when the economy is operating at a high level, which is where we are today. something that chair powell touched on yesterday. monetary policy is closer to neutral than what a lot of

people thought a few months ago. the fact the economy continues to grow at the trend growth rate at a time when the federal funds rate is higher than 4% tells you maybe monetary policy does not really -- does not be restrictive at all. the prospect for further rate cuts has diminished considerably. annmarie: for the rest of the year potentially given the political uncertainty? bill: potentially. we have uncertainty about policy in about what's going to happen to tariffs and about deportation and fiscal policy. the fed will be reluctant to take big steps they don't know what the policy mix is going to be in the second half of the year and into 2026. annmarie: we might not know the entire year. it might be like this for four years. what is the fed do? stay on pause forever? bill: powell said the fed would

cut if the economy slowed or if inflation came down. it may not be quite that simple. it might be you only cut if the economy slows down. i can see inflation moderating further and the economy staying strong. what is the motivation for cutting rates at that point? it is one of the other. you might actually need not just a fall in inflation but a substantial slowing of the economy. lisa: i'm curious about the x-axis when we talk about inflation expectations creeping higher even though inflation expectations over the next 10 years are going down. the longer term it will suppress growth. how does the fed respond to that given they have been patient with the idea of inflation taking a longer time to get to that 2%? at a certain point it becomes forever. bill: you are right. every year you spend about 2% there's more risk that inflation echo vacations -- expectations become an anchor.

when the fed looks at the effects on the economy, they are focused on if higher prices caused by higher tariffs are feeding into inflation expectations. if they do, that will make the fed more cautious. if they don't, the fed will be focused on growth impacts slowing down the economy. whether the fed can look to the tariff increases in terms of their effect on prices will depend important on what happens to inflation expectations in the next year. jonathan: thank you for your time this morning. the former new york fed president bill dudley on the latest. what did tk say back in the day? push out the x-axis. we are still doing it. lisa: this has been the fed that has been patient with getting inflation down to 2%. they don't want to jeopardize the labor market. patient becomes tolerance at some point -- patience becomes tolerance at some point. jonathan: when annmarie says it

is a feature, not a bug, do they keep waiting? i mentioned this yesterday. growth is slowing while the fed is playing chicken with the trump administration. lisa: if it shows up in the data, they have opportunity to respond to that growth shock. we are not seeing it at full employment and the fact that wages are still growing, sales coming in strong, and earnings. 77% of earnings so far in the reporting season have been beats. jonathan: more economic data for you. 46 minutes away we get cpi. let's get stories elsewhere with dani burger. dani: president trump has directed agencies to comply with orders for job cuts led by elon musk's department of government efficiency. a fact sheet shows agencies will be permitted to hire no more than one employee for every four that leave.

spirit rejected another takeover deal from frontier after a years on courtship between the two airlines. spirit plans to move forward with its own recapitalization plans. i hearing to consider the plan is scheduled for tomorrow. alibaba shares rising in the premarket session up 3.5%. the report is apple is working with the e-commerce chart to rollout ai features in china. apple and alibaba submitted ai features to chinese regulators for approval. regulators need to give the ok before companies can rollout china ai services. no major u.s. service has managed to get the nod from beijing. that is agree. jonathan: thank you. more from dani and 30 minutes. escalating tariff uncertainty. >> it is not the fed's job to comment on tariff policy. it remains to be seen what policies will be implement it. it is on -- implemented.

it is unwise to speculate. jonathan: but some people on the committee are speculating. when he says it will be unwise, who was that addressed at? the committee? the fomc? that is what they are doing. lisa: it is the market's job to speculate and feel time and they have to come up with certain scenarios. what are those scenarios? jonathan: we will catch up with kelly ann shaw next. ♪ ♪ ere ya headed? susan: where am i headed? am i just gonna take what the markets gives me? no. i can do some research. ya know, that's backed by j.p. morgan's leading strategists like us. when you want to invest with more confidence... the answer is j.p. morgan wealth management

a sleep number® smart bed is perfect for couples the climate360® smart bed is the only bed that cools and warms on each side and all our smart beds adjust the firmness for each of you. and now, save 50% on the new sleep number® limited edition smart bed. shop a sleep number® store near you. (giggling) you go to sandals to get really, really close, (giggling) to the caribbean. we should do this every morning. sandals valentine's sale is now on. save up to $1,000 and get a sandal-lit dinner for two. jonathan: from a beautiful new york city, it is a winter wonderland. i always say this about manhattan, it looks better at a distance. when you are in it, when it

snows in manhattan, it is never good. the sidewalks are slushy. annmarie: it is so fun. jonathan: you get that brown water everywhere that is filthy. lisa: it is beautiful at first and then nick turns multi-shades and then problematic. annmarie: that's it everywhere big cities no problem. jonathan: i have a lot of complaints. it is my home. we do a fantastic job of cleaning up the snow quickly off the roads. manhattan is very efficient. traffic is running smoothly. lisa: they put so much salt on the sidewalks my son said we might need assault date -- a salt day. jonathan: in davos, switzerland, they do a horrendous job of that. london, terrible. annmarie: washington, d.c. terrible. everyone will be late to these meetings today. jonathan: well done, new york and mayor adams. just about unchanged.

under surveillance, escalating tariff uncertainty. >> it is not the fed's job to comment on tariff policy. that is for elected people. generally, once somebody has to pay the tariff, in some cases it does not reach the consumer much. give remains to be seen what tariff policies will be implement it. it is on -- implemented. it is unwise to speculate. it is so hard to say what is going to happen. jonathan: global markets bracing for reciprocal tariff plans. citadel founder ken griffin attacking trump's tariffs in miami. "the bombastic rhetoric, the damage has been done. get tears into the minds of ceos, policymakers that we cannot depend on america as a trading partner." kelly ann shaw joins us now for more. what were the counterpoint be from the trump administration to comments like that from the

citadel ceo? we sought from the ford ceo as well. kelly ann: good morning from us snowy washington, d.c. you have to pull the american people and how the trading system is working for them. 60% believe trade has been better for other countries and the united states. that includes 73% of republicans. the statistic president trump talks about quite a bit is the u.s. tariff rates are the lowest in the world compared to other trading partners. the eu in particular has a very high tariff rate on autos and agricultural products. many of the products american consumers think are unfairly being competed with. part of this push towards reciprocity is to get at what the voters care about, which is seeing trade even out. annmarie: before we get to europe because that is clearly the next target for this administration, i want to talk

about the steel and aluminum tariffs. there were some carveouts during trump 1.0, especially for downstream manufacturers. there will be potentially countries like australia. will there be domestic manufacturers? kelly ann: it does not seem that way. what the trump administration did with this measure is say we had an effective measure in 2018 and created 120,000 manufacturing jobs. with the exclusions for certain domestic producers and the country exceptions, please exceptions swallowed the rule -- these exceptions swallowed the rule. trump's plan was to get rid of these exceptions, get rid of these exclusions and start fresh and see where we are. he suggested australia is up for a potential exception here. what is interesting about the product exclusion process is that the department of commerce has closed that office.

they let go all the contractors who were working on this product-based exclusions. i don't expect domestic producers will be able to apply for those in the near future. annmarie: they closed the office for good? kelly ann: that is my understanding. annmarie: if you want to go for exclusion you don't actually know who to call. 20 comes to europe, what are you expecting -- when it comes to europe, what are you exacting? 2.5% for them coming into the u.s. are you expecting the administration to go product by product when it comes to tariffs directed towards the european union? kelly ann: we don't know. trump has teased for several days big announcements on reciprocal trade and reciprocal tariffs. he talked a lot about the european union in the process. even the deputy chief of staff was on tv over the weekend talking specifically about the eu, about the unfairness in terms of the auto tariffs. he mentioned the vat tax. even though the eu charges a 10%

tariff on u.s. autos, they are subject to the vat, a 30% tax on u.s. exports. it could be that the administration is looking at not only tariff barriers but nontariff barriers, make an assessment about raising tariffs to the level that matches that of another country or even higher taking into account potential nontariff barriers. we don't know whether the president is going to announce the implementation of tariffs this week for announce a process directing his administration to look at this issue and along with all the other issues including the trade deficit, unfair trade practices, currency misalignments, and a report on reciprocity. jonathan: a lot away for the next month. former nec deputy director kelly ann shaw. europe is in the firing line. annmarie: when it comes to autos and it comes to farm products.

trump complained about this for years. angela merkel put it in her book how he would complain you see these german cars in new york but you don't see fords in germany. you have to think the european auto sector is going to be the ones that will get hit. lisa: i wonder how much people did not want to go after this because they did not want to undermine an ally. the idea that the relationship, the alliance came before the trade discrepancies that might have been happening. you wonder how things are going to be rearranged and whether the alliance will remain intact as you rearrange the business arrangements. kate is why people are feeling a little anxiety but also curiosity. jonathan: your has perhaps taken advantage of that. it is backed up by several examples. coming up, anastasia amoroso, david kelly, and mohamed el-erian. cpi report 34 minutes away. 8:30 eastern time.

just around the corner. ♪

>> there is a risk that inflation may become sticky. >> it is going to get very messy

to read the inflation data. >> there is concern over inflation taking off? until that -- taking off. . >> u.s. consumer is a standalone is very strong right now. >> this is bloomberg with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: equity futures totally unchanged on the s&p 500. on the nasdaq 100, firm or by 1.2%. on the russell come up. we will get the inflation report and later, day two on capitol hill for chairman file and the federal reserve in front of the house financial services committee. how do we freshen us up and do we get new information? lisa: it is the one-to-three punch to reduce have the cpi and then you have fed chair and then

you have $42 billion in 10 year notes. you have the sequencing of the cpi print, commentary from fed chair jay powell where is that the neutral rate is substantially higher than it used to be and the market reaction to it. katie: commentary from -- annmarie: commentary at writing, inflation should be lower in go hand in hand in upcoming tariffs. let's rock and roll, america. jonathan: i'm hoping you are -- happy you are both caffeinated. lisa: what is interesting to me is he says interest rates but talking about the 10-year but basically talking about the same thing. annmarie: i think jay powell may smooth things down but donald trump is not a snooze. jonathan: to think chairman powell will get a question on that front? lisa: i would be interested to see what he says about the 10

year rates and he has come under criticism from scott bessent by lowering interest points by hundred percent basis points which led to the rise in the 10 year yield. he has practiced at saying we don't take interference,. jonathan: i wanted to explain how those two things go together. how can he explain that? annmarie: it is good to be challenging because he sat in an interview and said we are happy where the fed is and that 10 year yield. lower it doesn't make sense when you look at the entire policy portfolio which is expanding the deficit and lowering taxes and potentially tariffs. we have to go back to trump 101, property developer. you want people to invest in u.s.. if you drop interest rates you

can build out the supply side of the economy and domestically in the united states. chairman powell will be more worried about the inflationary aspect of the tariffs and there is some tension there. the property developer wants rates to be low so people can buy property that they haven't been able to do. but the property developer of 2017 is facing a very different reality of 2025. and it is nuanced and that is not a very comfortable thing at the time of a lot of uncertainty. jonathan: eight: 30 eastern time, the cpi report. futures positive on the s&p 500. coming up, we will catch up with anastasia amoroso icapital of -- of icapital, david kelly, and mohamed el-erian.

anastasia amoroso saying there are clearly more incremental headwinds this year. they are not large enough to change the overall direction of travel which should be higher for equities. she joins us for more. good to see you. anastasia: good to see you. jonathan: why is it a pirate? anastasia: because of the u.s. economy, innovation and how that plays into earnings. if you look at earnings for the s&p 500, consensus was expecting 13 but also next year 13 earnings growth but there are headwinds that they will not wipe out the entirety of the 13% earnings growth. for every 10% rise in the u.s. dollar you shaved about two percentage points in terms of the earnings growth for the s&p 500. so maybe that knocks us down to about 11%. maybe we do have tariffs but maybe there are some auto tariffs or chairs on china and that shaves off another 1% or

two percentage points. i think what it does is create a headwind, doesn't stop the movement forward higher for equities but slows it. jonathan: does it constrain? anastasia: i don't know if the fed put is right there it. it was a big pivot from focusing on supporting the labor market which was a concern to now focusing on inflation. one thing i found interesting yesterday, there was a speech from the cleveland fed and she talked about the job not being done on inflation. as we look to the cpi print today we think about where the price increases in where the company is able to push them through on an annual basis and will there be a potential upside surprise. i think the fed is pointed once again to inflation and looking at the year-over-year measure. if you look at the core has been sticky.

i am not sure the fed put is in action right now. lisa: want to go back to the market commentator donald trump who came out saying interest rate should be lowered, something that would go hand in hand with tariffs. let's rock and rural america. one analyst and a big firm is saying he is right that actually tariffs hit to growth and might actually incentivize the federal reserve to cut rates. do you agree with that, that essentially if tariffs act as a headwind and corporate profitability, the fed will become more in play because they will respond more to growth than say inflation. anastasia: there are two sides of that. i would actually side that the fed should not overreact to tariffs. when you think about tariffs, they are a one-off hit and one-off we set the price level. the fed is previously indicating they are willing to look to

that. what we don't know is to what extent the tariffs get passed on to the u.s. consumer. if you look at the s&p 500 margin, it is 12 point 5%, record. is it possible companies will absorb some of the cost rather than passing it onto the consumer? is it possible the dollar rises and offsets the negative impact? there is some truth to the extent that we don't actually see the spike in inflation at some fear and we do see slower growth and as i talked about slower earnings, maybe the fed does continue to have the path lower towards interest rates. lisa: i know you have been bullish on stocks over bonds for a long time. i wonder right now based on the uncertainty and high valuations whether that is shifting at all, not necessarily into treasuries but credit and other instruments because the upside is more muddied. anastasia: i do still think stocks have a great role to play

in the portfolio. the s&p has not had a bad year. it is up let's say 3.5% and the nasdaq is outperforming and some of the places within the artificial intelligence are underperforming. the momentum continues. i'm not entirely positive of the complex but i think yields are probably range bound and spreads are tight and they are tight in leveraged loans. if there is one place i would look to within fixed income, it would be the private credit side. if you think the fed has limited scope to cut interest rates than you want that floating rate exposure that private credit gives you and does historically give you basis point of spread over the publicly traded leveraged loan counterparts. that spread is starting to widen out so i look to private credit for a place holder. annmarie: i would like to get your thoughts more on tariffs.

what will be your advice to those who say what we are seeing a lot of cost and a lot of chaos? anastasia: i wanted to what extent companies are starting to use the chaos to justify potential price increases. i hope that is not the case just yet but the playbook i would use for market investors for tariffs, this is certainly not the only time we will be talking about it this month or this week . there are more tariff headlines to come. the first thing for investors to do is understand, what is the full potential adverse impact of tariffs if they are implemented? we were talking about the 25% on mexico and canada, the overall impact was sized out as 5%. if we were to reprice to the 5% downside come as an investor, you could say that is a risk that is priced in and therefore i could start to incrementally step in and buy that dip. for investors, i don't think

tariffs and announcements the reason to sell stocks. there might be a positive resolution but in to immediately buy stocks, i really would want to see the full repricing in the markets and we have not seen that. annmarie: do we need to see the retaliation? we have already heard that there will be retaliatory for what trump puts in pace -- place. anastasia: the interesting thing is that even europe seems to be moving preemptively on maybe auto tariffs or others in anticipation of whether the -- what the trump administration can do. we also have the play brick -- playbook. we look at the trade deficits by country versus the united states and the subsidy disadvantage towards the united states. if you're a country that has a large trade deficits and/or a

subsidy and/or an outside tariff, you are likely a tariff potential. they are probably looking at that same church and moving preemptively. annmarie: do see companies worth getting in now if there moving preemptively and moving manufacturing into the united states? anastasia: from the market perspective, we need a headline the market reacts to and that becomes priced in. i do think companies are thinking about relocating their supply chains to the united states and that is why one of the top ideas for the year is looking not only at the stocks that have high domestic exposure but also on ensuring beneficiaries companies in which companies bring production back to the united states so they are not importing the higher cost of goods sold and which ones are manufacturing here. i imagine there are a lot of companies thinking about that right now. jonathan: i imagine chairman powell will not bring much data when asked. lisa: he will give as little as

possible. annmarie: he said it was possible. jonathan: it is good to see you. anastasia amoroso there. equity features about unchanged. her is dani burger with your bloomberg brief. dani: delivering out one to lawmakers, ford same tariffs on canada and mexico would be devastating for u.s. automakers. the citadel founder said the tariffs dull the edge and could bring mistrust with allies. alibaba rising three point 6%. information reporting apple is working with the e-commerce giant for ai in china and they say apple and alibaba submitted features to chinese regulators for approval and they need to give the ok before companies can

roll out the services. no major service has managed to get the not from beijing. and the giant schnauzer took best in show. he has been to westminster twice before and this is his last championship. his owner said he is eight stand out because he is bold, cocky and fun. that is your very important bloomberg brief. jonathan: there was some champions league football last night. then we go to dogs, that happen. the social media post from the president of the united states moments ago, interstate should be lowered, something which would go hand in hand with upcoming tariffs. let's rock and rural america. lisa: this is the argument on one hand you could say that tariffs will suppress growth but if you want to make that argument, it will be more

challenging on the other side. jonathan: up next, morning calls and reaction from david kelly from j.p. morgan and reaction to that post and they look to cpi. so, what are you thinking? i'm thinking... (speaking to self) about our honeymoon. what about africa? safari? hot air balloon ride? swim with elephants? wait, can we afford a safari? great question. like everything, it takes a little planning. or, put the money towards a down-payment... ...on a ranch ...in montana ...with horses let's take a look at those scenarios. j.p. morgan wealth management has advisors in chase branches and tools, like wealth plan to keep you on track. when you're planning for it all... the answer is j.p. morgan wealth management.

jonathan: and about 13 minutes' time, cpi report and then an hour after the opening bell. the s&p 500, unchanged on the s&p. bond yields going nowhere. 4.5353. crude down by 1%.

wti 72.46. barclays lowering price target to marriott on waiting on growth . ubs putting lift at 12.3 five, down by 14%. morgan stanley coverage another notice of equal rate rating citing short-term uncertainties about the u.s. obesity market. the noble stock down by 3%. as we count down to bloomberg economics expecting a modest month over month increase in core inflation. joining us to look at that is david kelly from j.p. morgan asset. i want to start from a quote with the resident, interstate should be lowered comes of that would go hand in hand with upcoming tariffs. how do you think the treasury secretary and chairman powell

would respond? respond? annmarie: i think --david: i think the chairman would not want to talk about it. we are going to get a core cpi reading which will be about 3.1 year over year, slowly going down but it is not to. iteris don't lower inflation. they add to inflation. in that environment, there is no reason for the federal reserve to be cutting interest rates. tariffs are not -- tariffs do not reduce inflation, the ad to inflation and therefore you shouldn't be adding stimulus to the economy which could keep inflation. jonathan: some making the case that the chairman should look to any potential bump in prices. icing perhaps that is not possible? -- are you saying perhaps that is not possible? david: 4.25 44.5 is not high

funds rate but very consistent with the 2% inflation rate. there's nothing particularly wrong with that. i don't think the fed should be in a hurry to cut rates further because it is not just about tariffs but how intense is the immigration crackdown going to be and will that lead to a tighter market. and what will be packed in the fiscal package and the fed has to think about all of those things. you have clarity on immigration, tariff and taxes, then they can look at do we need to make a further adjustment. right now they shouldn't do anything. lisa: based on the stickiness in inflation and based on the expectations we are going to get in 10 minutes time, if they were to cut rates today, would you see the 10 year yield selloff or actually goes up? david: it could actually go up. the things i've talked about are important but the other important thing is we are going to get another data point later this week from the treasury

department of the budget deficit and from the congressional budget office numbers, it looks like we'll be over $2 trillion on the budget deficit and a full employment economy. it is just getting worse and all that money has to be borrowed and that will keep a flow of rates anyway, so even if the fed would seem to capitulate to administrate -- administration pressure, that is not good for the bond market. it is very important for the treasury market that the fed have its independence and we seem to have its independence. and that is the best way to get the rates lower in the long run. laces like argentina and brazil didn't have low long-term rates because the government said they haven't because they had a because no one trusted them. lisa: are you comparing us to argentina? david: no, but we are heading in that direction. lisa: we are looking to get the

cpi print in nine minutes time and the testimony from jay powell and then we have the option of 10 year notes. how important will that be at a time for you talk about concerns about a deficit in a plan being formulated? david: it is important to see how the market does or does not react. the market should be forward looking and the market will be worried about both fed independence and treasury borrowing. so we will have to see how that goes. i expect jay powell to continue to express his opinion that the fed will make policy as they see the economy but do the members of congress seem to agree if you are doing an ok job and you should be independent? if they validate and support their independence, that

ultimately is good for the bond market. annmarie: does anyone in the investment community actually think that trump is going to influence him making the decision on not being independent? david: you look at a time when the fed was going over easy in response to a lot of job earning from the president. the fed wants to maintain independence but in order to maintain your independence, you don't want to seem --, there is already a direct pressure. i don't think the fed should raise rates, i think they are in a good position now, but when you have the most powerful person in the world and particularly the white house plus congress, that can have an effect on the fed whether they like it or not. annmarie: this president feels like he should be able to chime in on numerous topics and he does every day.

david: the good thing is the markets to get a little desensitized to it. it wouldn't be doing as well as it is if it were sensitive to the remarks of the president but i think people realize that he is a very unusual president. jonathan: jonathan: how useful is the university of michigan sentiment? david: not particularly. the survey size is small. jonathan: 600 plus? annmarie: they also change the techniques without highlighting it knocked six points off of the index. jonathan: what did they change? david: they went from phone survey to online. and apparently when they are only they are even grumpier on

the phone. lisa: i can verify that. david: if you change the survey methods, it changes it. they should have either put an ad factor onto the future or recalibrate history and they didn't do either so it looks like people got grumpier but just because they change the survey. jonathan: i want to understand why it matters to the fed. why does it matter to the fed that you historically have always poked holes in the survey from university of michigan? david: there are two things. they say they look at everything and that is part of it in the second thing is run inflation in particular. they are we searching for what does the consumer think of inflation. i think it's like asking a four-year-old. the normal person doesn't know what it is. jonathan: they feel it and it feels high.

david: they feel it and people think that eggs is inflation. i think they are wrong and i think the treasury market gives you a much better indication of inflation expectations in the university of michigan. jonathan: david kelly will be sticking with us. cbi dropping in just a moment. reaction from mohamed el-erian in just a moment. from new york, this is bloomberg. ♪ (♪♪) (♪♪) what took you so long? i'm sorry, there was a long line at the thai place.

you get the sauce i like? of course! you're the man! i wish. the future isn't scary. not investing in it is. nasdaq-100 innovators. one etf. before investing, carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com

jonathan: the basic data point of the week. cbi dropping in 20 seconds. the equity market on the s&p 500, totally unchanged. on the nasdaq 100, positive by .1%. in the bond market, 2, 10, 30 shaping up. it yields down a basis points, 10 year 4.5252. let's go over to michael mckee. michael: we come in high and hot. this will keep the fed on hold appears to be up -- cpi up .5%

in the core up .4%. both significantly higher than they were in december. remember we have had a seasonal adjustment issue with january. on a year-over-year basis, the headline number is 3%, up from 2.9 and the court is 3.3%, up from three .2%. energy is a big reason and shelter is another big reason. here's an interesting stat come index for shelter rose .4%, much up from the .2 percent last month accounting for nearly 30% of the overall increase in energy up 1.1 percent as gasoline increased 1.8% for the index for food also of .4%. food away from home, .2%. we also saw higher prices for used cars.

used cars up by two point 2%, the second or third month in a row. a lot of this may be coming in and out of natural disasters and hurricanes and buyers as people replace their cars. medical care services were flat for that is one that usually goes up this time of year as insurance companies adjust payments. all in all, this is not a good news story for inflation and it keeps the fed locked into where it is right now. perhaps if we see more of this sort of thing, we start to hear the fed raising rates. jonathan: it is not good about the markets. what is it about the first month of the year, is that i had fake or real. trading floor on stocks and bonds. yields up by eight basis points on twos. on tens, a similar amount. the dollar is stronger in the euro weaker. equity self, down by point 9% on

the s&p 500. on the russell, negative by 1.8. in the russell was outperforming coming into the print underperforms coming out the other sites. we are hot on headline and core. does this change the conversation for chairman powell on day two? lisa: you could argue if you see more the same of this the question on capitol hill is what is your threshold to consider hiking interest rates? what are you looking for to think maybe you are not restrictive and you need to go further because at this point not only are we seeing stalling core cpi rose to the degree it did. he said what is it about january, companies raise prices. that is what keeps happening across the board. jonathan: we had this experience and first quarter of last year and then we moved on quickly. is there any reason to believe we will do the same thing this time around? michael: if you look at the seasonal patterns, it should go the other way. we had high inflation in the first part of last year and we

should start to see that come down because it takes more to push the numbers up from a year-over-year basis. that is one of the things the fed has been looking at. the fed from cleveland was talking and she noted the seasonal pattern that should bring year-over-year inflation down. but they at least have one more month of problems here. lisa: the housing component of this is interesting at a time when so many people expected high interest rates to eventually take the wind out of the housing market. are we seeing the housing market actually recover on the backs of the 100 basis point of rate cuts at the end of last year? michael: when you look at rent of shelter, up .3 percent. primary residence up .3%. there was the feeling this would

so -- started going down because the new rent indexes were starting to show a decline in the rate of inflation and that didn't happen so that pushes owners equivalent rent up .3% in keeps shelter prices high. the fed has been waiting and waiting for shelter prices to come down. we are not seeing it get significantly worse but it is not helping. we also should note, and i can't give you the absolute comparison, but the bureau of labor statistics re-waited the components -- re-weighted it in the overall index. jonathan: if you are just joining us, coming in hotter than expected. the headline number month over month comes in at 0.5%, the estimate 0.3%. core stripping out food and energy, it came in at 0.4. the estimate was 0.3.

bond yields higher, treasuries lower. across the curve but at the front end as week push out rate cuts. two year yields higher by eight basis points. the driver -- dollar is stronger. the russell underperforms, down by two percentage points 55 minutes out from the opening bell. with us is it david kelly. what jumps out for you? david: it is not as bad as it looks at first glance. the things that bumped higher, when was the shelter increase of .4%. we saw lodging of 1.4%. you look at rent come up .3%. it bounces a lot. even airline fares work i think one point 4%. that is part of the court cpi in the auto insurance suddenly jumps 2%.

those street numbers are volatile and the government does it measure them well. i don't think it changes the overall thesis that inflation is under control but this is no reason for the fed to move in interest rates. there nothing that says we need to have lower interest rates. jonathan: does chairman powell have the luxury of making the same argument on capitol hill? david: he should. you should stand your ground for honest analysis. good economics and central banking requires you to analyze the numbers. there are some special factors here. it bumped up the number this month and in a few months time, or even next month you will get a flip on airlines and hotels and you can get a better than expected number. they shouldn't overreact. lisa: i keep thinking about how it was talked about that you can exclude this and exclude that. but at the end of the day it is

a rate that has been very sticky. are you saying it is ok for it to be sticky if is ok to accept a higher benchmark inflation rate? david: yes, the shelter is very important. it is 4.4% and it was 4.6%. it is coming down but coming down so slowly. we know it is going to keep coming down. we know the core of the inflation will eventually come down. it didn't happen this month and there is no reason for the fed to move quickly particularly given the policy uncertainty. jonathan: we appreciate your time here joining us now is mohamed el-erian of queens: cambridge -- queens college cambridge. first question to you, just how high is the hurdle to hike interest rates at the federal reserve and does this get

started after print like that? mohamed: i was thinking we would get started in certain segments of the market. it will not get started with in the fed could you have heard me say this over and over again, if the inflation target is truly 2% , then we would be talking about hikes, not just cuts. there are three things very clear from the numbers taken at face value. one, they are hotter than what the fed seems to expect given its signals and they are getting hotter. second, and this is where i differ with david a little bit, they are consistent with a whole host of other data points. this is an outlier but consistent with what we have seen in other places and also consistent with the hypothesis that companies and other segments of the population are

much more sensitive now to actual and expected cost increases. this not a repeat of 2021 when you had unanticipated inflation and people don't adjust quickly. this is a different economy. jonathan: are you suggesting this is more inflation from now than it was several years ago? mohamed: more inflation tentative now than it was before . but where i agree with david come in this is a conversation that the fed fed doesn't want to have, is that it is ok to have slightly higher inflation for now. you don't want to pull the world from under u.s. exceptionalism. there is already a lot of uncertainty in the environment. finally, the face value qualification was important, because not only as mike pointed out to we had the annual updates to also to measuring things but also the impact of the wildfire and we simply don't know what the net effect is but at face

value, this is certainly not good news for the fed and the bond market and equity market is reacting accordingly. lisa: on one hand, you can say this truly is a more inflation prone market and especially with companies more able and willing like coca-cola to pass along price increases and you can see us make the fed should be patient because 3% inflation might be ok as long as it keeps going downward. which is it? what is appropriate to respond? mohamed: it goes back to two issues. at that powell is finally willing to talk about in the second one that he doesn't want to talk about. the first one is what is a neutral rate? he said yesterday the neutral rate had meaningfully moved higher. the other one is what is the inflation target? that is the one he doesn't want

to talk about. my hope is that this fed will understand that if it could, and i understand why it couldn't, if they could talk about what is the top of the massive structural change, it would not be too percent. it would be flexible and target arrange. so it can be both. it can be that you should tolerate slightly after inflation prints assuming that expectations remained relatively stable. and then you should, on the 2% down the road but please don't target 2% anytime soon. lisa: i am struggling with the idea that the average inflation might be 3% but the eggs are 3% higher or if you go to fly it is 20% higher. there are select companies that

see the ability to kick up prices in the way that maybe they weren't at a time five years ago when this was a less inflation prone market. does that raise concerns about longer-term how much this could affect consumer confidence especially at the lower end of the consumer scale. mohamed: eggs are a supply shock , very different from higher prices or something where the demand is a very high. these two things are happening but economically very different in terms of attributes heward -- attribute. the key thing to remember, at least what i look at, is the bet that the bet that the fed and others were making is that service inflation would come down fast enough to offset goods inflation that is no longer going down in no longer going negative. what we are seeing is goods and

inflation are picking up in service inflation hasn't come down fast enough. that is the nature of the economy we are functioning in right now. annmarie: was it an policy error to cut 100 basis points? mohamed: i believe this fed has no strategic anchoring. it is a ridiculous sequence we have had. in july, no need for a cut. in september, there is a need for a cut of 50 basis points and not much has changed in between. then we come to the next two and we are recalibrating, getting down to the regular 25. and now suddenly there is a huge discussing -- discussion. there was no meaningful forward policy guidance coming from this fed and that is the big mistake, is that they are just incapable,

it seems,, on willingly but seems incapable of taking a strategic view of where the economy is going. they have been so burned by the huge mistake in 2021, where they did take a strategic view but the wrong one, that they don't want to take any strategic we. look for the fed policy not to act as an anchor for this economy but to fuel volatility further. i think that is the basic problem we have right now with this federal reserve. annmarie: is this the fed's fault in terms of what is going on now or because they are dealing with uncertainty because they don't have clarity on big policy issues in washington? mohamed: what i just said predated the uncertainty in washington. the fed has a problem but you would hope that when you would look around and companies look around in this uncertain world, that they at least think there is one bit that provides the

anchor in the fed is not doing that. so whatever volatility is in the system right now, the fed will amplify it and that is not what it should be doing and that is what -- not what forward policy is all about. if your data dependent, you will amplify it. jonathan: some have be the argument that i think potentially the next move is a hike. when you think about the next move, is the next move still a cut or is it a hike? mohamed: if they believe in the 2% inflation target, the next move would be a hike. i think they will tolerate high inflation and they will just keep promising us that everything will be fine and i think that we are going to be pausing and the pause button will be on a lot longer than the markets has been expecting. jonathan: do think that should be today's conversation and from

the house financial services committee day to. are they accepting a higher inflation rate that they should be targeting? mohamed: this committee should be having a very detailed talk about monetary policy, and it should be talking about the different scenarios facing the economy right now. that is what it should do. depending on whether chair powell is in the game of either side lighting a difficult question or punting on a difficult question, or ducking and weaving on the questions, he doesn't want to make news. he already made news yesterday that i don't think he was comfortable making. even if you got the questions, you are not going to get the answers. lisa: if the fed does want to tolerate higher inflation rate, is this neutral, not necessarily

any distance at all from neutral? mohamed: you have heard me say this again, and that is because i focus on the structural element of the economy. we are very near neutral and maybe there already. the economy has fundamentally changed from what it was in the last decade, and that is because the supply side has fundamentally changed. so i have been saying this for a while. we are very close if not at neutral. and i heard chairman paul yesterday say that for the first time -- shaman -- chairman powell will say yesterday it has move for the first time in years. jonathan: what would this mean from your perspective for the bond market going forward from here? how do things look compared to how they looked a decade ago? mohamed: the front end and up to about four or five years is easier for me than the long end

and easier in the market in the move to the expectation that we are not going to get a cut for quite a while. the long end is really hard here you have a massive tug-of-war in the big five, deregulation, fiscal on the expenditure and revenue side, trade, immigration, and i'm missing the fifth one. i will think of it in a minute. those big five, not clear how they will come out yet and that will impact the long end in a meaningful fashion. jonathan: we appreciate your time. mohammed al arian there on the latest inflation print. -- mohamed el-erian there on the inflation print. driving bond yields higher into the valley. looking at the five year, up by 10 basis points, driving strength into the u.s. dollar

and weakness into u.s. equities. lisa: i'm thinking about the question of what it does to the curve. what we have seen so far is that it flattens it and a lot of people talking about the steepening last year are getting that turn on its head with the idea that short-term means rates will be a lot higher but that could compress growth over the longer term, especially given the deficit some of the other of the five points mohamed was making. jonathan: let's get an update on the stories worldwide. dani: u.s. cpi coming in hotter than expected for january. the biggest increase since august 2023. the figure, corsi cpi, increase .4% in january, figure only five of the 73 forecasters in the bloomberg survey had called for. traders have now shifted bets for the next fed rate cut will be in december. it was previously penciled in for september. president donald trump and elon musk appeared in the oval office

work trump signed an executive order providing new guides for federal agencies to implement doge reporters. he said it has already discovered billions and billions of dollars in waste, fraud, and abuse. goldman sachs and the policy of not taking companies public that have all white male boards for debate previously would only ipo a u.s. or western europe company that included two diverse board members, including one woman. golden and just the many of many companies rethinking d.e.i. policies after the trump election victory. and -- jonathan: inflation data coming in hotter than expected. the main thing comes, date two on capitol hill -- day two on capitol hill with chairman powell. ♪

investment opportunities are everywhere you turn. but at t. rowe price, we're letting curiosity light the way.

asking smart questions about opportunities like advances in healthcare. and how these innovations will create a healthier world tomorrow. better questions. better outcomes.

a sleep number® smart bed is perfect for couples. (♪♪) it helps reduce snoring with a tap so you both get your best night's sleep. and now, save 50% on the new sleep number® limited edition smart bed. shop a sleep number® store near you.

jonathan: just moments ago, inflation data coming in hotter than expected on both headline and core. we saw the movie last year and it turned out to be a head fake. is it different this time. does the fed need to think about moving interest rates the other way or hiking? coming up a little later as we count onto the opening bell, we will catch up with chairman powell on day two on capitol hill. the start of the two-day congressional testimony in front of the house financial services committee. tomorrow, ppi and another round of jobless claims. friday, retail sales plus the munich conference, the security conference as well good for us, focus on one thing, inflation data, what it means for the market, not good for stocks or bonds and what it means for that man, chairman powell. lisa: does it increase questions about what the threshold would need it hike rates and what it means for the market pushing back the first cut until

december. a larger question is is the federal reserve accepting a fundamentally higher inflation rate and what does that do over the long to consumer confidence, businesses as well as benchmark rates? annmarie: and to mohamed el-erian kospi as point, are they accepting it but not announcing it. what stands out for me is right before we went to the cpi data, we got the united states saying the inflation rate should be lower. and cpi comes out and what do traders do, they say it is going to move from september to december if there even is a rate cut. everyone will start talking about hikes. collision course, donald trump-jay powell. jonathan: coming up on the program on capitol hill, you will hear from chairman powell. we are asking what would freshen up the testimony on capitol hill and that data freshens it up. coming up tomorrow, we will speak to bob diamond and and

around horse of citi. this wasn't bloomberg surveillance. -- this was bloomberg surveillance. ♪

>> markets are freaking out after that cpi reading. 30 minutes ago it does cash trade. katie: "open interest" starts right now. sonali: coming up, stocks slide in the bond yields to spike as cpi surprises to the upside. matt: gold is extending losses. we speak with mark bristow, ceo of gold gia