that's not something we're thinking about now or in the near future. >> governor weyda, are you going to get to the 2% by your measure? >> so our projection as of april, inflation projection, has for '23 fiscal year, 1.8%. 1.8 headline 2.0% for '24 now, this makes my job of justifying -- >> world central bankers talking to our sara eisen no portugal. pretty interesting comments about infrastructure spending in this country, at least, obviously, quantitative tightening, when we finally get back to 2% target. good wednesday morning, everybody. welcome to another hour of "squawk on the street. i'm carl quintanilla with leslie picker the heads of the four largest banks are sitting down with sarah at the ecb forum in

portugal we'll talk to sarah in a few moments about some of the highlights, but there have been many, even as the markets have been recovering a bit. s&p went positive a moment ago >> you did hear from chair powell just a moment ago, where he said that that 2% target, he doesn't expect it to happen this year or next year for core inflation. he says that he does see us getting there by 2025. sarah followed up and said, you know, we're going to be restrictive for a long time then and he said, we will be restrictive for as long as we need to be so 2%. it's going to be a while before we see that. at least according to the fed. >> yeah, others who disagree, it's going to happen a lot more quickly. take a quick look at the markets right now. we started out with not just the central bank commentary, but news in the chips and technology, as we get some reports of potentially new curves regarding vidia's chips in china dow continues to be weighed down s&p, pretty much back to the flood line and a little bit of strength picking up out of tech. our next guest says she's expecting a high in july, but

thinks that the central banks need to break the back of employment to truly tame inflation. joining us here on set, deputy ceo of multi asset management at goldman sachs. his comments did focus on labor consumption and that's what's driving the economy. >> absolutely. from our perspective, it's going to be very difficult to out-hawk the fed right now. they're very focused on second-order inflation effects that the boe is colonel expe currently experiencing and the momentum we've seen has been on a positive trajectory. it's really interesting, we're about to hit the beginning of the third quarter, and this is when most people said the recession was going to start, and we just don't see it that's a huge part of how we're looking at markets and allocating portfolios. it's late cycle for us it's not end-of-cycle. >> the dots moved year-end unemployment down, right were they 4.5 and came down to

the low 4s, right? they're sort of saying the same thing as you are >> they are. they were very specific. they threw the kitchen sink at inflation this last meeting. the target was to tell the market we are staying higher for longer the market was pricing in cuts those are completely priced out at this point. they just don't want to see that easing and that tension release from the market, as it relates to, you know, conditions easing. >> how much of a potential recession, though, at this point, is priced into the market >> so when you look at the yield curve, it's telling you, you know, a pretty significant story. it's one of the indicators that's flashing recession. but historically, you look at when it started the inversion, that was last year's time frame, somewhat close to october is when it got pretty significant usually it's about 12 months later. that would get you to november, when you start to see some version of economic contraction. now, we do agree that you're going to see the economy slowing. and it is, but it's slowing very slowly and that gives people time to adjust to higher interest rates. and the corporate and the

consumer has really smoothed the vol of higher rates. and we think that that's meaningful >> does that explain what's happened to housing, as people have had time to assimilate to 6.5 -- i got through 6.75 today. >> yeah, when you look at housing prices, that's one of the data points that's really showing you that things are pretty stable. that's a lot to do with supply so supply hasn't really come to market, because the consumer balance sheet is pretty strong so people aren't going to be for sellers. they don't want to go into new mortgages when they have a 30-year at 3%, if you will so, you know, the housing market is a little bit rate sensitive than people were originally expecting. >> just given the supply and demand dynamic there >> exactly >> as we look towards the future, we have a 71% probability of a rate hike, at least that's what the markets are pricing in, in july. you believe it's actually higher than that. you think it's almost a near-certainty that we will see a rate hike. and what is fueling that hypothesis >> yeah, it's really high bar

for them, in our perspective to not hike just the moment of the data, everything that we've seen this week now, we do get really important data on friday, in terms of pce. we're not expecting that to be a blowout number, but we areing last month to be revised up somewhat and at the end of the day, you've got rolling payrolls, three-month payrolls at 300k that's nowhere near that 80k neutral level that the fed has even established themselves and when you think about the employment backdrop, the cost to deliver stuff, it's wages. so they're very focused on that. >> one thing chair powell mentioned with sarah is that there could be a lag in terms of the credit crunch that happened as a result of the events from march. so that is partly behind their thinking for taking a pause last time how is that factoring into your calculation with regard to a recession? do you believe there is a lag, that we will see fallout effects

that have yet to really rise to the surface from the events of march? >> i think that's a very reasonable hypothesis and credit is the lifeblood of the economy. so you start to see credit come out from consumers, especially when they're starting to see loan repayments pick back up in the first quarter. that could show some stress. so from our perspective, this is a story where you are going to see the recession ultimately or the end of business cycle come to fruition. but it's more of a '24 story and we don't want to be positioned for that. we want to be positioned for late cycle >> so the playbook looks like what, in terms of equities, asset allocation, geographic allocation >> yes so we're very much so barbelling we think cash is a tremendous allocation at 5% it gives you the flexibility to be a liquidity provider and really act with speed, which is an alpha source in late cycle, when you see people start to trade things, you know, down, when there's liquidity pockets, which can happen during this

summer but we still like equities at the end of the day, earnings are nominal. and even if you see a mild recession, you get to gdp at around 4% in those instances so we like pairing u.s. growth with japanese value. and the japanese value story is there's a lot of internal demand, valuations are attractive, it's an under-owned space. so we like pairing those two together and keeping our equity allocation, it's the cornerstone of how we're allocated right now. >> you've got to love the joke this morning about how monetary flags sometimes take 25 years. >> yes, absolutely >> alexandra, thanks, good to see you. >> thank you so much >> thank you so much let's turn to the big movers of the day, the chip stocks. the group sinking on headlines that the curbs on ai chip exports to china. kristina partsinevelos has more on this developing story >> hi. the department of commerce won't comment on any type of new chip

curbs, but my chip sources have previously told me that they were expecting further restrictions this year it would require nvidia and intel to obtain a license to ship to china and other countries of concern, contributing to the initial sell-off that we saw in the stocks but a lot of them, amd is barely flat to negative, nvidia has turned around quite a bit. a lot of that has to do with the fact that you can't price it just yet and there's so much demand for a lot of these ai chips that it would offset any decrease from china. nvidia previously said the restrictions would cost roughly $400 million in q3 of 2023 but was able to create a less-capable workaround, maybe you can even call it a watered down ai chip, which could actually now be a target of controls keep in mind, nvidia gets roughly 10 to 15% of its revenue from domestic china, so that doesn't include hong kong. if you include hong kong, it's about 22%. and any new sales impact is expected to be similar or even higher in magnitude as last

time so roughly about 7% of total data center sales. assuming that they can't come up with another workaround this quickly. and amd only reports annual geography contradictions, china contributed roughly 22% of total revenue in 2022, but their ai chip is just getting off the ground later this year, so the impact may actually be a lot less when you compare it to nvidia, especially because customers are now microsoft, meta, and aws that are interested in buying these amd chips that could offset any weakness should the u.s. tightening restrictions on ai chips further, demand and shipments to china will not disappear as they still use older models but as nvidia ceo jensen wang warned, just last month they risked enormous damage to its tech sector, as it would encourage china to build its ai chips internally and we don't want that >> kristina, there may not be too much we can do and another concern would be the

potential retaliation from china, as a result of these actions here in the u.s. what are you hearing from chip makers and boards in terms of the risk of retaliation right now? >> the low-hanging fruit is micron on may 24th, china said that they were going to ban certain micron products, and micron said that would have a low-to-double-digit impact to its revenue. we should get more clarity about that in micron's earnings after the bell and another name is tower semiconductors intel wants to buy it for $5.4 billion. it's an israeli company. china says, no, we want to look at it first, this may go against our anti-trust rules, this could be another way that china will go after american companies by stopping any kind of acquisition, saying it may go against their anti-trust rules so they're nitpicking at certain companies that are the low-hanging fruit that won't impact the chip supply in their country. >> it feels like this is just the beginning of a geopolitical situation that will get more and

more interesting to say the least as time goes upon kristina, thank you for following it so closely for us after the break, the ceo of the nation's third largest convenience retailer is with us. casey's general stores has seen its stock run up by nearly 20% in the past year if a recession is on the horizon, could it be a beneficiary? we'll discuss. plus, our sara eisen wrapping up conversations with the central bankers in ptul,orga including the fed chair moments ago. highlights are coming up stay with us td ameritrade, this is anna. hi anna, this position is all over the place, help! hey professor, subscriptions are down but that's only an estimated 15% of their valuation. do you think the market is overreacting? how'd you know that? the company profile tool, in thinkorswim®. yes, i love you!! please ignore that. td ameritrade. award-winning customer service that has your back.

watch regeneron today. the fda did reject this higher dose version of its eye drug that's used to treat a disease that can lead to blindness many analysts still expect the drug to be eventually approved, but the timeline is up for debate down 3.5 today was up about 14% for the year back in april, let's say, but those year-to-date gains, leslie, are gone as of now >> yeah. completely went away turning to the consumer, our next guest runs the nation's third largest convenience store chain with a finger on the pulse of everything from fuel to fast food to charging stations. just yesterday announcing a new strategic plan for the next three years at the company's investor day here in new york city joining us here at post nine, casey's general stores' ceo, darren rebellis. so your three-year strategic plan, your growing store count, 350 stores by the end of fiscal

year 2026, accelerate food offerings, and prepared label offerings. how do you plan to get there as this organic growth, is this m&a? big capex? what do you think? >> well, we're going to do it through a combination of things. our growth algorithm is about half of organic growth with the existing store base. so driving same-store sales, our merchandising mix, our prepared foods that you talked about. we're the fifth largest pizza chain in the u.s., so that's the crowned jewels of the casey's brand, so we're really accelerating on that front but the other half is through unit development and that comes both organically and through m&a. and you know, something interesting about our industry is about two-thirds of the convenience stores in the u.s. are operated by chains of ten stores or less it's very fragmented, very small operators, and in the current environment, it's a very challenging environment for them to operate in. it really opens up a wide opportunity for stores -- chains like us to acquire and really

add value to those stores. so -- >> and benefit from scale, potentially. and if i'm kind of reading between the lines here, you're referring to the inflation pressures, which i was looking at the transcript from your most recent earnings call earlier this month you say that inflation pressures have subsided some, of course, depending on the category. how much of those pressures have you been pressing on to your customers. and now that they are subsiding, does that change the pricing at all for the items in your store? >> there's been a mix of that? on the consumer packaged goods sides, a lot of those cost increases, that the manufacturers experienced got passed on to us and we've passed those on we've been able to keep up with that i don't see those price subsiding. on the prepared foods side, it's more commodity driven. think of proteins, cheese in particular for us, we use about 30 million pounds of cheese a year it's a big input cost. and we try to price through the

cycle. we don't necessarily raise prices all the way to cover that cost, because that's -- that commodity is a little more volatile we know those costs will come down at some point, so we try to maintain that value proposition for our guests. and we're seeing that happen now. we've been able to keep our unit velocity on the pizza business really steady and now accelerating because we've been able to maintain that value proposition. >> it's interesting. general mills, for example, had an earnings print today, and they did take some price, but volumes are beginning to suffer, and i just wonder if now is the time to play a little more hardball when it comes to at least panckaged goods you're not sensing that? >> not at this point i think the prices have subsided a little bit i mean, i shouldn't say subside. the cost increases have slowed they're still going up, but they're moderating from where they were 6, 9, 12 months ago. >> what are you seeing with regard to the state of the consumer you fit in a certain area where if we did see a recession,

potentially, you could see an uptick in sales. are you seeing any evidence of that right now i know you're largely based in the midwest, is that correct >> yeah, that's correct. we're in 16 states in the midwest, interestingly enough, about half of our store base is in towns of 5,000 people or less so very much a rural play. and smaller towns, smaller cities, think 20,000, 50,000 population and so those consumers, you know, about three quarters of our consumer base earns $50,000 or more a year and so, that doesn't sound like a lot, when we're in new york city, but our markets, the states that we operate in, the most expensive state to live in, in our footprint, is ranked 22nd in the country in terms of -- >> which one is that illinois >> south dakota, actually. >> i would have guessed illinois too until i saw it so seven of the bottom 10 costs of living are in our footprint it's a very affordable geography, so $50,000 goes quite

a ways >> does that mean all the things that we hear about, we should be afraid of in the second half meaning student loans and the drawdown of savings and tighter credit and spiking jobless claims are going to be key to you in the next six months >> you know, we have to factor in all of those things, but you know, we're not as exposed as the student loan thing in particular, because a lot of our -- demographically, a lot of our guest base are skilled bad luck workers but the rest of the economy, that's a potential impact. but for us, we really have a great value proposition for our guests we've launched in our at least-year plan, we've launched our private label a program. we have other 300 skus in the assortment now, they're private labeled and represent a fantastic value to the guests and really high quality. and it has been rell received by our customers. >> it sounds like you're still finding people to hire and train

and, you know, the workforce isn't super tight, where these places are >> it's gotten better, for sure. obviously, the last couple of years with covid, it was a challenge. keeping stores staffed and we've really focused more recently on team member gaugga engagement, and providing our team members what they need to make the jobs easier in the stores that's reduced our turnover. if we don't turn them over as fast, we don't have to hire them as fast, either. and we've seen 20% reductions in overtime and in training hours it's really worked out to our benefit. >> the last thing i have, the video has gasoline with a two handle, i'm not sure if that's currently or not, but gas is down 20% year on year. $1, $1.30, $1.35 is that a big tail wind for your -- >> it can be from a volume standpoint as we're going into the holiday weekend, as an example if you think back to this time last year, gasoline was over $5 a gallon and so we're expecting 43

million people on the road this weekend. so i think a lot more people are going to be driving this year than last year, just for that reason >> that's a very good point. it is a holiday weekend. darren, thank you so much for being here and we will follow the flight of your three-year plan >> thanks very much for having me >> a lot more coming up on the consumer this afternoon. an exclusive with the ceo of mastercard that interview on "overtime, 4:00 p.m. eastern time, leslie >> and after the break, closing the gap in an ai deal making we just spoke about the u.s. trying to curb u.s. chip exports to china, but where are the vc dollars going and how will those investments shape the future of e rrthcuent publicly traded ai leaders. we discuss when "squawk on the street" returns.

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( ♪♪ ) constant contact delivers the marketing tools your small business needs to keep up, excel, and grow. constant contact. helping the small stand tall. the ai arms race between the u.s. and china continues to heat up, this time in the venture capital deal-making space, and that is the focus of today's tech check with deirdre bosa

>> new restrictions on chip exports. that is one piece of this broader ai arms race between the two countries. we have our early winners, big players, google, china has theirs, baidu, alibaba, others are certainly emerging, but as we have talked about before, it is not guaranteed that big tech will ultimately be the winners of this generative ai platform shift. so, there's another race going on to find another class of potential winners, at the earliest stages. the founders and start-ups that could pioneer new use cases that we haven't even thought of so far, the u.s. has been way ahead, in terms of deal making take a look at this chart that draws on data. it tells us that china is closing the gap with the u.s. in terms of that ai deal-making in 2020, china was doing less than 50% of the ai deals being done in the u.s. thissier, which we're only half way through, china has closed that gap its ai deal making is more than two-thirds, 70% that of u.s./ai

deal making. in terms of dollars invested, we are still far ahead of china by some $20, but the last platform shift, mobile, remember that, saw a slew of chinese players storm on to the scene and generally rival our big tech companies. bite dance, perhaps the best example of this. there are others, though and chinese big tech, like their american peers, they're investing heavily in this space themselves earlier this week, baidu claimed that its chat bot is beating chatgpt on some key measures and it has set aside some $140 million in a venture fund to invest in open ai start-ups. the question being asked today, do additional export band alter the landscape? does that slow down the pace of chinese ai deal making, but it will have to happen quickly. because that chart that i showed you that underlines the stakes right there, what is happening at the earliest levels and as we saw, with open ai, you can see these companies come up and become very powerful in terms of their capacity, what their large language models are

able to do at some of the earliest levels. >> deirdre, there's that, and also the reporting that washington was heavily involved behind the scenes in some scrutiny over zsequoia's deals that led to that decision to break apart. i'm curious what you think this all means for the appetite due across-border deal making in the vc space right now >> i think that there's still a lot of appetite. you bring up a really good point. you refer to sequoia breaking up its different businesses, perhaps because some of these geopolitical tensions, it has been in china for a long time, as long as any american vc made a lot of really good investments that have made the company a lot of money so i think what's happening now is still very, very interesting, for the american event krur capkrurture capitalists that are willing to take the risks of going into china, but they'll have to do so very carefully, potentially with more restrictions going in place for the chips. but again, what we've learned over the last few years, guys, is that when there's a will, there's a way.

loopholes have been found. remember, there were chinese companies that were sort of renting space on certain advanced chips so that's still tbd. can they get around this and when there's money involved, we've certainly seen time and time again that companies, venture capitalists, will find a way. >> like holding back water, no question there, d. deirdre bosa this morning, back home in sfo. after the break, gen restaurant group now open for trading over at the nasdaq a number of companies pricing public offerings tonight, as well we're going to look into the shuttering and the resurgence iof the ipo market in a moment

a couple hours into trading, dow still just south of the flat line bob pisani is back at post nin talking about the pickup of the poppy market you've been talking about jen restaurants for a while now. >> the barbecue is waiting they opened and opened at $18.30 why is that important? it's a small deal, but the price was $12 last night and the price talk was $10 to $12 and they up-sized the deal, instead of $3 million, they went to $3.6 million. the bottom line is this, they

were looking to raise $33 million. it was a small deal, and they opened at $18.30 if we put up the chart here and see what that's doing. and that's a significant demand. that's ipo demand in addition to the fact that there might be some restaurant demand here. bu but look at that that's suppressed demand for ipos that's out there. that's not because people suddenly want restaurants. three big deals tomorrow it's been a long time since we've has three $300 million deals in a single day. it's all going to be down here at the nyse. we'll have everybody involved. we'll be talking to people citadel is going to be the market maker there, we'll be talking to them in the morning but we have fidelis insurance, a big bermuda-based property insurance company, do re-insurance, property insurance. kodiak gas service does natural gas compression. we'll look at these numbers here, all $300 million

and savers value village, we did a story on trader talk this morning. i find this very interesting this is the biggest for-profit thrift operator in the united states all three are profitable, by the way. but thrift is very cool. young people are going to vintage stores, it's got a growing base of people who like thrift that's out there. it's got a huge angle on clothing waste you know, people sort of shame everybody for the amount of food that's thrown out. it's amazing the amount of clothing that is thrown out in the united states. and in the s1 yesterday, they had several interesting pieces of information, how much clothing is thrown away and the value of re-using items out there, which is the business they're in i found the data very, very interesting. and the final thing is, this is not in their comment, but this is my comment. this is a kind of recession play all of those people out there who think, there's an imminent recession that's going to be serious. there's a minority that believe there's going to be a serious recession, and this is the kind of thing that would appeal to them if you believe there's going to be a serious recession, thrift would do extremely well. it's already doing well

generally, has been doing well but there's an interesting way for the doomsters out there to say, oh, this would do very well in a recessionary environment. so we'll keep an eye on, i'm particularly interested in this one, but we'll keep an eye on this one >> that one appealing to the consumer, and then the two restaurants, as well it seems like the market does like the new issues in the consumer market. let's take a look at another consumer names that's general mills falling this morning after reporting a revenue miss for the fiscal fourth quarter operating in a different consumer space here. but on the bright side, they did hike their quarterly dividend by 9% and ceo jeff harmening was optimism about inflation in 2024, predicting a drop year over year. do you think the consumer can look forward to some relief based on these results >> let's hope so here's the problem with general mills. this is not a new problem. this has happened with a number of consumer companies. prices have been higher, because they have pricing power. but the pricing power is

weakening a little bit but the volumes have been weak so think about this. you could keep getting prices high and volumes weak, and you can still have organic growth. but if you start suddenly changing, that keeps going, prices are still up, but they're weakening. and the volumes are still weak organic sales growth start declining. and that's really the problem. you never want to see organics, that's a very important internal metric that people need to look at that's under pressure right now. that's why it's down so much today. the other thing is, consumer staples are a victim of the tech rally. i don't know if you can put up a longer chart, but for the last six weeks, all the consumer staples names have been under pressure but general mills, especially, it's 77. that was $90 look, see that, six weeks ago, that was a $90 site. and that's not just general mills' internal issues, that's the pressure that's on the consumer staples group with the rally we've seen in technology so two whammies are sort of hitting general mills here

>> sounds like an inflection point for sure >> meantime, our sara eisen wrapping up interviews with a number of central bankers, including the fed chair a few moments ago. highlights coming in just a moment, but sara, what can we expect to hear from you? >> reporter: hi, carl and leslie just off the stage with the heads of the fed and the ecb and the bank of england and the bank of japan and i tried to really grill them on how they were thinking about the moderation of inflation and just how much is too much when it comes to tightening policy. i'll share with you some of the highlights and potentially market-moving comments from that conversation right after the reeak. he on "squawk on the street" from central portugal, cite of the ecb forum. well be right back

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now you've built something better for everyone. that's the sustainability solution ibm and a global real estate company created. what will you create? ibm. let's create. as promised, our sara eisen joins us from the ecb forum in portugal, where she just got done moderating that panel sara, the headlines have been ricocheting all over the world i'm curious to know how it felt to you on stage? >> reporter: well, first of all, carl, thank you. and it felt like it was a great moment to talk to them, because we're at this point now where a lot of these big -- major central bankers have been tightening policy, raising interest rates, for at least a year now, to fight inflation and inflation is coming down, but not fast enough for any of them, really, except for the bank of japan, which still sees the need for inflation to rise so they're moving at different speeds and i started off by asking them why they recently made the moves they made, a pause for the fed,

a 25-basis point increase for the ecb, and a half a point -- surprising -- increase for the bank of england. here's what they said. >> that you could remain on hold >> the progress on headline inflation coming down is certainly welcome and ought to keep inflation expectations anchored >> do you talk amongst yourselves >> yeah, of course we do >> i mean, do you call before policy meetings? >> can i just -- i just want to follow-up on what jay said i think he's completely right. and i think that the -- this is what i call the cache-22 issue >> that one was about policy coordination, and whether they talk to each other about the different moves they've made here's what they've said about the recentmoves they've made and how they're thinking about what they're going to do next. >> we still have ground to cover. and i think that as i said earlier on, we are data dependent. we will decide on a mee

meeting-by-meeting basis, but we know that we have ground to cover. and if our baseline stance, then we also know that we will very likely hike again in july. >> the cumulus of data, both particularly on the labor market and on the inflation release we had, which to us showcased signs of persistence and kcaused us to conclude that we had to make a strong move at that point. it was justified -- my own view on that was, if we were really of the view that we were going to do 25 and then we were really sort of baked in front of the 25 based on the evidence that we've seen, it was better to do the 50 and then, as christine said, we will be evidence driven. we will wait for the next set of evidence for our own might which to christine's point again, will be one where we have a full forecast. >> the labor market is really pulling the economy. and my colleagues and i, as you will know, wrote down in our

sep, two more additional rate hikes. the median was quite a strong majority, actually, wanted two or more rate hikes and the reason for that was, if you look at the data over the last quarter, what you see is stronger than expected growth, a tighter than expected labor market, and higher than expected inflation. that tells us that although policy is restrictive, it's not -- it may not be restrictive enough, and it has not been restrictive for long enough. >> so i don't get why you didn't raise rates at the last meeting, especially, i think it was a surprise that it was a unanimous decision to hold rates steady, when you said a majority think that they still need to go farther on raising rates >> it's really just -- as you get closer and closer to the goal -- what we're aiming for is a policy that's sufficiently restrictive to bring inflation down to 2% over time as you get closer to that, you get closer to the place where the risks become more imbalanced so, you know, we did 475 basis points hikes in a row, starting

in june of last year in december, we moved down to 50 then we did three consecutive 25 basis point hikes. this is really just a continuation we're going to move the decisions a little bit -- make theme little bit, with a little bit more time in between them. in an effort to get more information from the data, to see how much restraint is really coming from these -- through the pipeline, from rate hikes that we only made now, in many cases, six, eight, nine months ago. so that's why we did it. >> so maybe in every other meeting hike >> we have not decided that. the only thing we've decided was not to raise rates at the june meeting. we have not made a decision to go to that it may work out that way, with it may not work out that way, but i wouldn't take moving consecutive meetings off the table, at all. >> although the headline rate of inflation is above 3%, which is well above the 2% inflation target we think underlying inflation is still a bit lower, around 2% that's why we are keeping policy unchanged at the moment.

>> hawkish powell, dovish bank of japan, for sure there the fact that he didn't take consecutive rate hikes off table, maybe we'll get another w one in september the question now is how much economic pain is he willing to tolerate in the name of fighting inflation. and he still says there's a bigger risk of underdoing it on the inflation fight than overdoing it right now listen >> the thing with the risk is, there may be social costs associated with restoring price stability. the social cost of failing to restore price stability will be higher in almost all likely cases. we've seen what that looks like and it's one of the principle things that society counts on us to accomplish and i think we all feel committed to accomplishing it it is, of course, a good thing that inflation expectations have remained anchored all of this time, but our understanding of

inflation expectations is not a precise one. and longer inflation remains high, you know, the more risk there is that inflation will become entrenched in the economy. so the passage of time is not our friend >> he says he doesn't foresee a recession at this point, that the economy is resilient, but is watching the risks and one of them, of course, i asked him about is the impact of the three bank failures that we had in march and the potential tightening of credit that we're seeing here's how he sees it. >> there's a fair amount of research showing that when something like that happens, bank availability and credit can move down a little bit with a pit of a lag so we're watching carefully to see whether that does appear tightening and financial conditions is what we're doing, so we have seen bank credit conditions tighten the question is, that's what we're trying to achieve. the question is, is there an ooth channel of that or a greater amount of that coming

from what happened in march. i think that's in the back of my mind, to see whether we do see that >> so clearly, they're watching that carefully, but they're encouraged on that front perhaps the most telling remarks came when i asked him about when he thinks we'll return to the target of 2% inflation this is in the forecast, but we haven't yet heard chair powell himself of when he forecasted that to happen we did today >> i don't see us getting back to 2% this year or next year >> you don't >> no, i see us making progress, steady progress on -- this is core inflation headline inflation is coming down now, is lower than core but for core inflation, i don't see us getting to 2% this year or tnext year. i see us getting there the year after? >> yeah. >> 2025, core inflation, 2%. >> yeah. >> so you'll be restrictive for a long time. >> no.

well, we'll be restrictive as long as we need to be. >> a little hint there, but overall, it was a pretty hawkish standpoint in other words, they're still more worried about inflation, carl and leslie, than they are about the overall economy. he did say we're starting to see signs of cooling, for instance, in the labor market. they're watching that, but no real talk of recession and really, just wouldn't take the bait on overdoing it on tightening and also, you know, maintained over and over that there's still work to be done. wouldn't commit to whether it was july, september, every other meeting, that sort of thing. but that's all under consideration right now. if you were wondering, carl, if powell was maybe less hawkish or a little more worry about the economy, i didn't get that today. >> no, that was definitely the read over here i thought some of the most interesting stuff you got was out of japan and that amazing line about monetary lags getting measured in decades >> that was funny. right, the last time they

tightened, they were tightening policy with a very, very, very long time ago. and they're finally starting to see inflation. going into this meeting, the big question mark for weydon, and he's the newest of all four of them on stage, he bank the head of the bank of japan just a few months ago, so the big question is how much pressure they're facing now that their overall inflation rate is double the 2% target, do they have to stop easing the yield curve control, the negative interest rates? that's all in full effect. and he indicated that by his measure, their inflation is not yet at 2% and he doesn't necessarily see that happening until next year. and then, maybe, he'll be under more pressure to unwind that but didn't sound like he was ready anytime soon to change policy or even intervene in the currency market, where there's some chatter today, because the yen has just gotten so weak. he said, well, it's them it's bank of england and europe central bank and the federal reserve. because they're all tightening policy, so their currencies are

getting strong against the yen instead, he's monitoring it. that was the first time we got that headline. they're clearly watching it. but i didn't get any hint that they're about to reverse course and doanything hawkish >> i think you really hit the nail on the head on why it was so special to see everybody together because as you mentioned in the panel, they talk behind the scenes now, they don't, you know, get their directives from the person sitting to the chair to their left, for example. but they do take into some consideration the global impact of their policies. so it was really amazing and you did a great job following up and asking each individual the appropriate questions for their region but just to kind of get a sense in one place, of how they think about a variety of topics, so, we really appreciate you bringing that to us. >> thank you,les lesleslie >> and we'll have much more on how those comments we just heard are shaping the street's view about the next rate hike jeffrey's david zervos is back with us. we're back in two.

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come on, guys! do you hear that? i don't hear anything anymore. find out if you're sitting on a goldmine. call coventry direct today at the number on your screen, or visit coventrydirect.com. welcome back our own sara eisen just spoke with central bank leaders in portugal about their efforts to rein in inflation. and here to break it all down is jefferies' chief market strategist david zervos. david, thank you so much i want to get your thoughts on the two major headlines from that large conversation as it applies to the u.s. and markets.

jay powell saying he does believe there is more restriction coming while policy is restricted it may not be restrictive enough he said he wouldn't rule out the idea of consecutive rate hikes, that this isn't pause isn't indicative that we could see an every other meeting phenomenon and that 2% target for core cpi, inflation, not attainable until 2025 what do you make of some of those headlines today? >> everyone, sara, yourself included, interpreted it all correctly. it was a hawkish message i think he's trying to temper market enthusiasm for the skip, that it's a skip and not an extended pause in all likelihood what the two consecutive meeting statement was all about.

i think the core pce, they focus on, has been steady now for five months at 4.7%, it's giving them trouble. it's concerning. he's expressing that concern and telling you they have a reasonably long journey ahead and trying to prepare the market for that that's a message i don't think they like to hear. >> the markets are kind of mixed today. do you think they are already priced into that hawkishness, internalizing what he's saying >> i don't, leslie i think the market has a more optimistic view. jay said that earlier before when he was asked about the discrepancy between their forecast and the street. he said the street is more optimistic on how quickly inflation can come down.

even the fed had to raise their core pce forecast from 3.6 to 3.9 because it's not moving as quickly. i think that's what's getting under the skin of the fomc >> you say that you are quite content not chasing the equity market so what would you advise investors do with their money now? >> we've been talking all year on this show and others about the high yield credit market and why that is a safer on a risk adjusted basis return than going all in on the equities we like being risk on. we do think we're in a range,

but i think the credit market bonds yielding 8, 9, 10, 11% depending on what part of the structure you're in whether it's struck tore credit, loans, bonds, offer a great opportunity for investors to not be fully committed as we go into the end of this year and beginning of next year and as the rate hikes bite more and the fed has to do a little more. >> fascinating david zervos, thank you so much for joining us on an important, very important, macro day today. we appreciate it >> the market continues to be in a range, the ten-year in a range, oil still in a range. can't break 70 i don't know if you've seen ag -- >> commodity futures, yes. >> the lowest since 2021 there are elements of the market that are at least going along with powell's description of goods deflation, headline

inflation remaining subdued. >> just amazing at a time where you are worried about at least food inflation >> that risk off phenomenon we're seeing >> what a morning of headlines our thanks to sara eisen for moderating such a high-profile event. we'll see what the implications are as we get to the judge carl, thank you very much. welcome to "the halftime report." i'm scott wapner front and center this hour, the longest monthly winning streak for stocks in nearly two years and what it means knew for the second half of the year. and speaking of that momentum how about apple hitting another new high today, little more than a dollar away from $3 trillion joining me for the hour today joe terranova, amy raskin, steve weiss. everybody is here at post 9. the dow is being