tom: do we need a banner that says, adam posen says u.k. is banana republic? does that work? am: i would rather go with the child in the background. jonathan: governor bailey with the child in the background. adam posen, thank you. a range of opinions on what is happening. the fed behind us, the bank of england still to come. tom: this is olivia blanchard saying we need 4% inflation. he said that was 01 off. now we have a group led by adam posen, olivier len chart, and others, who are saying 2% is important. jonathan: some people would take the other side of this debate. if you have to make a move, are you hiking into weakness? that is the question. lisa: that is the reason why you bring up emerging markets. we have seen that in a number of developing markets. that may beat what the bank of england will do today. jonathan: futures up, the s&p help. -- the s&p up. market looks good. this is bloomberg. ♪ >> nancy pelosi is pushing the house towards vote on the economic agenda, but a few issues, family leave, immigration. the measure still does not have the full support of senate

that is a point adam posen has made.y will not fight higher inflation on a base level but embrace it. what will trigger that shift in mentality? ed: they will have to concede inflation is not transitory but it is persistent. right now they are saying the supply chain disruptions are persistent. what does that mean? it means inflationary pressures will stay persistent. i think much will depend on the fed chair. i do not think it will be jay powell. i think it is likely to be lael brainard. openings would get filled by more progressive people. the fed will become more politicized and more progressive and more inclined to say to percent is too low, 3% is fine. if it is above 3% we can live with it. they did not want to raise interest rates more than they have to. lisa: you mentioned the 1970's, which is a trigger for a lot of people watching the bond market. i wonder where the analogy start and where they drop off, especially if you do have a more dovish fed that is more willing to allow inflation to hover around 3%. are we

honored to have adam posen here with us earlier, and many others as well.chaudhry has a heritage from the trade division. what is so important here about place and -- about inflation betting is the bet made with inflation derivative products. jonathan: i am pleased you brought some of this up. let's start with the broader theme to start this morning. inflation expectations didn't shift yesterday, lisa. the market has now established what it things about inflation and what it thinks the fed will have to do. a lot of people define german powell's news conference yesterday as a success because there was not much disruption in markets. it is really the market response that defines that success. equities all-time highs, yields didn't move much. ok. to me, it is still a market pricing and hikes next year and a federal reserve split on just doing one next year. the federal reserve is saying here is our base case. i think the base case of market participants, there is still a spread there between where the fed is and where markets are priced. lisa: what i find fasc

you are talking about the potential for an adam posen 3% inflation rate long term. is lael brainard more inclined to try to adapt to policies that actually do allow that to happen, or does fed chair jay powell have the exact same approach as she does when it comes to that? tom: we welcome you across this nation come from $2.90 a gallon gas out to four dollars. i got a huge response on the four plus dollar gallon crew. francisco blanch, was he saying five dollars a gallon? jonathan: we could get close to something like that if crude keeps climbing. he is talking about triple digit crude right now. it is heller's -- triple digit crude. right now, $82.32. tom: the dow a little bit negative. it is fractional. jonathan: the s&p off by more than 0.1%. we have had a great run the last week or so. eight days of gains on the s&p, five weeks of gains on the s&p 500. these are the longest weekly and daily winning streaks we have had in the year so far. in the fx market, euro-dollar $1.1572. there your nominal yield, 1.45 one cents -- nominal yield, 1.4584% on 10-year gilts. to

lisa: this is going directly to the adam posen school of thought, where perhaps this federal reserveught to rethink what their target is for inflation and allow it to move to more of a 3% rate. what does that due to the bond complex if we are talking about negative real yields? does that mean they just go more negative and the fed has to remain that much more accommodative to achieve that? jim: ultimately, but i have looked at on the bond yields is if we -- we have been sustaining at 2% inflation, and we have had yields of 3% on the 10 year. i think if we sustain more at 3% of the cycle, ultimately the 10 year yield is going to hit 4% little more at some point, so even the funds rate, you can look at end of cycle funds rate close to that as well before the other end of the cycle. we are a long ways from that. it could happen very quickly. i still think we are going to maybe see 2% before the end of the year on the 10 year if these inflation numbers are coming in hot. lisa: do you think that equity markets could sustain their valuations with a 4% 10 year yield? kailey: given 1.75% spo

want to go to your claimed seminar you hold every year, and part of that debate will be around adam posenon institute, and the idea of a 3% level instead of 2%. why can't we go decimals and are we doing that right now and that the new 2% is 2.2% or 2.3%. are we job owning our way to that level -- are we jawboning our way to that level? michael: i do not think we can go to 3% for political reasons. the fed, that they interpreted 2% in the 1990's was sleight-of-hand on the congressional mandate. some might say the flexible average inflation targeting was a backhanded way of raising the inflation target. i think there's something to that. on average there should be higher realized inflation. decimal points, given the imprecision of how we measure inflation, that might be a bit much. going to 3% is not in the cards anytime soon. lisa: i want to finish where we began the show, with tom asking a good question. are we just following hysteria with respect to an asian with these 1970 -- two inflation with these 1970's comparisons? what is the consequence of the inflation we are seeing now? is it a