>> we are looking at what is happening among the banks and seeing if there will be tightening credit conditions. >> if we did not have this banking crisis this would be a more hawkish result. >> it will depend on how successful they are at limiting spread. >> the fed does not want to look like they are doing a u-turn with inflation running as hard as it is. >> the risk of a hard landing is higher because the fed will not know the appropriate policy. >> this is "bloomberg surveillance." >> split screened chaos in

washington, d.c., that was yesterday. live from new york city. good morning. this is "bloomberg surveillance." equity futures up .1%. this market got into a difficult moment at one point but it was not about chairman powell but the treasury secretary. lisa: chairman powell did an excellent job being very boring and telling a line that did not disrupt anything and then janet yellen came out and said that we had not discussed it yet. and then all of a sudden, you can interpret those comments however you want, but the market interpreted them as there was no backstop as she had hinted at in that left a pretty jonathan: big impact. jonathan:earlier in the week she possibly use the systemic risk exception and there is a key distinction. there is a key between doing that again and having blanket positive insurance.

the difficult part is that the day before people misinterpreted the comments and the underlying meaning of what she was implying. lisa: she cannot do that without congressional support and she was speaking to congress and the senate and that is telling. there is not the congressional will to make this happen. if she is talking about her proposal what i am curious about is when we end up with a legislative stalemate in terms of what her capacity as. jonathan: if the -- and this was a point of contention last week. she cannot square the circle and at the same time you can say if we have these troubles again and we think that there could be contagion and we can have the systemic risk exception. that is a big difference between that and saying we are going to have blanket deposit insurance. the problem for chairman powell it comes out at the very top and at the same time secretary yellen is saying that is the conflict between the two at the

same time which is poor scheduling. you know that when chairman powell is speaking -- i do not know how this stuff works and how this got scheduled and can they just reschedule when they find out that she will speak at the same time? lisa: i do not know the scheduling either but i will tell you steve's take, it is astounding that they would've given contradictory messages on bank deposits at the same time. powell said all deposits are safe and yellen said hold my beer. that is really the talk of the market. jonathan: you would've that out that she would have thought that they have spoken to each other. lisa: and the fact that they have not does not them boo you -- give you confidence. jonathan: equities futures up .5%. on the treasury curve, unchanged on the two year. 3.94 and a 25 basis point hike in the two year yield dropped 25

basis points. lisa: we heard from jay powell that they had no rate cuts priced in the market said you have almost 100 basis points priced in. so what people are believing i will leave up to people to decide. jonathan: what is coming up? lisa: more central banks. turkiye and the bank of england. the swiss national bank raised rates by 50 basis points. 11:00 a.m., bank of england is speaking at the peterson institute. the bank of england is expected to raise rates by 25 basis points. here is where we will see more divergence in the currency and more potential dollar weakness. this is what people are speculating on. if you see the fed pulling back and european banks seeing hot inflation in terms of the rate hiking cycle, do you get divergence where it is all systems go in europe and not so much in the u.s.?

10:00 a.m. and the tiktok ceo is coming before the energy and commerce committee. what do we end up getting if we hear from politicians who are basically using this as a campaign pitch point? there will be some tell what the appetite is to do something. it will be interesting to see what proposals he has. jonathan: i am surprised they have not done anything already. why is this taking so long? lisa: it is not popular. i cannot think of anything else. they do campaign advertisements on tiktok, so on what point can they square the circle if they want -- if you want to use a similar analogy. and then at 3:00 p.m., janet yellen. will she clarify after tanking bank stocks with her lack of support of ongoing deposit insurance. i am watching the kbw bank index. do we see a reprieve? ongoing research -- concerns

about first republic and pac -west with 25% of their deposits withdrawn. how do we stave that off especially if janet yellen is giving contradictory messages? jonathan: you know what we have learned, people thought that the ecb had delivered the playbook and that is not the one he reached for. credit squeeze is not 8 -- credit suisse is not a substitute for rate hikes. you mentioned this a little bit heard earlier, this opens the door for what to expect from the ecb and what the fed should deliver. lisa: there are a lot of questions but that is a big theme that is a pivot point. jonathan: joining us the chief investment strategist at oppenheimer, thank you. i mentioned this to you, we will talk about this. if the fed backs away but -- because things are breaking, are

you telling me that that is bullish? >> that is not a bad thing. and i think that the market really responded to chair powell and i think that was all really knew -- doing cry -- quite well and then later on we had this from the secretary of the treasury and that kind of show people up. this is not uncommon, times like this, it is not what brings a market down, it is how quick the response is and the recognition that investors need to realize that not every response will be correct, but it is a process of working our way out of another area so to speak. lisa: we are going to get out of this somehow with rate cuts, but the fed says no. how much are you counting on rate cuts to have -- to how this

emerges and how we emerge from the woods of financial systemic issues? john: great question and i am not really relying on rate cuts. i think inflation is sticky and the fed has to do something. its credibility is still on the line and its credibility is always on the line whether it is a rate hike or cutting cycle. in this instance having been behind the curve, so we had this inflation hit the 40 year high, and this is an important period. they can -- they have to show that they can manage both this and a crisis in confidence within the regional banks. i think they can, they are very capable of doing it. it does not mean that they are infallible, they just have to work through a process. lisa: you have been a bullish investor for a while. what does being able right now need -- mean? what does it mean hoping for?

john: the main thing is that we are building our positions in areas we think will be rewarded, and if i just take a look and i hate to give the bears places they might hit if they got bogged down today at some point. it has been terrific, all of a sudden tech has become the new value story. there was a recognition that we are not going back, not back to the slide rule. technology is alive a well and it had -- alive and well and it has to be profitable. as well as that, it looks good for a consumer discretionary and it looks good for areas of communication services and industrials. this is the area we like to invest, not play a little bit longer on the financials. this is going to take to regain

trust in terms of investors who are not players, but are intermediate to longer-term investors. it will take them a little while to feel more relaxed about financials. jonathan: we need the consumer to relax about financials so investors can relax. you need policy to act as a circuit breaker. do you think this financial instability can end without blanket deposit insurance? john: you know, i think that the real definition is we will have to be -- there will have to be a redefining about what that maximum amount of a deposit that gets covered, and then anything over that would likely have to be paid by the depositer in being over and having an overage versus what the covert amount is so the taxpayer is not on the hook for it. jonathan: thank you.

what did you make of that? lisa: i just love that he did not want to give anything to the bears in any way shape or sore -- form and so we talked about how it might take longer for tech to come back so perhaps it will lag behind in the near term. when -- what he is talking about is the bull case at a time where you have optimism in the economy, and momentum and a story of resilience and a lot of sex there is that even if you get a rocky road over the long term you could lift. jonathan: can this end without blanket deposit insurance? can this financial instability end without a? lisa: without mass consolidation and perhaps a greater degree of regulation. with these banks and what politicians rather have a greater degree of regulation that changes the business model and reduces the profitability case, or provide a backstop to

depositors that they have not before? those are the two eat -- two issues and either way there has to be policy change to revive the confidence. jane frazier saying the this is a new terrain given at which the speed that silicon valley failed. jonathan: extra regulation is guaranteed? lisa: you would think so but i do not think people will be gung ho about this because this is the bundesbanks in germany. jonathan: that is a nice comparison. where did you read that? lisa: i just made it up. you just -- jonathan: you just made it up on the spot. lisa: let us move on. it is true. jonathan: that is a good start to the morning. we have not slept for a week. futures positive .4%. lisa will make things up for the next two hours. yields 3.48 54 basis points. ♪

>> keeping you up-to-date from news around the world with the first word. jerome powell made it clear that inflation is still the top concern of the central bank. less than two weeks after the second biggest bank failure in u.s. history powell advised that more fed tightening might be in-store following the quarter-point rate hike. they are betting that the bank turmoil will not turn into a broader meltdown. the bank of england is likely to continue the quickest set of interest rate increases in three decades. investors expect them to raise the benchmark lending rate by a quarter-point. they were solidified wednesday when new data showed inflation climbing for the first time in four months. janet yellen says that the u.s. is not considering blanket bank apposite insurance without working with congress. a senate subcommittee had asked her whether all protections for

u.s. deposits would require congressional approval and she said that the heads of recently failed american bank should be held accountable. the u.s. fears that a war weary world might embrace the china ukraine ease plan. the presidents of china and russia discussed the proposals which the u.s. has rejected but dismissing it could lead china to argue that the u.s. is not interested in peace. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. i am lisa mateo, this is bloomberg. bloomberg. ♪ to get lost in investment research. introducing j.p. morgan personal advisors. hey david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management. what does it mean to be ever better?

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introducing j.p. morgan personal advisors. hey david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management.

>> we have seen that we have the tools to protect depositors when there is a threat of serious harm to the economy or financial system. we are prepared to use those tools, and depositors should assume that their deposits are safe. jonathan: chairman powell did his job but at the same time there is this exchange with secretary ellen. >> madam secretary is ensuring every deposit of every fc -- fbi see -- fbi see bank require

congressional approval? >> it is not something that we look at and that will be a case-by-case determination and it is not considered or discussed anything having to do with blanket insurance or guarantees of assets. jonathan: secretary ellen -- yellen that one is a point of contention. lisa: she flagged that that was what they were considering when we had reports that this was on the table to protect -- to prevent this lack of confidence and markets had a significant response. jonathan: there is a difference of if there is failing and it poses systemic risk the potential possibility of contagion that they cannot use that systemic risk exception and make depositors whole. that is about all the treasury secretary can say because we have reported that maybe they are looking at blanket insurance, that she is not willing to say this on the

record at all. lisa: that is part of the existential questions facing the region -- the regional banks. we were talking earlier the landesbanks. jonathan: we should do this again. lisa: it is a relative comparison and it is -- there are many of them and they are too small to be successful and they are not merged because each politician is representative of that bank and i am wondering in the u.s. if there is a feeling of regulating too harshly various regional banks. jonathan: it is clearly a two tier banking system, how do you solve that what do you do? lisa: if it is not deposit insurance what do they do? if it is not regulation it will crimp their business models. lisa: you just hope it goes away and it just kind of disappears? lisa: what did they say, the whole business strategy? jonathan: it is not clear what the policy is. lisa: janet yellen has a chance

to clarify that. jonathan: equities positive .4%. yields up four basis points. 10-year yield 3.47. the dollar-euro, 1.0 874. stephen joins us, financial institutions research director. wonderful to catch up with you. i will ask the question that was asked about 10 minutes ago, can you address this financial issue without like it deposit insurance? stephen: i think you can, certainly there has been a little bit of back and forth on this topic and treasury secretary ellen -- yellen is not ready to fight that battle so there might have been disappointments on the lack of being constructed on that. but, at the same time i think something like yesterday's news

was a novel approach and it might bring into the fray an industry solution which is that banks get together in a consortium type of way and ensure deposits up to $2 million and i think that is definitely a novel approach. i think it could be a differentiating factor for banks who are a part of those. look over here and we will ensure your deposits up to 2 million when the bank only goes to $250,000. there could be an industry solution and at the same time chairman powell left open the possibility that if a bank is truly failing that they will still step in and save depositors. so i do not know if this will be necessarily an issue that either depositors or investors need not be able to sleep at night. jonathan: were you surprised that the treasury secretary had not considered or discussed a blanket insurance or guarantee

of deposits. were you surprised that she had not considered or discussed it? stephen: especially since previous comments indicated that she would. maybe she read the tea leaves and said this is not something i will be able to get through easily and i am not willing to die on the fence for. and just backed away. so, it would be nice to have that initial backstop, but i do not think it is critical. lisa: if it does not come to pass, which seems increasingly likely, doesn't that reduce the profitability model substantially for regional banks? stephen: it does, and i think we are looking at heavy regulation because of this episode that is bound to hurt industry profitability. it will add to safety and

soundness, but we are looking at stress testing for smaller and midsize banks that will press down on the lower asset sizes and more banks deemed to be critical and systemic stress testing for these wider arrays of rate environments, particularly on the higher side which is not the base case in the severe, adverse scenario. you get potentially a higher deposit insurance. premiums. the ips took a big hit, and the cost of capital will probably move higher and greater liquidity if not capital questions as well. lisa: how to use twitter -- how do you stress test against tweets? stephen: you do not -- you make sure that your bank is not what silicon valley bank was, not a lot of insured depositors and deposits that were not diversified out of money-losing startups.

and better regulation that will protect the investment portfolio from rising rates in the case of silicon valley you had a flood of deposits in the 2000 and 2001 period. they invested it in the wrong. so you have to shy away from that. there are three things that are avoidable and that twitter will not allow -- or should not allow a run on your bank if you stay away from her -- from those three in particular. jonathan: we have to leave it there. the situation continues to evolve. tweets are the accelerant, not the fuse. i think the idea that bank runs happen more easily with twitter, they can happen more tweet -- more quickly. what started this was a poorly managed bank and people running for the exit. lisa: i would agree and that was borne out by the balance sheet.

that said i wonder what kind of protections there are against tweets. bill ackman coming out overnight and basically talked about how he expects big deposit runs because of the lack of insurance. totally free speech and go for it, what at what point is there a sort of some kind of concern. where does free speech and something that impedes the financial system, where do the two leave off when there is investment that takes place. jonathan: tow -- so to regain that trust with the consumer i keep coming back to the same question, can you addresses without blanket deposit insurance. there could be an industry solution where the banks have to do something themselves. lisa: he pointed to sophia which announces plan -- sofi which announced a plan to introduce to 2000 -- to $2 million and got to other banks to do that. if you start getting private

sector insurance solutions, great at solving the problem. but it is going to cost something does that make the model more difficult and impede some of the lending? jonathan: the futures are still rolling over about positive bite .2%. i know a lot of you are watching first republic in that stock is positive by 1.9% which is unchanged to what we have seen. it had another downgrade this time. those downgrades are just piling up at this bank. frances donald up next. on the latest change from the federal reserve. ♪

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jonathan: live from new york city, good morning to you all, equity futures on the s&p 500 positive by about .25% and fading a bit and on the nasdaq we are positive .8%. a lift after a big move in the treasury curve down 20 basis points in the front end even after a 25 basis point hike because we are going who knew -- we are going who knows where. the medium. state unchanged at 5.1%, looking out ahead in the latest projections for march and the march meeting from yesterday.

the two year three hi -- 3.95 but much lower over the last month or so. 34659 -- 346.59. we are looking at the difference between the ecb and federal reserve. earlier on euro, 109 -- one point 09, 1 .0 930. and now i am with you, this is one to watch. the language from lagarde is nothing like the language from chairman powell. lisa: this is a pivotal moment where we see a different -- a difference of tone and all of the other ecb members who have said that we stillb have a serious problemb in inflation and the fact thatg -- we sell they problem with inflation data and the fact that it came in different from united kingdom and not makes a difficult decision at how much they have to raise further at a time where

other areas are seeing disinflation. jonathan: allow me to frame the different review -- different views coming forward. more -- can we expect a 25 basis hike driven by another strong payroll prints and of that stuff or bad stuff, whichever way you see it. a surge in bank funding pressures can hurt that view. when uncertainty is high policy makers enter wait and see mode. it is unlikely that this is enough information to decide. this is the problem we have, the data dependence nonsense that we talk about all the time, depending on what data? i have joked does it include bank stocks? and now the federal reserve told you the financial instability is a substitute for rate hikes. to what extent no one knows and they have admitted that. what does that mean for cpi when

it comes and and for payrolls and how to adjust for these numbers if this issue is ongoing. lisa: do not mention it and it will be irrelevant. honestly when you look at the analyses there will be disinflation so the data does not matter because it is backwards looking. how me more do we need to see before we start thinking about the other side? what is the binary risk of seeing the inflation potential for the longer-term suddenly searching upward because of a lack of conviction right now? jonathan: the fed has essentially put a number on this because i said if we had the sep two weeks ago that meeting was coming up 50 basis points. that was my thought at the time and everybody shared that belief going from 5.1 to 5.50 and they might have to lift the dot and do more. they were running around saying 5.40. the fact that it stayed the same as them telling you that even though cpi was hard -- was hot and the payrolls were decent we

are going to say i think maybe 50 basins -- basis points is coming. when are you going to find out if that true is not -- true or not. do you need a month, two or three or do you find that out by early may. the fed found themselves in a really tough spot when it comes to the next move. lisa: i would take a step further. if they wait a couple of meetings what is the potential damage if they hike the rates again in september when people are starting to see the effects take hold more significantly what inflation has not come down a lot -- come down enough. jonathan: this is the frances donald take, "while powell said that the basis case did not include cuts the market base case certainly does, who is right?" she joins us now. you think they are done and welcome to the show. frances: they are largely done,

it could be another 25 basis points over nothing but in the great scheme of things it does not matter. the market already has a cost for this meeting and what actually shocks my economic and inflation models is another 25 basis points. it is how fast they cut and when they start cutting. the conversation will have to shift in the next few weeks away from this next incremental meeting to what does the path to the next one to two years looking like. if the fed will get its way there is significant mispricing and i suspect that the market will price in more cuts moving forward in the fed will follow. jonathan: what drives that, economic data or financial instability? frances: the two. you talked about the difference between the ecb and the fed, president lagarde told us that there is no tension between the price stability and financial stability mandate. even though chairman powell said that the banking system was

sound, he was clear that they were incorporating real impact from the stress through the lending channel. we know that this is going to dampen growth moving forward and anyone with an economic model the day that we saw the first banking stress colluded and that the -- clued in that this will be -- that we have a playbook from that and this brings in recessions. lisa: we have heard people say this is a liquidity mismatch and a credit crunch and you will say that this will become a credit problem versus you are right this is something that could be addressed with the positive insurance and other measures? frances: i pullout charts from before in the banking stress issues when you saw senior loan officers telling us that we were in a sizable tightening. this was happening before we experienced banking stress. even though you want to say the impact is nil, i can prove to you that we are seeing a wide

range of people saying that credit is pulling back and that is important because the bull case has been that the consumer is strong and the consumer was being driven by leveraging. if that slows or stalls that we have momentum slowing. q1 or q2? probably not but traditional means say that we are in a significant soft patch. my issue is maybe the fed goes 25 basis points or not, i think not at this juncture but how quickly they choose to respond and it is possible that the hawkish thing is not the next meeting but they try to stay on pause as long as possible given that inflation is uncomfortably high. lisa: it seems like the threshold has gone way down for cutting rates given what you expect in the coming months. how low do you expect them to cut rates have been that there is an effect from some sort of credit contraction? frances: we have playbooks for

uncertainty shots -- shocks and credit crunch is but it has been a very long time since we had a playbook or -- for low growth but inflation around three to 4%. the most important thing i heard yesterday was his reference to long-term inflation expectations being anchored and he said it was true for households, businesses and forecasters and markets which might be the direction that he chooses to tilt towards as we see cyclically high inflation. even as we come to the end of the year they might be able to say the long run served -- concerns about inflation expectations we no longer have those and we can tilt back towards the employment side because the said does have a dual mandate, we just have not talked about the unemployment side. lisa: do you think that rate cuts in this framework will be bullish or positive for risk assets? frances: traditionally the

context around rate cuts matters but we have to get through a recession first. there is a little bit of what people are saying that the leading indicators of the leading indicators of the leading indicators are positive. that is jumping the gun, we have to go through a reading of this economy to wait lower growth environment. a be jumping the gun a bit too much if we get too bullish on rate cuts given the context. jonathan: thank you. just brilliant. a lot of people have said president lagarde did a good job and a lot of people said chairman powell did a good job and they did very different jobs when you compare and contrast. lisa: jay powell opened up the door to the market retaining its view that perhaps it was done with the rate hiking cycle which is effectively what they did by keeping the. where it was -- the dot where it was. and there could be additional policy firming.

how many people do you think googled what firming meant? jonathan: i thought that was an elegant way of dealing with a complex issue and i imagine it took a long time to come up with it when they had that board meeting. they made what they thought was the best decision at the time. history will judge whether it is optimal and i said this yesterday, you can look like burns, you back away too soon and you look foolish. or you end up hiking into a bigger crisis so it is too early for me to say they have made the right decision i do not know what that actually is. that is what they were up against yesterday trying to work out whether this treaty was the right decision given what they are up against. lisa: they did a great job expressing uncertainty and lack of conviction and a sense of what they believe. what i find interesting is that the market took this as an endorsement of rate cuts and that his old one takeaway, game

on and as frances donald was talking about and the question is how far do they go in this cycle if inflation does not come down fully. jonathan: we said has two weeks change things. they told us that they think that two weeks has changed things and that this will lead to tighter lending standards and this is a substitute for rate hike to what extent we do not know but that is the direction of travel. i said is this disinflationary, this shock and they say they think it is. lisa: a lot of people agree with them. they were reflecting what i would say is a consensus that things and even if there is stability in the financial system there will be restriction of credit, money is more expensive for regional lenders when they punch above their weight. jonathan: do you want to talk about streaming and sports. you will also hear me complain about not being able to find football games in the united states because there are 20

different streaming platforms each with a home. peacock on the weekend, paramount for the champions league staff and i have no idea where any of this is. apple is considering bidding for streaming rights for a range of football games according to people familiar, a new -- a move that would increase competition with amazon and prime deal. this is coming from joshua turner. lisa: so basically you in england are not escaping anything? jonathan: i think sky sports and amazon has had a little dabble as well. i do not care who hosted i really do not, i just want to know where to go for certain games. lisa: why cant there just be a menu, like football, click here. jonathan: i do not want to just exit one out. lisa: someone is coming up with a solution. jonathan: i hope they do not just for me for everybody.

from new york, this is bloomberg. lisa m.: keeping you up-to-date with news around the world. i am lisa mateo. worries over inflation trump the recent banking turmoil as jerome powell ejected the idea of rate cuts. the quarter-point rake height -- rate hike comes two weeks after the second-biggest bank failure in u.s. history. the swiss national bank raises by 50 points and indicates that there is more to come. inflation out rate -- outweighs any concerns then the market reaction to the downfall of credit suisse. swiss banks are not exposed to u.s. bank failures. top executives at first republic bank have agreed to forgo their bonuses and some other pay. the bank has lost 88% of market value this year and it is grappling with a crisis of confidence in some regional banks.

washington and the banking industry have been trying to keep it from becoming the next bank to collapse. it is a victory for boeing in japan. japan airlines agreed to buy 21 737 max jets. airbus was originally seen as the front runner of the sale. the boeing order is estimated to be about $1 billion. it is a late twist in the sale of manchester united. we learned that bidders have been granted extra time to come up with new offers. a consortium has raised its offer of above the $5.5 bill -- bed. this is bloomberg. ♪ s. hey david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management. this is ge aerospace,

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your supply chain and ryder makes sure you're ever delivering with freight brokerage to transportation management, truckload capacity and dedicated trucks and drivers. introducing j.p. morgan personal advisors. hey david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management. >> we recognize that there is some volatility in the market but we believe that the u.k.

banking system is strong and the u.k. banks are well-capitalized. they have core ratios that are three times higher than the 2008 local financial crisis but we will monitor the situation carefully. jonathan: jeremy hunt on the banking system of the united kingdom. it seems like they serve as the chinese -- it seems that if you serve as a chancellor or a financial, you have to come out with a banking system is sound. we are well capitalizing on all of the above. the problem from the u.k. has not come from the financial system but the data, inflation back to double digits. this is the problem of a central bank trying to back away from rate hikes. they got slapped around the face by cpi. lisa: this is a reason why the theme is how much divergence does there have to be from central banks dealing with inflation that in some places it has peaked and in some places it

has not. and there is a sense of differences between the different inflationary drivers. jonathan: looking for a move to 4.25 and a basis point hike from the bank of england. joining us is jennifer, the chief global economist at capital economics. thank you for being with us. the best decision today, what is it? jennifer: difficult one. i think it probably is best to press on with another 25 basis point hike given the inflation data that we saw yesterday, the strength of food inflation and services inflation in the u.k. are a particular concern. i think it is a closer call than the market seems to think and that market pricing seems to imply at the moment. at his last meeting which seemed a long time ago, the start of february that the bank of england was the clearest of the

major central banks indicating that it was close to the end of its tightening cycle and that further tightening would depend on the data being stronger than expected either on the inflation or activity france. i think it is a close call. lisa: do you think that if they do hike they will indicate as jay powell did, at least this was how he was read in the markets, that they are at the end of the cycle and it is just when they start cutting. jennifer: it will be dovish and similar to what we have seen from the fed. the bank of england is that a few of its rate hikes have been on the dovish side and this one will not be different because there are clearly big risks to the economy in the u.k. and those have intensified with the turmoil in the banking sector and there is a big chance that credit conditions tightening aggressively in the months ahead and the bank of england will have an ion that and the

implications of the future and a lot of commentaries are trying to separate. central banks are trying to do that and saying that we are serious about the inflation flight and we will raise interest rates. ultimately in the future if credit conditions tightening brings down inflation and these become aligned at some point. lisa: every single central banker has tried to draw a distinction between their banking system in the u.s. and how it is much more secure than those that can be subject to deposit outflows. what about in the united kingdom where there is a unique set of issues particularly how tied to interest rates some of the mortgages and other debt really are and will they adjust in real time? jennifer: it is more about the banking system that it is very well-capitalized but that does not help you if there are massive deposit outflows. it does not matter what bank you are or how strong your deposits are. what we have to hope is that the

fact that capital ratios are relatively high and the banks appear to be in good help -- health and prevent that loss of confidence. the you wake -- the u.k. economy is relatively exposed to what is happening to interest rates and the feed should be relatively rapid and there has been quite a shift from the variable-rate mortgages of which we used to rely strongly unlike the u.s. to a bit more fixed rates and longer term rates so that is not as quick as it was. that is not a good or bad thing but it makes us think that there is even more of a drag from the policy tightening is yet to come as it starts to feedthrough to the real economy. that is another reason for the bank of england to act with caution. jonathan: in fixed income we call it a maturity wall. we say when does everyone have to face the moment when they have to go out and issue debt because things are maturing. is there a cliff edge morning --

moment with fixed rate mortgages? what is the average one and where is the moment? jennifer: i think it is around two years and that moment is extremely difficult to judge unless you know when everybody's mortgage is maturing and why they might decide to remortgage. our sense of having dug through the data is that it is only around one third of the impact of policy tightening has already come and there is another two thirds to go if we assume that we get another hike today and the effects of the previous policy tightening are feeding through. jonathan: this goes to the longer question, are they longer or shorter and the u.k. versus the united states and europe? how do you think about that issue? jennifer: shorter in the u.k. than the u.s. partly because of the fact that these are very long-term fixes on mortgages which are not so common.

it is massively uncertain. the other thing about this is that we know that they are variable and long and very unclear. so central banks are very much reliance on watching the data and what is going on, not just in the real economy but also in financial markets and the banking center to judge what the effects of the previous tightening has been. and i think the banking turmoil see is a clear indication of some of the effects of the past policy tightening even though it was difficult to pinpoint in advance. just how it would play out. lisa: a lot of people would agree that the lags are shorter in the united kingdom because of the structure of the debt. is there a warning for what the potential ramifications for inflation would be him and that we saw an upside surprise in the united kingdom even after the hikes have been implemented? jennifer: yes, there is a

warning in it and the bank will need to act with caution. and that is one reason why, although in terms of the inflation data it was clear that inflation was turning down in the u.s., six weeks ago at the time of the last meeting. in the bank of england was the one that said more clearly that it was reaching the end of its tightening cycle in the coming days will be very data dependent. that is a reflection of this to some extent, the fact that the pass-through is rapid and the economy's reliance. jonathan: thank you for the insight. about an hour in six minutes away from the bank of england rate decision. why are we talking about france? do you see the mess playing out in paris? forcing through a raise in the retirement age from 62 to 64. i was looking at the news around french airports. one airport in paris, they are asking them to cut flights by

30%. lisa: if you take a look at the cost of hotels i feel like i am sitting in tom's seat. so everything is getting more expensive because there are fewer workers and fewer availability at a time when they need the tourist and they need to keep the growth going. there is a question of why you are seeing so many more strikes and labor upheaval and what this means for rages -- wages and the stickiness of inflation. there are structural forces underneath the economy that we cannot forget about that are prompting increases across the board in wages and prices. jonathan: i think it is the french socialist model that right now given what we are facing in this economy they have to make clear changes and that is why it was forced through by micron. lisa: the reason why people talk about the u.k. in tandem with this type of situation is that you are seeing strikes in the u.k. that you have not seen which are more akin to what you

would see in france. do you disagree? jonathan: i am saying that we still pick up the trash in london. lisa: you are not going to go to paris? jonathan: london is tidy and clean. lisa: what do you feel about new york city? jonathan: tidy, it is clean. lisa: do you feel that -- do you really feel that? jonathan: do you have different thoughts on -- in new york? lisa: during the pandemic it was a problem. moving on, i was looking at cinnamon -- synonyms for the word firming. so they were like crystallized, coagulate, how do you say that. jonathan: do you think they sit there and do that? i am told that they do. i am told. lisa: on the bloomberg? jonathan: they have a bloomberg. but they go through words. they surround the table and work it out. they spend ages doing it. they spend ages. lisa: i would enjoy that. jl. jonathan: is that another one?

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>> we are looking at what's happening among the banks and asking if there will be some tightening of credit conditions. >> this would have been a more hawkish result. >> it depends on how successful they are at eliminating spread from the current situation. >> the fed does not look like it wants to be doing a u-turn with inflation running as hot as it is. >> the risk of hardening is higher. the fed won't know the

appropriate policy to do. >> this is "bloomberg surveillance." jonathan: i texted tom yesterday. a dovish hike. lost it. went nuts. so glad he's not here because he would go insane talking about this. it is a dovish hike. 25 basis points. enjoy the beach, tom. good morning. equity futures positive .4%. tk out all week. he's back on monday. it was a dovish hike. i think they were pretty clear about the whole thing. they believe the instability is a substitute for further tightening. lisa: the facts changed and so did their rate hike. while they did push back against rate cuts, it seems like the balance of risks shifted downward. but chance of a seemed more clear in terms of what was happening with the banks and

rate cut surprised into the market pretty solidly. jonathan: asking the right question i think. not much time between now and the may meeting. first couple of days of the month. is that time to get enough incoming information to make a decision about hiking interest rates were not? i think we have to wait and see. some may think there is a pause in may regardless of how this plays out for the year. lisa: if we don't see any banks collapse and we see some sort of stability -- let's say we get deposit insurance and janet yellen goes to the house and says we will ensure all deposits up to $4 million and game on, do they go back and say our concern is inflation at a time of the banking system seems pretty safe itself? jonathan: you are talking about no landing again. it's only been two weeks. the base case has changed. lisa: the difficulty for investors -- jeff rosenberg put it well. he was talking about the asymmetry of risk. you could end up getting either

much higher inflation on the back end forget a hard landing in rates going to 1% or 2%. either way you can have a very different picture and different investing thesis. jonathan: i think the phrase was something like the risk cuts both ways. did truly does cut both ways, which is why i think it is hard for the fed to make the right or wrong call. 25 basis points. wait and see is the right call. see how this plays out. both of us have no idea how this plays out in the next couple weeks. lisa: i keep going back to janet yellen in front of the senate committee about how we have not even considered insuring all deposits. that seems to run counter everything everyone was saying. jay powell was saying your deposits are safe. how did the square that at a time when people are depending on some sort of resolution as one of the linchpins for the economy to have a soft landing or just cool?

jonathan: i will make this point repeatedly this morning. two point. i don't think she contradicted herself. i don't. there's a massive difference between saying if a bank poses a systemic risk and that could be contagion then we will use systemic risk exception to make all depositors whole. there's a difference between that and then saying we will have blanket deposit insurance. massive difference. you can drive a truck between those two things. that's a huge, huge difference. what surprised me yesterday about her comments that she somehow contradicted herself in the day before was the idea they have not discussed it. that is what i don't understand. are you telling me after two weeks of this, after seeing deposits fully, banks in trouble, the treasury has not had a discussion about blanket deposit insurance? are we serious? lisa: this seems to be a little misstep or oversight.

there is the question of how to they push back against a market that has gained some solace from the idea of deposit insurance in a broader sense to solve the problem. a band-aid with swooping in and miraculously saving any banks that runs and issues is not going to solve the problem at a time when it is a completely different backdrop for the speed of which deposits can leave a bank. jonathan: we have a lot to work through. in 55 minutes, a bank giving lynn rate decision. they are focused on the incoming information. cpi early this week in the u.k. another 10%. we are positive by about half of 1% on the s&p 500. in the bond market, big rally to the front end yesterday. yields lower by 20 basis points after the rate hike. the rejections of the federman basically the same when it came to the dot plot -- for the fed remained basically the same when

it comes to the dot plot. 348.84. lisa: the bank of england as having a press conference today. we will be hearing from the bank of england's catherine man at 11:00 a.m. i'm curious about the divergence. are we seeing material shift from the u.s. more on hold and other european nations continuing with some rate hikes and more uncertainty as to the path ahead with an eye towards further hiking? the tiktok ceo is testifying. very interesting to see whether we get some indication of the willingness of congress members to potentially ban tiktok, force a sale, do something to insulate data concerns people have raised. 3:00 p.m., a janet yellen redux. she's testifying in front of the house appropriations committee. does she clarify her comments and give some sense of what the discussions have been, where she and jay powell are on the same

page, what indications are for how they are going to solve a problem that has caused the kbw bank index to crater in the past couple of months? jonathan: she can keep saying deposits are safe. she think they are. she thinks the financial system is resilient. what we all want to know is whether they will drive forward with blanket deposit insurance. when she's asked about the policy, she is asked about the circle. that is the point of tension for the treasury secretary. got some breaking news from ford. predicting losses in its electric vehicle business will grow to $3 billion this year. let's frame the $3 billion this year. the deficit would match the accumulated ed losses over the past two years -- ev losses over the past two years. that transition is really expensive. ford is putting a number on it this morning. lisa: at this poe still buying trucks that are

fueled by gasoline. how do you end up switching to a more modern technology or something that is the future when you don't have the clientele yet to back it up, and the transition costs are expensive? jonathan: the orders are pretty big. lisa: i agree, but the cost incurred by outfitting your whole factory is a big thing. jonathan: it is not an overnight thing. you saw the struggles tesla had and they did not have a legacy business to transition from. this is difficult stuff. predicting losses in the ev unit to grow to $3 billion this year. the deficit matching equating losses in the past two years. joining us now is jose rasco. let's start here. i will ask this question, is the fed done? the market is screaming you are so done. jose: we don't think they are. if you look at what they said, they want to keep going. we will keep to those words.

we think they will go in may and june. then we think it will be on hold for the better part of the year. that will come under fire obviously. the economy will recover and we will see what happens with the fragility of the banking system. that could change the course of action. lisa: how much confidence do you have in that view? goes completely against where the market is. jose: we have them cutting rates but not until next year. lisa, your is a key point. the fed is trying to walk a fine line. they are trying to tighten on one hand and tighten conditions or tightening in terms of financial conditions. on the other hand side they are trying to provide liquidity for the banking system. liquidity seems to be the key word. it's a fine line they are walking. the market has anticipated a lot of rate cuts this year. are economists think it is up in the future. lisa: the proposal is pretty

much the same regardless of whether there is a banking stress that causes the fed to cut rates or if the fed does not see that kind of distress and continues with rate hikes and hold for a year. is it the same kind of outcome when it comes to where you want to put the money? jose: no, not at all. the first thing we have to get our hands around his what happens in the banking system in the short-term. you talked before about regional banks and what will happen. a good deal of money has left. as a result they will have to do something to attract that capital back. we are looking for downward revisions to earnings and technology because of the obvious situation with the banking system and financials. we are looking for more downward revisions to earnings. jonathan: given everything that has happened, are these regionals investable without blanket deposit insurance at the moment? jose: great question. i think what they have said implicitly by not saying -- i for the argument.

they will ensure banks that are in trouble. i don't think that will work. you will have to step to the plate and either make a commitment or not. what they seem to be doing is piecemeal. the market may push their hands and may force them to the table to make a commitment one way or another. jonathan: they are investable for now, jose. jose: we are selective. let's put it that way. we are telling most clients to stay away from regional banks now. we think there is more downside. yes, we think there is room in the future. we are very selective. jonathan: thanks for that. jose rasco of hsbc. difficult to make that call into the banks. lisa:lisa: we are not getting certainty on policy. how do you come up with a base case of profitability if you don't know what the parameters are? jonathan: what are the parameters? how wide is the band of

outcomes for 2023? lisa: about as wide as you can possibly get. either a backstop that gives a boost to the banks and all of a sudden they become the profit engines they once were, or you end up with more regulation and concerns about deposit flight. what do you do with that? alessio de longis joining us shortly. march became less constructive on risk assets. that's coming up shortly. equities up one half of 1%. yields of 2%. just short of 350 on the u.s. ten-year in america. the right decision about 50 minutes away. ♪ lisa m.: keeping you up-to-date with news from around the world with the first word, i am lisa mateo. jerome powell has made it clear inflation is still the top concern at the central bank. less than two weeks after the second biggest bank failure in u.s. history, he advised more

fed tightening may be in store following wednesday's. quarter-point rate hike officials are betting the bank turmoil will not turn into a broader financial meltdown. the bank of england is likely to continue the quickest set of interest rate increases in three decades. investors and economists expect the boe to raise the benchmark lending rate by a quarter-point. does excitations were solidified on wednesday when new data showed inflation climbing in the u.k. for the first time in four months. treasury secretary janet yellen says the u.s. is not considering blanket bank deposit insurance without working with congress. a senate subcommittee asked her whether protections for all u.s. deposits would require congressional approval. she said the heads of recently failed american banks should be held accountable. the u.s. fears a war weary world may embrace china's ukraine peace plan. xi jinping and vladimir putin discussed a proposal which the

u.s. has rejected. still dismissing it outright could let china argue that the u.s. is not interested in peace. ford's transition to electric is not cheap. the other maker predictions losses in the ev business will grow to $3 billion in 2023 as it spends big on new models and factories. that matches its accumulated losses over the last two years. ford has started reporting financial results by business unit rather than by region. global news powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo and this is bloomberg. ♪ introducing j.p. morgan personal advisors. hey david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management.

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>> they are happy to export something here that 150 million americans are consuming three weeks a year on a platform that is run by the ccp that may serve their interests and who bring up -- hoovering up. the american people have the imagination to choose a different platform and that is what we should be. jonathan: that was senator michael bennett on balance of power on wednesday talking about tiktok. the ceo looking to defend the company on capitol hill today, saying, "tiktok has never shared

a received a request to share u.s. user data with the chinese government, norwood tiktok on such -- honor -- nor would tiktok honor such a request." lisa: that will be perpetuated by the politician speaking with the executive. he gets to the nuts and bolts of who benefits for when you do sell this immediately. on the other side, what happens if they sell these assets? snap shares of almost 2.5% premarket trading. just on q ahead of this hearing. they have been flying. jonathan: this is what snape wants, what facebook wants because they cannot get exposure to the chinese mainland. their view is it is not just about tiktok and whatever you think about tiktok. it's about reciprocity. surely that is a plea for the u.s. social media companies. lisa: i'm sure it's informed that tiktok has the eyeballs of more than three quarters of all teenagers in the united states.

jonathan: amazing numbers. lisa: if they can take over that business, ca-ching. jonathan: always the way. annmarie joins us from washington, d.c. annmarie: it will be intense and hours long. it will come from everything in cybersecurity, national security, to mental health. you have some lawmakers that will point to suicides that have happened with young teens, saying they got these ideas circulating on tiktok. it will be a range of issues at play here. he will have no allies in the room. this is a lose hearing for the ceo. what he's been trying to do is fight some of this before he goes into that room gets grilled by lawmakers.

he came out with his own tiktok and said if you want to make sure you can keep this app or the content, put your appeals in the comments and call your elected officials. what you are seeing and congress in the past when four hours is the youth in the rotundas creating tiktok videos. they are there in support of the ceo. lisa: how do you prepare for a lose-lose hearing? you know you are heading into the firing squad. jonathan: it's about security and national security, that's the bottom line. it's over. it should not be about pleasing a certain part of the electorate because they use an app. lisa: this raises the question. why haven't they banned this if they recommended the sale or some sort of ban? annmarie: this has been through sifius. trump wanted to outright ban the app. they got struck down in the

courts. there's been a slew of legal challenges on the executive order. the biden administration had to redo the executive order, set it up again. that is why you had this issue we have today. they got hobbled up in the court structure. congress needs to move and give the authority to the executive branch to make a move on tiktok. i know you guys will be speaking to senator mark warner in the next hour. it is his bill that has the white house backing. that will give the commerce department to look into items like tiktok, not just tiktok. they want to give it broad support. this will obviously take months. they need to make sure the house gets on board as well and then send it to the president. when it goes to commerce, they need to do a review. this will come very close to the 2024 presidential election when democrats certainly need those young eyeballs on tiktok. that is where they get their news and these individuals lean

liberal and will likely be voting for a democratic president. lisa: making light of the fact this is sort of the footloose of the modern generation, people, teens and young people who are on tiktok are saying let me do my dances. let me get my news this way. what is the problem? is that the main push back why this has not really been more actionable yet? annmarie: that is one pushback everyone is well aware of. this would annoy the youth, their constituents. senator bennett said he's on tiktok but don't tell my kids i'm not. all these individuals have kids, no kids and this is where they spend their time. this is how they socialize. that is only one part of it. obviously they want to wait for the full review. we've had reporting that that is pretty much hit a wall. recommending you either have to divest, sell, this can no longer be as is, status quo in the united states. now you will really start to see

the momentum pickup after we have seen the review really hit a wall. tiktok thought they could get around it with project taxes. they say project texas was unprecedented but that's not sufficient when it comes user data. jonathan: great work as always. you can catch annmarie and joe mathieu on balance of power on bloomberg tv and bloomberg radio. you can see it weekdays at 5:00 p.m. eastern time. balance of power coming up later. looking forward to their coverage and looking forward to the hearing. this is one of those hearings where they have already made their mind. this is like entertaining the other person on the other side of the room. we will catch up with a senator leading the effort in the next hour and ask him about that. lisa: i want to hear how much is about national security and how much is about the mental health of individuals and things of that nature. that has got to get snap and meta a little nervous.

that is not a victory for them and you have seen that victory in their shares. you put restrictions on some of the big social media companies, go after some of the other issues, they are pretty broad-based. not just isolated to tiktok. jonathan: this is a hangover from the previous administration. it was oracle and microsoft was some random tie when tiktok would have a sale fall through. here we are years later talking about the same thing. what is the bill about today? and the gulf authority to make the ultimate call. lisa: the administer has come out and said they backed some sort of action on this particular company. either a sale or ban. whether they are open to it. then he wants is, you can drive a truck through it like janet yellen at her comments about bank deposits. will they? especially ahead of the election? if we are bumping up against the election and you have young eyeballs on a site that gets

lots of advertising from said politicians, are you going to ban it at that moment? jonathan: this is a double-edged sword. when he comes out and says we are on it 150 million phones, you have to think that through a little bit more. on one hand this is people like our product. we have access to 150 million phones. that is know what the hearing wants to hear. lisa: correct. they think, you are on 150 million phones. this is the conundrum of politicians. that is access. jonathan: it should not be a conundrum. lisa: how do you really feel? jonathan: it is not for me to say it is a national security risk. they have to make their mind up about that. i'm just saying if it is a national security risk, it has proven to be a national security risk. the rest of this should not even matter. it should be done. forget about it. the factory are entertaining this conversation that the youth

will not vote, we are to accept something might be a national security risk but because the individuals might go out and vote in the next election we should allow that? lisa: how much is that really an argument about social media in the broader sense? a lot of the ills annmarie was talking out, yet it is access. advertisers, politicians, everyone loves it. it has ended a lot of important conversations. jonathan: that has been going on for a long time. not a new conversation. winnie cisar will join us shortly and we will look at the interview francine lacqua has done with the ecb president. that is coming up shortly. this is ge aerospace,

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jonathan: two hours away from the opening bell. equity futures posited by about half of 1%. 30 minutes from negative bank of england rate decision. we will break that down with the team over in london. we had a great interview with the swiss national bank president. they have hiked interest rates. a bit of a messy time in switzerland. >> the fed is saying uncertainty has gone up a lot. the stress is going to restrain

the economy. that substitutes a little for rate hikes so we are not having to do as much as we thought earlier. jonathan: that is not the right tape. i hope we have the right tape now. the swiss national bank president. >> it creates a problem that is much smaller given the fact that ubs will take over credit suisse. we hope it results in a stable banking system in switzerland. there is uncertainty on the global scale. you have to continue to follow that closely, observe closely and see the impact on the swiss situation. >> are you surprised by the turmoil we saw the markets given the wipeout on monday. >> i cannot really comment on the 81 issue. there's a financial regulator in charge. the impact for the swiss situation is limited. >> were you surprised by the market turmoil after the weekend? >> i cannot comment on that.

we are not in charge of the decision for the 81 issue. >> it impacts what you are looking at and the parameters. are you confident we will not see a day like monday again? >> we expect the situation to calm down and people look at that carefully. it becomes more clear the medium to long-term consequences then. >> what the worry about the most right now? there was a lot then over the weekend. the other options, we would have been worse off. going forward what could be troublesome? >> it is not absolutely essential that ubs and credit suisse takeover takes place this way. we do not have any risk anymore. the commitment is complete. it is very important they were closely together. this is important for their situation and for switzerland.

we are supporting that by all necessary liquidity. this is something we are looking at very carefully. on the global scale, the answer remains high and we will look at that as well. >> you are briefed been it by minute what's going on with the banks -- minute by minute what's going on with the banks. is there a danger the financial system has become less secure? depositors are wondering what happens to this large bank. >> as you all know, with all the motions we are taking at the decision advancing this problem is not solved. the situation is now much better. >> can you ask plane what you think happened in the last six days? it started in the u.s. with svb. there were contacts with the and u.s. regulators. -- u.s. treasury and u.s.

regulators. >> a decision was a private-sector decision to do everything that avoids a resolution. the resolution would have been very problematic. it could have triggered an international crisis in switzerland. of course also globally. it was very important to avoid the solution in the circumstances given the fragility of the banking system globally and the financial markets. that was achieved by having this takeover of credit suisse by ubs. >> what surprised you the most about the speed? a lot of people are commending you at how fast this went. it was a fully capitalized bank. >> the bank was fully i based at the beginning of the week but we had shots coming from the u.s. we had in a very few days a meltdown of the confidence of

both counterparties and deposit holders. that created this difficult situation. fortunately it was able due to good preparation by having a few days, a solution that avoided those circumstances. jonathan: francine joins us from europe. phenomenal work once more catching up with important figures in switzerland. what did we learn about the s&p and with they knew going into this takeover of ubs from credit suisse? francine: what we learned as they are very conservative and don't to say much at all in terms of the market turmoil. we asked multiple times. the president felt many questions -- fielded many questions of the press conference. you think wiping out the 81s would lead to market turmoil? market -- he would not be drawn in.

what we learned is there doesn't seem to be a clear picture. we are only four days since the government brokered between ubs and credit suisse, but there is no big picture about happens next. he was asked, and we try to get more information on whether this changes supervisory roles. whether this leads to more rules. we asked about what jane fraser said. was there a bank run? we are much more on mobile phones. he does not think that is the case at the moment. this was the swiss national bank that was prepared for all questions but prepared by not answering them. it is still very soon to understand what the legacy of this cobbled together merger is and what kind of big, large bank switzerland ends up with. lisa: how much pushback is there within switzerland to move on regulators to allow 81s to get wiped out before equity? how much investigation is there is to how that decision got made at a time when people are threatening lawsuits and they

are seeing a huge divergence open up and pricing with the swiss market in the european market? francine: we actually heard from one of the parties looking into this. i think it will be pressure from outside. if you wipeout $17 billion worth of 81s, there will be holders of that. there will be lawsuits. we were at the press conference on sunday will be asked about 81s. we have not had a clear picture of why that happened. it was only four days after that the regulators, not the swiss national bank, put out a statement claiming why they did that. we had about 100 banknotes from various banks explaining why. they are basically basing themselves on a law. a footnote in the prospectus saying this was the right way to do this. we also know from insiders that this was the big debate on sunday. if you do this, what does it mean for financial turmoil? i don't know if the debate will unfold in switzerland or it will

be those bondholders trying to get to the bottom of exactly who held what that will try to do lawsuits. it will be switzerland against international bondholders. jonathan: wonderful work once more. francine, thank you. if you would like to was the interview you, you can find it on the bloomberg terminal and shortly on bloomberg.com. joining us now is winnie cisar. you came into this month with a different approach. you are cautious and now you have become more constructive. walk me through the evolution of your thinking in the last couple of months. winnie: good morning, jonathan. you are right. we start of the year very constructive on credit. spreads hit the base case forecast for both u.s. investment and high-yield by the end of january. we thought this feels a little overdone. heading into that we gave central-bank meetings at the beginning of february, we were concerned about hawkish messaging and what could happen

in the treasury market. that unfolded. then we had the bank issues. we went into this round of volatility fairly cautious on the regional banks. the financials teams has had a great call. as of last friday we felt like perhaps things are a little bit overdone. spreads had blown out. yields had tanked. we thought it is time to take that tactical caution and go back to overweight in the u.s. credit. lisa: this is fascinating when people say it is hard to get any visibility given the necessary regulatory changes, whether it is deposit insurance or greater regulation for smaller banks. how do you determine from a credit vantage point what is investable? what kind of uncertainty you are willing to accept? winnie: that's a tricky one. as we are thinking about the fed and monetary policy and the applications for the broader economy, banks are where the rubber meets the road in terms of taking financial policy and pushing into the real economy. we think a lot of this will be a

disinflationary type event, which is good. that is what the fed is trying to go for. how much of that momentum really impacts consumer spending, makes its way into the labor market? we don't think there is a material risk of broad-based challenges. we have been calling for this bumpy landing. some segments of the economy are going to feel some real pain. we think there is some pretty good visibility into the corporate credit markets where fundamentals are quite strong and have the ability to withstand some of those headwinds. lisa: how do you pushback against those in look at credit spreads and high-yield on spreads around 500 basis points, five percentage points, and say typically during a recession you see 700 or 800 basis points? this time is no different. how do you pushback against that? winnie: the big pushback is that

yields are a lot more attractive more than they have been in the last decade. we have a fundamentally different high-yield markets. we have more double b's. more fallen angels that are rising star contenders again. we have a better tranche of liability management that has come through, where maturities have been pushed out. we have a leveraged loan market that has observed a lot of the more stress -- absorbed a lot of the stress and high-yield structures. we can inspect to see continued rates volatility, some spread volatility. from a fundamental perspective it is a much cleaner market and has been historically. jonathan: wonderful to hear your thoughts. winnie cisar. timed this perfectly after january becoming cautious, then literally waiting for this to play out the way it has done. obviously did not seeing yet play out precisely this way but now they see things in a more constructive light. lisa: if you like to before the

sella, you will like it afterwards -- selloff, you will like it afterwards. have the facts changed? at what point do you have different parameters and how do you get your head around what those would be? jonathan: u.s. ig is now junk right. lisa: the downgrade chris becomes more tangible in certain sectors of the economy. cut rates to zero. jonathan: we want to give the opportunity to say those things. dan blanchflower. the bank decision 18 minutes away from the boe. looking for a rate hike from governor bailey. ♪ lisa m.: keeping you up-to-date with news from around the world, but the first word i am lisa mateo. worries over inflation trump to the recent banking turmoil as jerome powell rejected the idea of rate cuts and said more tightening could be ahead.

wednesday's rate hike comes less than two weeks after the second biggest bank failure in u.s. history. the swiss national bank raised interest rates by 50 basis points and indicated there is more to come. they signaled inflation outweighs any concerns after the market reaction to the downfall of credit suisse. s&p chairman thomas jordan says swiss banks are not exposed to u.s. bank failures. citigroup ceo james fraser says the string of bank failures has been isolated and the biggest u.s. banks are well-capitalized. there is concern about smaller banks. he spoke with david rubenstein at the economic club of washington event. >> there could be some smaller institutions that have similar issues in terms of being caught without managing the balance sheets as a liaison they have done. it is quite right. there may be a few of them. we certainly hope they will be fewer of them. again, they should be manageable.

lisa m.: you can watch that interview on march 29 other david rubenstein show, peer-to-peer conversations at 9:00 p.m. new york time. there's a late twist to the sale of world-famous football club manchester united. bloomberg has learned bidders have been granted extra time to come up with new offers. a qatari consortium has raised its offer above its initial $5.5 billion bid. jim radcliffe's first bid was below that but he's expected to increase his offer. global news powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo and this is bloomberg. ♪ personal advisors. hey david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management.

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see the likelihood of credit tightening. we know that can have an effect on macroeconomy, on the land, on labor market inflation and we are watching to see what that is. jonathan: chairman powell of the federal reserve. a lot of people thinking a decent job at yesterday's news conference. stocks were lower but not because of that, but because of the treasury secretary. we will get to that another time. at the same time, saying deposits being guaranteed an insured was not even part of the discussion, the conversation. lisa: he cannot win, can he? a great job to be as dry as possible and not say anything new and not go off script. been janet yellen goes, about that whole depositing, whatever you thought is not really -- jonathan: he was never going to win.there is no winning, no good decision after yesterday, after the last few weeks. dan blanchflower joins us now.

the bank of england, inflation year-over-year, double digits. is that the wrong move today? danny: some news yesterday which was inflation rose more than folks thought. that is gone. we were supposed to be focused on what is coming. there's a major credit crunch and the reality is the bank of england in its forecasts was forecasting no growth whatsoever for three years. inflation below the target. we just had a huge fiscal tightening. what we are going to sit and watch is disaster coming. it feels like 2008 all over again. who was holding what bad stuff/ presumably in the u.k. with the mortgage markets now in disarray we will start to see banks holding bad mortgages.

people cannot afford to pay. i think this is the peak, a huge mistake. i would have voted for big rate cuts. b what will you will see is disastrous data will show an banks move into panic mode as the markets are pricing in already. jonathan: danny, 25 is the wrong move so let's talk about the federal reserve. was that the wrong move yesterday? danny: i think so. we are seeing inflation clearly peaked. to what extent is this crunch a big deal? powell thinks is the equivalent of about 150 basis points of tightening. that is probably true. this is a new set of tightening over where we were. the fed has been entirely guessing. there is no economics to base their claims that this would be a soft landing. do keep going and you keep going. outcomes, about 18 months later.

-- outcomes come about 18 must later. the new report was so well i credit suisse and the nine billion ubs had received to make up for what was hidden under the hood we did not know. at these times you should be cautious as to what is coming on the downside. the only question is, how bad is it going to be? this looks like a wing and a prayer. we will carry on raising rates. well, let's wait for data to come. my assumption is it will start to come when the market thinks it's going to come. powell says maybe we will raise rates. look at the fed watch talk. markets are pricing in three cuts by the end of the year. why would you race when the markets think you are going to cut? we are in confusion. absolutely in confusion. it feels like 2008. in the u.k., we rescued northern rock thinking that would solve everything. bradford and bingley failed,

rbs failed six and i must later. -- six to nine months later. there is no economic basis for anything they are doing. the real economy is what will matter. wage growth is a big deal. that has not picked up the way they thought. lisa: i have to cut in. a lot of people are listening and saying, really? like 2008? you are dealing with a liquidity crunch, not a credit crunch. you are talking about assets backed by sound loans, not mortgage debt taken by somebody with no income and who put nothing down. this is a different kind of scenario than it was in 2008. how do you push back against that and say this is comparable? danny: every credit crisis and every housing boom, the standard think everybody says is this time it is different for a variety of reasons. this time it is different. it simply cannot happen again. it is not just about that. it's about confidence.

it's about confidence that the banks are whole, confidence my deposits are safe. janet yellen made a huge error yesterday. it was answering the question. now you have $1 million in some regional bank. what should you do? you should pull the money out if it is not guaranteed and take it to bank of america. that looks like an error. it's about confidence. each time in the history of crises everyone says this time is different. the other thing is that you guys have reported on it. what did ubs see under the hood that we don't know about? remember, as he said in 2008, who would have thought in august of to the night rbs would fail -- of 2008 that rbs would fail? you are wrong. you have to be mindful of the credit crunch.

lisa: let's put the banking crisis aside. the nones and unknowns. look at what the data which showing before this particular meeting. this perhaps backward looking but harder than expected inflation data persisting in the u.s. and in the u.k. and other european nations. have you been surprised by how sticky inflation has been and how long it's taken to show signs of coming down? did that get you concerned about where we are heading in terms of fed policy being used as a tool for financial stability and fighting inflation? danny: to some extent i have been surprised. there are shocks in the u.k. context imposed by brexit. go to august of 2008. what you said was essentially what people said then. inflation was 5.5%. within nine months it went to deflation. we are seeing the base effexor

dropping out. if it -- base affects our dropping out. the inflation numbers are very low. a lot of what you're seeing is about this weird technical thing about the seasonal adjusting. what we are talking about is inflation is fine. it is seasonally adjusted using new methods. look at the wages. wages have not picked up the way people thought. wage growth has been relatively benign. it is hard to read the data. it is as if people think we have a nice playbook. we have never seen anything like this other than the great recession. every piece of data since 1945 is relevant. we have to look at other crises. you will see different inflation plummet. jonathan: i have to squeeze this in. if they cannot offer blanket deposit insurance, what will change? danny: i think in essence wooden the bank of england and the bank of canada and the ecb have to do

the same? a blanket deposit insurance would be a help. jonathan: thank you for catching up with us. danny blanchflower with the bank of england decision six minutes away. it seems like it's a game changer. danny can speak for himself. if you come up with positive insurance it could change everything. i think it is difficult for the fed to make the right call. the only have the last two weeks ago on. do they extrapolate out for the rest of the year and cut interest rates? who will do that? lisa: we don't understand what the banking system will look like if they don't depart -- don't provide deposit insurance. it has to come from congress. i think janet yellen was facing off with that yesterday. the issue danny is raising his you are not solving the prom by just saying we will swoop in and see if deposits are insured in a systemic crisis. how do you know which bank is systemic and which will rise to the occasion for some sort of rescue? can you count on that in the

same kind of way you can count on one of the biggest banks that will hold your deposits. jonathan: the fed chair is giving you the playbook from monetary policy and believes it is a substitute for rate hikes. the longer it continues, the worse it gets and the more we will start thinking about moving the other way and cutting interest rates. lisa: that is why you see that priced into the markets right now. jonathan: can you make that call today is a fed chair? we can say in a couple of months time what an idiot for hiking interest rates. lisa: either way he will be the whipping post here. ♪

>> we are looking out what's happening with the banks and asking is there going to be some

kind of credit conditions. >> if we didn't have the spanking crisis there would've been a more hawkish result. the fed doesn't want to look as if it's doing a u-turn with inflation still running as hot as it is. the risk of a hard landing is higher because the fed doesn't know the appropriate policy. >> this is bloomberg surveillance with john keene, jonathan ferro and lisa abramowicz. jonathon: we have another rate hike from the bank of england. this is bloomberg surveillance. tom keene has been away all week. the sterling is stronger by .5%. the bank of england is rising rates by 25 basis points. just like the federal reserve and the ecb, you have to take a

stance on monetary policy and explain your thoughts about financial stability. lisa: they said they are in conversations with policymakers and see stability in the banking system. that's one of the themes. they did say they are going to raise rates 4.25 percent but they would require more hikes but not taking more hikes off the table. it was a 7-2 decision. they were also looking forward to ongoing scrutiny of any more potential stress to the banking system but calling it resilient. jonathon: it's a very clear distinction between what's developing here and in the u.k. and europe. there is a belief that the instability will lead to tighter financial conditions.

even up against inflation that is too high. in the u.k. in europe they have not seen enough evidence in the u.k. or in the euro zone to make the same argument. lisa: they are increasing projections for the economy. it doesn't seem like this is the same kind of deterrent to rate hikes going forward in europe as it is in the u.s. which raises the question of are we seeing ongoing divergence between u.s. and european policies when there's a difference in policy. jonathon: the rate is now 425 at the bank of england. the pound against the dollar is 1.23. lizzy, your thoughts on this one? >> it was what we were expecting. it takes the key rate of 4.25%. that upside surprise yesterday,

the bank is have the status since monday but it follows the ecb, the fed. they are all prioritizing the fight of inflation over financial stability. the bank is not bothered by short-term volatility is focused on the long game. the stable inflation environment contributes to financial stability. there is no press conference but the vote was split seven-two we expected a 6-3 split. there were expressed concerns about hikes not fully taking hold because of the lock in monetary policy. they think domestic inflation is overestimated, she is a trade expert. looking at the future path for rates they have removed the language about acting forcibly

and talked about tightening of necessary. the bank says inflation is likely to fall sharply over the rest of the year, the second quarter inflation forecast will be lower than seen in february. that's good news for the prime minister. lisa: can we categorize this as a dovish hike or is this a hike with a lot of uncertainty? a bit more confidence in the financial system in the u.k. than the u.s.? lizzie: the fact that john conlon has not joined the dissenters showing his confidence in the financial system. he is in charge of financial stability and the added guidance saying they are closely monitoring credit conditions. there is an element of uncertainty but over recent days, the bank of england and treasury have been at pains to stress that they are confident in the financial system.

it is as expected but they are showing confidence. jonathon: on the others, your thoughts on this one. across the ecb, federal reserve and bank of england there is a similarity, they were worried about the signal they sent about the monetary policy. there was a little bit of reluctance to join the doves because you don't want to project your worried about the financial system while saying it is robust. lisa: ed cast of muddy paul over everything that is muddy. how can you look at inflation through a clean lens when looking at the banking system. you are seeing concerns that percolate from one to another. as like whack-a-mole, who expresses concern next? alessia de longis next we havealessia de longis invesco

from talk to me about the change they given what we see transpiring over the last few months. >> at the beginning of the year we had a protracted view which panned out a little too fast and too far. when we entered march, we started signaling extended price action and it was beginning to rollover as a result of positive inflation surprises. they are steepening their yield curves in anticipation of hikes. they need to reposition again for a defensive asset location posture. what happened with banking developments has accelerated the path. it's important to make the distinction. we have been able to rule out thinks of policy actions and developments in switzerland, to

rule out a systemic accident in the banking sector. with that being said, the tensions in the credit market have increased from a cyclical perspective. wider credits bed -- spreads and lower credit growth are necessary conditions are necessary to have monetary positions tightened in the future and bring inflation down. lisa: there seems to be a policy divergence driven by the american financial system and regionals that are subject to deposit flight. the banking system has a pervasive issue that needs to be dealt with and other nations like u.k. and europe, do you agree with that? can you trade on that? is there something underpinning that in terms of ongoing rate hikes and europe in the end of them in the u.s.? alessia: i think the cyclical divergences there and growth in

monetary policy. on the margin, from this point on with the federal reserve we are looking at marginal increases, another 25 basis points in may. the ecb and the bank of england have more to go, at least another 50 if not more. that's cyclical divergence can be expressed through multiple venues. again, i am ruling out -- i would not say that we can trade on the more structural, systemic actions of the banks. the last couple of weeks were more of a risk of a systemic shock that would have changed the dynamic but i think now we are more comfortably back into the cyclical end of the cycle pricing dynamics. lisa: so what can you go back to

european banks? alessia: we favor a bias away from value and away from cyclicals. more into quality oriented and growth oriented sectors. the defensive sector is health care, consumer staples and technology. we see quality panned out as rates rally again. those sectors with longer dated cash flows are more duration have outperformed. we think this is an environment for defensive sectors. jonathon: are you working on the assumption that the fed is done? alessia: working on the assumption that one more hike and we are done. cyclical divergence in favor of european equities, in favor of the euro. a global backdrop where policy

being done is not necessarily the recipe yet, we need to see the impact of growth first. jonathon: alessia de longis from invesco there. lisa: if you talk about growth divergence you should see more cyclical areas of the european market doing better than in the u.s. and you are not seeing that in the same way. i don't understand how to square the circle from an investing perspective. this is a confusing market. jonathon: it's too soon to draw a conclusion over the past weeks. it's a multi-month process, is too soon to talk about the rebels. lisa: how much do i have to deal with this? it's a multi-month process? the problem is people have to make calls. jonathon: even programs like

this have to come up with something new every day. but sometimes you have to be boring and say how it is. there are two weeks where banks listen to regulators as banks shut down. two weakens of that. we have no idea what next weekend looks like her the weekend after that. lisa: people are clinging to what they do know which it does change the scenario as it deals with credit standards. jonathon: they are clinging to what they want to happen and using to what has happened to plug into their view. lisa: you are so jaded. jonathon: you have no reason to make the same calls. lisa: yeah, but this one is right. jonathon: danny is the biggest of anywhere. with your view change if we got blanket deposit insurance, his

view would change. how quickly would that happen? is it possible? yes sure it is. the s&p is up .43%. lisa: keeping you up-to-date from news from around the world. on capitol hill the ceo of tiktok faces a number of lawmakers who want the game at band in the u.s.. the republican chair holding the hearing will say that his popularity exposes a vulnerability that could be exploited by china. tiktok says that is spent $1.5 billion to address those concerns. in new york, the jury -- whether the former president concealed payments. he has denied any wrongdoing.

the u.s. fears that the world weary world will embrace chinese peace plans. she's on peeing and putin discussed options. but china could argue that the u.s. is not interested in peace. apple is launching an omission effort to raise its profile in hollywood. attract circumscribed letters to their streaming service. they will spend one billion a year to make movies released in theaters. including films from martin scorsese and ridley scott. global news 24 hours a day, on air and on bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo, and this is bloomberg. ♪ okay, great. j.p. morgan wealth management.

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>> they are happy to explore something here that 150 million americans consume 365 days a year on a platform that's run by the ccp that may serve their interest in hoover bring up data from the american people. the american people have the imagination to choose a different platform and that is what we should do. jonathon: that was senator michael bennett talking about tiktok. the ceo of tiktok is looking to defend the company on capitol hill saying tiktok has never

shared or received a request to share u.s. user data with the chinese government nor with tiktok on her such request if one were ever made. he will say exactly that and what will they say back to them? will that convince them? lisa: it can't convince them because the empirical data would highlight that the chinese communist party does not take we will not honor your request well. it would not go over in the same way we would wish. this is a question i have, to what extent is the questioning going to rest on national security and how much will it focus on some of the side effects of social media. the reason i think that's important because how much does a target other social media companies rather than isolate tiktok? jonathon: if you are tuning in,

the bank of england raised interest rates .25 points. we will run you through the price action, futures are still doing ok up .4%. sterling was rallying in the bond market you are seeing a hike of 3.6. we will get more data in a few minutes time. the news conferences change the way we receive that incoming information and economic data from the federal reserve because us told you that what dictates the outlook was not just inflation it was financial stability. lisa: this is something we've been talking about for a while, we got hotter than expected inflation numbers for a while so what point do you look at that again and look at the potential

for resurgence and inflation? jonathon: let's go over to annmarie hordern. in front of the u.s. house, the ceo will speak. what can you say today to ally some of these concerns? annmarie: one think he wants to highlight is the plan that they have called project taxes, a way to isolate u.s. data in the united states, the use oracle for this. when you have reporting that the u.s. government is telling that you need to divest her face a ban. project taxes was not sufficient in terms of protecting user data that they are telling them that this is the option. you need to sell her face a ban. the ceo will talk about what they call unprecedented action. how much money they have spent on this and how they feel that

this is secure and he will likely mention that the chinese communist party has never asked tiktok for user data. the issue is that most of these lawmakers are not going to buy it. it's been an issue for too many years and they don't see the reason why tiktok should be allowed in the united states given the fact that is owned by -- it's banned in china and india. lisa: what is the next steps if congress does sign off on some sort of bill. is it just is shunted over to president biden? annmarie: what would happen is, it depends on which bill it is. there are four tiktok bills were keeping an eye on. the one the white house's

backing is by senator thune. it gives this broad support to the commerce department to look into it. this was an executive order from the trump administration. it means that executive order stands and give the commerce department the means to go through this and look to see if there are national security issues with tiktok and other companies coming from foreign adversaries in the commerce department would make their suggestion. that would lead to a ban. what i said earlier, this could take months. we don't even have this bill on the floor yet. these are just ideas at the moment. lisa: we will be following this throughout the morning. the hearing started 10:00 a.m.. the issue affecting teenagers but the bigger issue for markets is deposit insurance and i'm wondering what the latest is

that what you expect to hear from janet yellen given the responsive markets in the messiness of the communication, the divergence between her and jay powell. annmarie: yesterday, and a subcommittee for appropriations for the treasury secretary. we were scheduled to go there to talk about the 2024 fiscal budget. you will see fighting members they are talking about the budget. what we've seen in the past few weeks in the banking sector she was asked about this. our reporting was that officials were looking at ways to expand fdic insurance. the question asked to janet yellen was about if congress would have to have approval. she was saying and i think it was the word blanket, she

said we are not looking at a blanket use of this. our reporting about temporary and emergency responses, she made clear that they are not looking at a blanket case for this that would need congressional approval but she made the case that the reason why they lifted the fdic cap is because i saw a risk of contagion. if we see any sort of contagion risk that is when we would have to go in and use the emergency power. jonathon: the key distinction is really important. yellen is in the difficult spot right now. it's hard to do. you can say if a bank fails and it has the threat of contagion we can use the systemic system

-- lisa: how does she give confidence to a system, people say how about transparency or greater sense of red flags being raised by banks. or a concentration in particular industries. what if they did something like that to make it clear that they had some sense of it. jonathon: kathy jones at charles schwab coming up. that is the lineup going into the opening bell. lisa: we have been talking about tiktok all morning. that will be dominating capitol hill. as we expect 10 situation

for the ceo of tiktok. >> is a hearing here in the house. i have had concerns that the united states has not had any kind of rational policy on how we deal with foreign technologies from countries like china and russia that pose a national security threat. a few years back it was a russian software company where we went through a long debate about it. now were talking about tiktok. i put up bipartisan bill together, that said we need to give congress the authority and tools that if there is a national security threat allow them to take an action up to divest her -- tiktok is

extremely popular. it learns from you every time you're on. at the end of the day, no matter what the ceo says, china's law made clear in 2017 that bibance will have to turn its information over the government. that information could be used to spy on journalists. it could be used to target certain people in the chinese diaspora. it can target some of our kids who are on that site. the number two part, this is a huge potential propaganda tool.

if the president xi wants to take on taiwan, tiktok could be the site saying to millions of people around the world, thus not so bad in terms of the message is conveying. evidence of that has been that the chinese leadership has said they would rather have tiktok band in america than give up the source code which is the secret sauce, the algorithms that create this addictive tool. they would rather give up tiktok in america rather than give up the source code. i don't know how americans would ever be safe without that source code. lisa: i want to make sure that we get this point clarified to dig into what you are saying. you are talking about national security concerns and how this data could be used to be manipulative to the public.

there is also this question of learning from you and data collection. how do you draw the distinction between tiktok's use of this is a company owned and headquartered in china versus social companies in the u.s. i collect data and have a lot of learning tools from their users? sen warner: candidly, i have concerns about american sites. is embarrassing that we don't have an ability to have data portability so if you get tired of facebook you could move to a new site and still talk to your friends. it's crazy that we haven't taken on section two 30 which gives all the social media companies a get out of jail free card for the content they pose. all of those concerns i have about american, british and

english companies. those concerns are not national security bays, they are basic fairness business practices. at the end of the day tiktok has to be obligated by chinese law, and 2017 they said every chinese company is not responsible to shareholders but to the government. the fact that this data could end up in the hands of the communist party, that moves this platform into the realm of national security. one of the things i want to do is require the intelligence community to declassify as much information as possible so it's not a case of trust us, this is a security risk. i do believe that should this

action take place the market will create an alternative. all these folks that are making money on tiktok, i believe there will be other sites. that could be companies in america, india and france. i think the market will provide that alternative. lisa: senator mark warner, thank you for your comments. we look forward to talking to you after the meeting. we are getting some data on the jobless numbers. probably not what the fed chair was to see. michael mckee were handing it over to you. mike: for those looking for the labor market to weaken, 191 thousand people filed for jobless claims. that is down from the prior week and it's not what was expected. there was a thought that it would go up to 197,000.

we are not seeing any kind of movement at all. there are a lot of layoff announcements so we are waiting to see what happens, windows will show up. it looks like at this point what's going on is that people are getting severances so that keeps them from filing from jobless claims or companies are holding onto workers. lisa: yesterday we were talking about how the actual economic data doesn't matter because we are looking for the potential of some kind of systemic event and the banking sector. at what point does the economic data matter? at what point are we looking at jobless claims lower-than-expected as a sign that we have a hot labor market? mike: we have to look out it is a fed being on to pass. one they are keeping an eye out for what is going on in the banking system and since he don't know what the effect is going to be able to operate with

the data that they have that shows a tight labor market and inflation still high. they will make monetary policy on that basis. they will be looking it jobless claims. they will want to see if hourly earnings are going out. we will have your new favorite economic indicator, the survey of senior loan officers by the federal reserve to see what credit tightening there is. they don't have an exact date for that but it will come out in april. we will watch out for that when that comes out. lisa: thank you so much for keeping us posted. we will break down all the data people are no longer looking at until that senior loan officer still comes in. jobless claims coming in lower-than-expected at 190 1000 versus 197,000. this is pointing to the ongoing

strength in the labor market that is backward looking enough for the federal reserve to move on. you're not seeing any drama in the market reactions. two-year yields are up and the ongoing bit of recovery and optimism in equities as people take a look at the potential for rate because. joining us now to parse through the economic picture is stephen stanley from santander us capital markets llc why doesn't the economic data matter? >> markets are focusing on further shoes to drop. if something major were to happen that would take precedent. a number of folks are worried that the events of the last few weeks are going to create significant economic weakness. i'm not so sure about that. if you believe that then it doesn't matter what payroll look like last month or this month

because there may be something coming down the line. lisa: you don't believe that stephen? you think that what we have seen so far and certain regional banks doesn't necessarily tighten credit conditions enough to act as a rate hike or to rate hikes or whatever you want to price and the line? stephen: i think there will be an impact. credit conditions are going to tighten but it will be relatively modest to moving in the direction that the fed has been hoping to push towards and the fed has been trying to tighten financial conditions and to be fair, they have struggled to do so to the degree they would like. as you mentioned before, they are having difficulty getting the economy slow down. inflation is still very high in a certain amount of credit tightening from the fest perspective would be a good thing. they're hoping to cut the soft

without further contagion and that's what were looking to see going forward. lisa: as traders listen to jay powell with a split screen with janet yellen without full-scale deposit insurance they had one conclusion, this is the end of the rate hiking cycle and the fed will cut rates going forward. do you disagree with that assessment? stephen: what i have said is we've gone back to the natural state of affairs. this is how we were aligned for most of last year and at the beginning of 2023 with the fed talking about additional rate hikes and being on hold for a long. of time. we are back to that after a brief dalliance with the markets getting super hawkish. i think in some way it's a comfortable position. again, it's a function of a different economic outlook.

the fed sees the impacts of this being limited. in the gop forecast, the growth forecast was revised down by .1. thus their preliminary assessment of the magnitude of the events of the past couple of weeks. the markets are looking for something much bigger than that in terms of downward influence. lisa: when will we see economic data matter, when the banking issues have been resolved or we have a sense of the scope of them? is there a data point that we are looking for that will take on importance regardless of the backdrop of the banking sector? stephen: the economic indicators are still going to matter. employment reports, cpi, consumer spending, those of really driven things in the past. a lot of the other second-tier

indicators that we have watched, they are not enough to break through the heightened level of noise right now. the other point i would make is that as a banking situation comes down the data will become more important. right now, people are of the mind that we're looking into a different economic situation and 2, 3 months and it will take time for that play out. it is closer to what the fed has suggested that the banking situation is not necessarily going to dramatically change the projected economy and we get back to business as usual in terms of watching the key indicators that have been driving fed policy. stephen: what do you think the terminal rate policy is gonna look like at this point? i have not moved, i met 5.3

eight. i would say unless we see a miraculous fall and inflation the big difference i would take with was priced into the market in terms of this pivot idea. the fed will be on hold until inflation gets down to something closer to 2% and that will take a while. lisa: stephen stanley of santander us capital markets llc it does seem like this is the economic data point of the moment which is faang stocks and the fear in the system. it is not just traditional banks. where are the nodes of concern focus? sonali: traditional banks are the focus because you have the banks lending to small companies both small businesses or job creators.

we have to remember when we came into this how much pressure the businesses were under before the credit crunch started. they say credit conditions were tighter since 2008 before the banking crisis was started. there is some silver linings here. think of jane fraser said about the idea of a few more banks facing more pressure in the near term but not creating a nationwide credit crunch. what that implies is that there can be more strained among the smaller banks without the systemic ripple effects but that does not mean that credit won't be as easily available as it was in the past. lisa: how does crypto fold into this because silicon valley bank was connected to a.

we have seen others with that exposure, is there a unifying thread? sonali: you have to look at them one by one because it is the time to parse your client base. take pack west, their deposit bays was tied to the tech community. it was not enough to create significant strain that you saw it as some other firms but you look at first republic, this california profile facing dire straits at a much more massive scale. we can say that we can leave these all together in one basket. that's imprudent because each of these firms are facing different lifelines for different investors. lisa: what are you watching for the few days ahead?

right now, we look at markets that have a bit of a lift after a couple of turmoil. we have seen that grind higher, it's like people want to look past whatever is to come. people talk about potential weakness and people say, no big deal. nasdaq is up .9% s&p up .5 oh percent. - .50 percent. when does that change, this is bloomberg. lisa: keeping you up-to-date from news around the world, i'm lisa mateo. over inflation trump the recent baking turmoil saying that more tightening may be ahead. the rate hike comes two weeks

after the bank failure. credit suisse has big banks putting their at the fact oh on hold. firms such as deutsche bank, citigroup and jp morgan are preparing to hire some of the swiss banks and investment bankers. talks have begun in london and new york and headhunters are flying to zurich. in france, more strikes are set against the pension system. public transportation, schools and refineries are likely to be impacting. it has been two months since unions organized walkouts. he wants to raise the retirement age to 64. tesla has started a price war in china. elon musk has cut prices twice since october. that has made some models 50% cheaper than in the u.s.. at left rivals in china to

follow suit, at least 30 have lowered prices. global news 24 hours a day, on air and on bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i'm lisa mateo and this is bloomberg. ♪ ♪ it's easy to get lost in investment research. introducing j.p. morgan personal advisors. hey david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management. sfx: [soft beach sounds]

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than the business you're in. (robot whirring) want smarter factories? that's the internet of things business. accelerating r and d? data science business. hey. have a look. managing global supply chains? shrink our carbon footprint business. thank you. (in foreign language) that's where deloitte comes in. with a potent blend of acumen and technology to help advance and connect all that it takes to excel in business ... to the business i'm in. deloitte. introducing j.p. morgan personal advisors. hey david! connect with an advisor to create your personalized plan. let's find the right investments for your goals. okay, great. j.p. morgan wealth management. >> the banking system is pretty sound and we are talking about a few banks. we heard from chairman powell

that this is not something that has spread across the entire banking system. this is not like it was last time. this is not a credit crisis. this is just a few banks. lisa: that was jane fraser yesterday. this is been the big concern for a lot of central bankers coming out and saying that their financial systems are safe and sound and resilient. norway has not had to deal with it as much. norway central bank came out this morning and raised rates by 25 basis points, the highest rate since 2009 and had a hawkish tone. we have the governor of norges bank investment management was there any discussion about going further than 25 basis points even 50 basis points based on how hawkish the talk

was? >> we always have good discussions but when we met yesterday the decision to raise policy rates by 25 basis points was unanimous. we are signaling that more hikes will likely be needed to incur -- to curb inflation and we will raise in may to three .5% in the summer. lisa: could you see some strengthening and it would be a positive that would bring down inflation so to be more aggressive at a time where there is policy divergence in other regions of the world was a positive? >> we do not have a target range for the current exchange rate the fact that we have seen a

depreciation of our currency was one of the reasons we think it's necessary to heighten to get inflation back to target. the currency going forward, there is considerable uncertainty. if the krona becomes weaker than projected docket call for a higher interest rate going forward. lisa: so that's something that's an active consideration. is there a particular level, like the euro would match something concerning for you or would be the appropriate level of strength to offset some of the inflation that you are seeing? gov wolden bache: we do not have a target range for the krona exchange rate. that's one of the factors we consider when making our forecast and interest rate

decisions. the forecasts are based on the assumption that the krona will appreciate going further but if it turns out that it's weaker than projected, could isolation .2 a need for larger rate hikes. the outcome is uncertain and we will take into account the range of factors. lisa: the central bank has talked about the potential for a wage price spiral and that something people expect. could we be getting into the 1970's type of behavior. what would you have to see to make sure that you are not as some sort of wage inflation spiral? gov wolden bache: we are not seeing that now but we are seeing that wage growth is on the rise and expectations for wage growth has been revised upwards. we are expecting wage growth of

around 5% this year and that is one of the reasons why we expect without further tightening of monetary policy, inflation to remain high for some time. lisa: do you see this inflationary process something secular as something that is global and has not been stymied by the turmoil in pockets of the banking system? gov wolden bache: the underlying drivers of inflation before the pandemic and the reversal of those drivers would mean going forward is a matter that is creating uncertainty about the outlook. we must be prepared for rate volatility in prices and we will be prepared to do what we need to do in order to get inflation back to target. lisa: how much do you look to other central banks to determine your policy?

how important is it to understand that the ecb is raising rates you have to raise rates and tandem because of the currency differential? gov wolden bache: we are setting interest rates on the basis of the norwegian economy. we are a small, open economy and the exchange rate matters for inflation. what other central banks do does matter but there is not a mechanical relationship between the decisions taken by other central banks and our interest rate decisions. what other central banks are one of the factors we take into account when we make our decision. lisa: based on what you seen of the past couple of months is it more likely that you get to 3.5% or a terminal rate or you go even further because of some of the wage inflation and other pressures? gov wolden bache: there are risks on both sides of our

interest rate projections. we have not yet seen the full effects of the tightening we have behind us and we are expecting high inflation and higher interest rates to curb household spending. to what extent is still uncertain. we are basing our forecast on their not being a significant tightening of financial conditions as a result of the recent turmoil. there are risks on both sides of our interest rate projections and other central banks is one factor we will be monitoring closely. lisa: thank you so much for being with us after the rate decision earlier this morning. it seems like we have seen this ongoing divergence. michael has been tracking it all who joins us now. it seemed that's the take away over the past few weeks that there does seem to be under the

covers a bit of diversions where you see a hawkish tone from european banks and the fed already seeing the rate hiking cycle and. mike: the fed is close to the end, they think they are at restrictive if not above it and they want to get a little bit above it to curb inflation. while the ecb and boe is a little behind. i separate the bank of england because they have a different problem and that they are dealing with the aftereffects of brexit. they have labor shortages and supply chain problems. the ecb is dealing with an energy cost inflation spike in the u.s. has a mixture of that and supply chains. but that's leftover stuff and they are trying to bring down inflation with high rates, they move first so they are already there. the ecb is catching up fairly rapidly. at this point, the fed's closest to the end. lisa: how much do you think the

jay powell talks to janet yellen? mike: they talk at least once a week. beyond that, i'm not sure. in the last few weeks they probably talk to each other quite a bit. yesterday was a confusing day and there were a lot of mistaken impressions left by yellen's testimony. the medium size central banks said the treasury a letter saying we would like a blanket insurance policy for our banks up to two years. what yellen was saying, we will not do that because that requires congress to agree. unless we decide there is a systemic urgency and we don't think there is a systemic emergency. that really upset investors when powell was trying to say at the same time, your savings are safe. there was some confusion there in the translation that the

treasury department didn't mean and that's probably why they didn't coordinate the sauce between the two. lisa: michael mckee, thank you for that and the ongoing coverage over the past week. the tumultuous time when we were expecting the fed decision. it was muddied by janet yellen's discussion. we will keep the conversation coming up. on balance of power, congressman brendan boyle, a democrat from pennsylvania talking about the potential for deposit insurance as well as on the tiktok hearings in the house. and markets, you are seeing a bit of a lift. there has been an ongoing sense of optimism and markets despite the parish commentary -- bearish

commentary from new york, this is bloomberg. ♪ ever better. it's when disruption hits your supply chain and ryder makes sure you're ever delivering with freight brokerage to transportation management, truckload capacity and dedicated trucks and drivers.

jonathan: if you thought yesterday was messy, maybe what you can blame the treasury secretary and not the fed chair. from new york city, good morning. "the countdown to the open" starts right now. >> everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. jonathan: live from new york, jay pl