>> i think we are seeing enough the inflation meeting.

>> there is a reasonable risk that they do not cut year. >> the start of cuts is not easy. in is about normalizing. >> inflation is slowing down. jonathan: this is it. the third hour of bloomberg surveillance starts right now. good morning. inflation data right around the corner. i know how much work goes into this. strip out food and energy.

lisa: everyone will be looking at it because there is this impulse. jonathan: where does this leave the federal reserve? annmarie: they will be focused on this, but this is not going to be enough. what strikes me is the year-over-year cpi is not too far with the budget put out. the projections are interesting. 2.9% inflation is not going to help them or the fed. jonathan: 2024 real gdp. 2.4% this year. lisa: they will probably keep it

there. the disinflation so far is kind of going to stall out. we heard that with respect to airline tickets, but the demand is there. these have to be paying on the fed. jonathan: is an a beat for this market? there is a difference between what the market is looking for and what economists are looking for. lisa: i would say that yes, it is a beat. that is the biggest cloud hanging over the market. everybody is prepared but not for an acceleration of data. jonathan: looking across the

treasury curve, yields are a little bit higher. that is the story and the bond market. just a touch stronger. coming up this hour, a fantastic lineup. the biggest risk event this month. way and on inflation data. not looking for cuts. will catch up. we begin with our top story. just under 30 minutes away. cpi is now priced as the largest risk event in march, but we agree with him. it is partially condemned -- partially contingent on the data. it would support the seasonality

argument. still, let's get into this. yvon about this. the difference between what the market is looking for and what they have projected. >> i think economists consider that a miss. i think it is a tale risk story. it is going to be positive for u.s. equity market. you start to have some issues. jonathan: who does it help? the big players? what part of the equity market will do well off of that number? >> you will see some of these things thanks all caps. i think it will probably help.

lisa: i found it really interesting. the same thing that they have been talking about. whether it is good or bad in terms of how you price risk. >> it is important. an anonymous volatility on a global basis. it is kind of the risk driver. the last month, it has been like, wait a second, it is

different. you start to see volatility rise a little bit. it is indicative of a certain stance. lisa: how would that be for a potential acceleration? >> we have had about to digest it. i think people started to do a little bit of work there but there would be a little bit of risk. it has revolved around lower equities and lower yields. i do not think a lot of portfolios are set up for that. growth data can get you that big pullback. if you are going down to percent, it is probably because you are printing negative payrolls. the reason is you have strong

growth. it cents a pretty high floor for equity market. i think it would be disruptive for internal markets. lisa: we were hearing earlier as well. the stock market has shown incredible resilience to any kind of it is immune to potential rate shocks. you can see it not play out when it comes to the market. >> is a discussion. that deep inflation till risk has been cut off. i put that aside and start talking about margin and earning. it becomes a real risk for the market. i think we are a little ways

away from that. it has also gotten pushed back. if you have a high patient. , it should be something to keep your eye on. jonathan: that is pretty straightforward. >> obviously there are moving parts. that is a must you have -- we still like keep. but you are seeing broad made out.

the number is below 50% right now. it is basically log tech. annmarie: one for you is the labor market breaking? >> i think the market is going to pay attention. a soft landing. hard landing would be printing payrolls. it is actually unfortunate because last you, it would have been a better idea.

lisa: what can shake your view that the equity market will keep on rallying and broadening out with an economy that is supposed to be decelerating? what is that awkward yoga pose become problematic? >> fundamentally speaking, margins are what people are really focused on. the logic is you have this very high novel growth. i think it might have surprised some corporate's. the question is if you are only growing 5% nominal, are you able to defend that margin? we saw that margin turning over. for me, it is payrolls and margins. jonathan: we have to to unpack

that, how they respond to each other. is that the next step? is that the focus for you? >> you have taken over after million jobs. tier play, these things are interleague. it is a question of how they come together. in a strong economy, it is not an issue. company easy to make a hard decision of margins versus revenue. that is an issue the market will have to get through. jonathan: stuart will be sticking with us. these are the numbers that we are looking for. stripping out food and energy.

the data is just around the corner. let's get you an update on stories elsewhere. >> southwest and boeing are sliding after southwest said they would have to cut capacity due to continued challenges and a drop in deliveries. this is in addition to a hiring freeze. a heart disease drug has been approved, and could open the door for medicare coverage. they are reviewing the fda's action and whether they will cover the treatments. many medicare programs are already covering similar drugs for weight loss. asking elon musk if he would like to buy truth social.

another high-profile discussion between the two. earlier they met in florida as the former president binds up motors for the election. elon musk said he is not donating money to either candidate for president. jonathan: more data about 15 minutes away. >> you might get a stronger-than-expected inflation the bird today, but extrapolating that out. jonathan: that conversation is coming up next. good morning. ♪

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that happened during commercial breaks and sometimes we try to move on quickly just to save lisa from herself, but on this occasion, you have to repeat what you just said. what are you looking forward to? lisa: the upper special. the reason why is because she is going to talk about her use of weight-loss drugs and give the case for them at a time when this is one of the revolutions and markets as well. maybe get short weight watchers. she is going to host revelation oh and reveal. jonathan: we will pick up on that story and just a moment. under surveillance this morning, inflation data right around the corner. >> hereby get a stronger

inflation the bird. i bought extrapolating that out. it seems like every cycle we go through there is another on inflation. if you get a couple of unexpectedly strong inflation numbers, that will be a catalyst for some kind of pullback. jonathan: a headline month over month figure expected take silvery. ultimately, we do not expect the report to provide sufficient evidence to cut rates. mike mckee, what are you looking for? make: we are looking for upside surprises. on a year-over-year basis, we see it come down. it might be coming and hot

again. we had a big divergence. we will see what kind of things we get. and what my surprise underneath. lisa has given me something to work with. remember when she bought her refrigerator? that went on for weeks. prescription drugs are in the cpi. lisa: are you trying to say buy index is going off of weight-loss revelation? [laughter] jonathan: i went to talk about disinflationary trade. why do you think that was?

mike: it is looking at longer-term. we will wait until we have to make a decision and then we will take a look at where we are. there will be a question of whether jay powell was too optimistic. cpi might be coming and more than expected. we do have a new summary of projections. if we get a hot number, it could influence and change it a little bit. lisa: stuart has been talking about how this is an incredibly important cpi. . i do not have a sense of how flexible some of the committee members are at this point.

mike: i think they think and is 50-50 for the economy. there are seasonal effects. they have to take those out of the equation and figure out if what they see is a lasting jump or not. maybe they enough with fewer cuts just because you run out of time. the markets will be looking at this and go, we have inflation. let's see what we get out of all of this? jonathan: your compatriot is

looking for it to remain unchanged. is there anything about what happened at 8:30 that can bring that meeting alive? mike: it is a relatively low bar to get there. from a market's perspective, they have to at least adjust. if you get them back to back, you have to respect -- we will get that kind of situation. lisa: i will use another word that jamie dimon used. at what point to beget inflation that is not accompanied? mike: that is why we are so focused.

they are willing to tolerate a lot of stuff. talking about stagflation, it will be persistently high. it is above what the fed would otherwise like. he, that is something that has to play out. lisa: is this inflationary or deflationary act of >> the market is probably thinking of this as deflationary trends. if you are being optimistic.

they are less happy, so they do not mind. mike: and it is not just weight-loss. that could be a lot of health problems that could be taken care of. but the interesting thing is that you will probably get drugs approved. the company's will be taking over the pavement. it would be a short-term win. jonathan: how do you come up with a multiple to put on

companies like that? >> i think the issue is you look at the spending and how many people are not in the workforce. jonathan: in the context, has it shifted? people used to talk about health care as a defensive way of maintaining equities. >> we like it for exactly the reason you describe. if you got that risk off, it will grow 50%. if the market rallies, they can

keep up. we are pretty positive on it. the earnings, the inflation, which is why we had to talk about it. jonathan: mike mckee will stick with us and talk about the inflation data. no rate cuts in 2024. together with jp morgan's david kelly. the biggest data point of the week stateside, maybe even worldwide is coming up next. ♪ in minutes! -how? -a.i. (impressed) ay i like it! who wants to come see the future?! get your business online in minutes with godaddy airo

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jonathan: this scores going into the information look like this. negative or rather positive. i what half of 1%. shaping up as follows. 4.08%. your economic data. mike mckee has the numbers. mike: it looks like we are hot.

the forecast was for a .3% rise. that is probably energy related but we will check the numbers. it comes down but it looks like we have a little bit stronger numbers than anticipated. jonathan: equities looked like this. now just about unchanged. positive i about .2%. yields coming and up a single basis point. these are not major moves. you have to think about where we were.

yields have come down a lot since then. the euro dropping back. we were looking for .4. stripping out food and energy. when you look beneath the surface, what do you see? mike: the headline is probably energy driven. they fell in the month of january. a big difference there. everybody keeps an eye on the prices because we all have to pay that. for the month, we saw food prices fall flat. used cars were up for the by

.5%, which is in contrast to the decline in january. a big change their. what we are seeing for owners equivalent rent is that we have seen that come down a little bit. the divergence that we saw january has gone away. it looks like used cars played a big role. lisa: i've tried to figure out why. it was the owners potential equivalent. why isn't this being viewed as

something that is multifaceted? mike: we are seeing things total of one month and down the other. since you have that, it might be noise. some of it is pretty volatile. i have this whole log thing to look for, but that is the kind of regular thing that tells you that it is not something that cannot be gotten or cannot change as we go forward. jonathan: 0.4%.

a touch hotter than anticipated. what jumped out the was the index, not as bad as it was the previous month. we are accelerated. it is probably worth asking whether we can take it. mike: there was third. we had this whole kerfuffle about the leading of single-family houses. right now it does not matter because they came back down. prices continued to climb because that is what is supposed to happen. we will see better numbers going forward.

jonathan: just about unchanged. up by 0.6%. still higher. out to the 30 year. fantastic panel for you. david, first to you. your view. >> we had an increase in airline fares. down 7%. you want that to come down faster. but it is going to take some

time. some of the things have bounced month to month. jonathan: is the cookie interest rates? >> i am not looking for a fast pension. if they can slowly cool, that is best for the economy and investors. lisa: if you leave the pan of cookies on the oven, do they cool at all? a lot of these different factors are sticky, but if you do not have some sort of ongoing type policy, do they cool at all? >> i hate to bring it back, but it really does. most of the components are those

that are service related and income based. 3.8%, it sounds like a really big move. this is the tight labor market. inflation is definitely going to go back. the reason you have a market is because the fed tells you that they want to cut rate. they are telling you, we went to cut rates. but the data is not letting them. they probably were not going to be given the opportunity. it continues to be the thought

process. the federal reserve is fighting the economy. about fighting the fed or the economy. fighting the american consumer is a losing battle. this american consumer has a tight market and they are going to spend it. people are willing to spend money. >> i do slightly disagree with this idea of inflation coming out of the labor market. but one of the key variables i look at, what are restaurant yields doing?

also, if you look at the market, people are not putting in huge numbers. there are a number of small businesses that say that they are going to raise. so we are not seeing wage increases. we have a lot of low-wage immigrants that i think are holding that wage growth down. when i see is auto insurance pushing up the inflation rate. it is pushing up, but both those numbers are lacking finality. inflation is going to come down slowly. i think it will be fast enough to start cutting in june. we should move back to neutral.

>> when you start looking at individual component, we are making huge mistakes. it has components that will move up and down. that is why we do not look at individual components. the broad index is tell you a message. the reality of the situation is the index is not doing what they want it to do. and they are doing it because of the labor market. we do not have enough historic data to make any real, valid statistic data. we are jumping on these new statistics, just like we did during covid we were looking at

how many people were booking restaurants. they all led us absolutely nowhere. it is telling us that we still have a tight labor market. there is enough activity to keep it going and to keep it from coming back to the fed's target. the reality is the economy is not giving them the opportunity. >> even with the jobs data coming have to put together a mosaic. the truth is this is not your grandfather's economy. even looking beneath, i agree

these response categories, but it is adding .6%. we would be at 18.6 instead of a 3.2. it is more than 50%. the way they are missed measuring shelter, if they fall out gradually over the course of this year, that will move down unless we have an energy shock. i still think it is cooling. they are just cooling slowly. >> one of the reasons why insurance rates are going up, when you get a fender bender today, it is costly.

it is not a spurious uptake. when people get into it, this is the index that we have. this is the index that we have. this is the index that we are setting policy on. they do a good job trying to measure these things as accurately as possible. it undermines the reality of the situation and keeps people hoping for something that is not happening. they want everybody to keep on hoping that it will happen so it keeps the market tight. that is what i think is the driving motivation. you have an economy saying, we are not going to upset the apple cart.

we will keep the economy moving. that is good for stocks. the corollary is taken on the assumption. people are saying, we are not getting back to double-digit inflation. we are talking 100 basis points. that is huge. we cannot discount the fact that we are getting stuck around three and not two. jonathan: we will continue this conversation. steve basically saying, no rate cut in 2024. david kelly is basically saying the federal reserve should get out of the way. the conversation continues, next. >> last year was the year of cash. many people realize, i have to

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jonathan: u.s. inflation numbers out would signal. a very different outcome. yields are lower by a single basis point. the euro is stronger. lisa: it is confounding to me. nobody wants to fight the fed and the fed wants to cut rates. nothing in the numbers is strong enough. jonathan: david, what is the

answer? >> if we have a federal funds rate, that is a type policy. it is causing problems with assets and regional bags. i think they should gradually move back to neutral. i think they would be right to cut in two. break mates back to a neutral level. they ought to do that because there is no reason to be interfering. the issue of auto insurance, i

have to pay higher auto insurance as well. whether it is measured correctly or incorrectly, i would not think it would be half as much as that. but it is going to pull the cpi inflationary down. if it is moving in the right direction, that is why they should move back to neutral. lisa: a hotter than expected cpi for. they can see is make them hot. real wages are increasing. how do you fight against that idea?

>> we had an economy capable of tying inflation, but happening major strikes to be have occurring right now? i think the answer is zero. we are not seeing a vigorous labor force demanding high increases or they will quit. i think you can run the economy relatively strong without generating high inflation. what is wrong with that? it is not inflationary at its core. it is fading and i think inflation comes back down anyways. lisa: i be entering a new normal?

>> there is a belief that because we were there before covid, we will go back to that. there was to be of very big differences. larry summers said it was not correct. they corrected the overhang. lower interest rates to we file their mortgages. the other fundamental difference , before covid, people were uncertain. there was a high degree of uncertainty. corporations making sure.

now there is a lot more maturity . the question is, does it come back from three to two? it is a bond market. the 10-year note should take the inflation target and the underlying trade for the economy. we are basically in the middle of that range right now. we are nowhere near that range. this is the problem for the federal reserve. they do not have a 3% target. markets are allowing them to continue to be patient. at some point they might say, we

will allow you to be patient. as the risk, if they move. you could reverse a lot of the goods inflation. this is why they have to be patient. they will have to be patient through the year. they do not want to sit this economy back. my consideration is the yield curve could stay inverted a lot longer. nobody borrows at the front end of the curve like they used to. jonathan: the biggest risk right

now, is it coming too soon or holding too long? >> i think that they should come as a matter of long-term strategic policy move back to neutral rates because the economy does not need them to be tight at this point. the bigger risks are for outside of the behavior of the federal reserve anyways with geopolitical and environmental risks. if something happens to while, our view of the world changes a little bit. i think they will begin to cut. that is how they forecast. when i see is and is not pushing

up demand. the whole part of the global economy is not going to give you inflation. it allows you down to 2%. thank you -- jonathan: thank you. the green light is still on. 0.4%. big data follow-up tomorrow. this was bloomberg surveillance. ♪ quest cookoff got off to a slow start. saving nine points before closing it out 62. there, cocoa golf was pushed all the way by the italian, eventually closing it out in the

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>> the conduct of the market starts right now. >> everything you need to know to get set for the start of u.s. trading, this is ""bloomberg the open" with jonathan ferro. dani: uscp