>> we are still in a booming economy, eight even if we are concerned about profit margins. >> where we are now is in a pretty rapid and ongoing repricing in fixed income. >> can the fed cool the economy, have a soft landing without creating recession? >> the markets underestimate the extent the fed can go without breaking the economy. >> growth is solid in the u.s. inflation data is critical now. >> this is bloomberg surveillance with tom keene, and

lisa abramowicz. lisa: countdown to a new dawn of inflation. this is bloomberg surveillance on bloomberg television, bloomberg radio. jonathan ferro is off today. kailey leinz is very much in. 30 minutes away from a new statistic. 8% is the threshold we are crossing for the first time since the early 1980's. and inflationary shock. now what? tom: this is my fault. i am wrong here. what percentage of america has never seen this statistic? lisa: how does this translate to a shift in consumer behavior, consumer perception, how can businesses sustain what is expected to be 8.4 percent consumer price inflation for the month of march? tom: the makeup will matter, and i will leave it to michael mckee

to tell me what the fed looks like. the answer is pce matters be made to the american public, that doesn't matter. it is stunning inflation. lisa: we are talking this week about the u.s. heading into the ecb and imf discussions on thursday, as we look at inflation in the u.s. and globally. the u.s. has the momentum that the rest of the world does not. what kind of lead over are we seeing into the rest of the world? sri lanka saying they are halting dollar payments. kailey: inflation becoming a political crisis. you are seeing higher prices lead to actual unrest in some of these countries. sri lanka is not alone in it. food prices globally moving higher. we know where that led us in the arab spring. even if the u.s. economy can be

more resilient in the face of these higher prices, can the rest of the world do the same? i'm not sure the answer to the question is yes. lisa: we have seen the dollar strengthened as people talk about waning growth in the rest of the world. at what point does something break? we are moving at historic pace. not only are we seeing historic numbers but historic pace. risk assets have wobbled, the nasdaq is down 14%, but resilient earnings. tom: i want to jump into the video we are seeing today, the dollar stronger. the euro breaks down from 109. green on the screen in the equity markets. in the last three days, vix out to 24.14. we showed you mr. macron earlier, mentioned european wheat prices up six standard

deviations. this is marine le pen speaking of her approach, which you have to believe will go to the center here. kailey: all that focus on the cost of living crisis. the political consequences of higher inflation ripples throughout the world, including here in the u.s., as we get closer to midterm elections. the president doing something to rein in the pressure that americans are feeling at the gas pump. tom: the pressure is to get out of town. le pen and micron far away from paris this morning. jim paulsen is out rooting for the minnesota twins, joining us

with perspective. the agricultural reality of this economy, is it a boom for agriculture and midwest farmers? jim: i think it is. that has generally been the case historically. i grew up in the great state of iowa. the best decade ever when i was a kid was the 1970's when all the farm kids had new pickup trucks to drive to school. i think that is the case here in minnesota, midwest in general. it is certainly noticeable to consumers here, just like it is everywhere across the country. wherever you go you are paying more. but for the farm community, it will be a boon. lisa: the upsides are offsetting the downsides in the u.s., and that is cutting people off guard. this is not breaking the economy

yet, even if we see a 2.8 sent 10-year yield, because of how much good there is. the positive attributes of inflation, higher prices that people are earning. how much are we dancing on the head of the pin, how long can this moment last? jim: if we are going to continue to have 8% going to 10% inflation, not very long. rates have to scream even higher. if it is persistent inflation at this level, 2.80 10-year is nowhere close to where it needs to be. when we had 8% inflation in 1970, the 10-year was breaking through 6% and ultimately went higher. i still think this is likely to roll over in the second half of the year. we might be seeing this morning the peak in cpi inflation rate

in the month of march, over all. the other thing to think about, inflation is a product of demand and supply. yes, demand has to slow down. we have excess supply. but what is different in this cycle to me is we have a chronic supply shortage. usually with inflation we have excess supply and demand. we just have stronger demand than supply. the reason that's important, when both are at excess, all you have is to destroy demand to bring it down. we have a different possibility here. yes, we have to moderate demand, and we are doing that already with policy tightening, higher inflation causing consumers to be more conservative. but we are also lifting supplies. that is starting to happen. the most encouraging aspect, in the last five months, we have

seen the u.s. labor force grow at a 4.2% annualized pace after basically growing less than one half of 1% most of the pandemic. that is a big surge in the labor supply going into the third year of recovery, will help supply chain problems across the country. we are going to address this inflation problem not only by bringing demand on with slower overall growth, but by lifting supply. if we do that, we could have a much better chance of a soft landing then we would in normal times. kailey: soft landing when it come to the broader economic picture. how does that translate to corporate earnings? jim: i think corporate earnings will remain fairly strong. i think the economy is very strong. yes, we are slowing it down from last year, but it is still very

strong. if you look back to 2016, at the end of the year, we had 2% real gdp growth, 2% inflation, 2.6% 10-year yield, a valuation for multiple on the s&p of 19.2 times earnings. today we have a for evaluation of 19.8, same ballpark. we have a yield that is 2.75, 2.80, same ballpark. yes, we have higher inflation but we also have a real growth rate that is 2.5 times stronger than back then. nominal growth is three times stronger. real growth is 2.5 stronger, and we are selling at the same volume. i don't think a 2.80 yield is that challenging for equities when you are growing 2.5 to three times faster than back then. nominal growth being higher

means earnings are probably going to grow stronger. i still think we will get a 2.40 number by the end of the year. tom: jim paulsen, thank you. lisa, i'm looking here with a nice lift in the market. dow futures up 49. the vix coming in at a 23 handle. politically, this is fascinating. marine le pen speaking in france. talking about the le pen approach, the arching daughter of the arch far right leader, degaulle, appealing to the poor in the left. i don't know an american equivalent of le pen switching over from the immigrant and far right tone to the left to ask for votes. lisa: actually, there is a pretty direct: very where you see the extremes on both sides

coming together, where you want to tear down the norm. that is something you see increasingly in a lot of political dynamics right now around the world. you saw that in the u.s. during donald trump's era. i wonder how much this inflationary print will exacerbate that, even if it is the backdrop of what is happening in ukraine and the unity of nato, and this is one of the tensions i'm watching politically. tom: france with a 4.5, maybe heading to 5% inflation, versus what we will see in america. international relations and the politics of the moment. stay with us on bloomberg radio and bloomberg television. the inflation report in 17 minutes. >> keeping you up-to-date with news from around the world.

president biden will allow expanded sales of higher ethanol gasoline in an attempt to lower fuel prices. he will make the announcement today during a visit to an ethanol maker in iowa. using this gas could save drivers $.10 per gallon. ukraine expects russia to widen its offensive in the eastern part of the country this week, echoing a u.s. warning which called for a bloodier phase of the war. in the city of mariupol, the mayor says more than 10,000 civilians have died since the invasion. in shanghai, u.s. consular staff have been asked to leave the city. residents and shanghai are restricted to their house for at least two weeks but some residents report great access to supply. sri lanka is taking an ordinary

step to protect its fuel imports. the government is suspending payments on some foreign debt, warning creditors of a possible default. there have been protests against 20% inflation and daily electric outages. shares of carmax are falling. they reported earnings that missed fourth-quarter estimates. unit sales declined. carmax blame that on inflation and the end of stimulus programs and dwindling consumer confidence. global news 24 hours a day, on-air, and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg.

>> we do not have a policy rule for every segment of the population. we don't have one for andy industry. we have one, it is called the fed funds rate. that is really it. it's a very brute force kind of hammer that we use on the economy, and when you have to use a brute force tool, sometimes there is some collateral damage that happens. tom: an important voice at the federal reserve, christopher waller, researcher out of st. louis.

i will be clear when he speaks, experts lean forward and listen carefully. ira jersey is one of those experts, chief interest-rate strategist at bloomberg intelligence. we tried to get you yesterday. i know you are on the phone trying to pull down the amazon of 2462 at 4.1%. where is credit going given the full faith and credit we are seeing? is credit finally going to see some real damage given what government bonds are doing? ira: i think investment-grade credit will continue to underperform a little bit but it really depends on the segment. but we have tightening of monetary policy, what tends to happen is more bifurcation within credit. credits that are highly levered, continue to lever up when interest rates are going up tend

to do worse than credits that are trying to pay down debt and have good cash flow to buy back debt or not issue as much. it is more of a credit pickers market as opposed to or sell everything in sight. pick your spots here if you are going to be dipping into the corporate market. lisa: the corporate credit market is being driven by the rates market, as we have this drumbeat, the cpi print is really front and center. what is the reaction in the rates market if the inflation we are about to get actually surprises to the downside? ira: i think there is an interesting risk of that. you see some components, used cars have come off a lot. oil prices have been fluctuating, and you could wind up seeing a bit of a downside print. if that happens, we don't see much of a move into your yields.

the five-your sector could rally 15 basis points because that is very sensitive to how high the fed will ultimately hike. the fed is hiking. it's a question of to what level do they hike. 2.5, 2.75? tom: is the five-year a short-term indicator? ira: we use the five-year as an indication of the terminal rate. the interest rate that the fed will ultimately hike to. if that is lower than the markets are currently pricing around 3% plus or minus five basis points, you can see the five-year maybe rally back. we are already pricing for the fed to cut in late 2023, early 2024. we think the market is thinking

the peak will be in 15 months, and then the fed will have to take some of that back. lisa: we saw yields breaking the 2.80 level earlier today. we'll yields also heading more negative, -18 basis points. what would the reaction be in real yields to a downside surprise on inflation which could still have an 8% handle even if it comes in below expectation? ira: real yields have had this massive move. they have come up 100 basis points in basically a month. it wouldn't be a surprise where you have the downside surprise that real yields rally to maybe -25 basis points. real yields are sensitive to policy actions. as the federal reserve continues to hike, as they unwind their balance sheet, real yields will turn positive. kailey: when? ira: i think in the next six weeks. the fed will hike in may.

as long as we are pricing for a couple of hikes in june and july, 10 year real yields can be positive. lisa: where do you think inflation rates will head toward later this year or next year, when the terminal rate is the key variable? ira: this will be the peak. mathematically when you look at year-over-year prints, this month should be the peak. the question is, is the market correct in thinking people have 4% year on year inflation? personally, i think the risk might be that we were a little bit below that. there are a lot of variables to that, but the big thing is, what do the oil prices do and what do the goods do? even though goods prices year on year are very high, the chances of them repeating what they have done last year are pretty low. i do think we will have inflation sub 4%, but that is

still well above the fed's target, so they will remain hawkish for the first portion of 2023. tom: greatly appreciate that brief, his writings on bloomberg intelligence are a must read. we now go to michael mckee been we believe he is with us. we had some difficult -- technical difficulties. all the focus is on the median number, 8.4%. i am appalled by the core number of 6.6%, which gets us back to your favorite song "eye of the tiger." mike: if we hit the forecast, we will get to 1982 for the headline and the core. you and i remember -- the ladies do not. tom: core. mike: this is telling you this

is broad-based, more than just food and energy. americans notice food and energy at the gas station or grocery store, but we are seeing different categories contribute. there are some expectations that even today we will see some of the transitory numbers, reopening numbers like airfares and hotels. housing has been going up on a regular basis. that will keep going up, adding to inflation pressures. tom: the first time i heard "eye of the tiger" i said you have to be kidding me. it was the "rocky" movie. neither mckee or i will be singing, but it is an historic moment. this is absolutely original for a huge body of americans.

michael mckee will give us the data in four minutes. and then we have seth carpenter, chief global economist at morgan stanley. futures are up eight. this is bloomberg on radio and television.

tom: the only price that is down in america are red sox baseball tickets. they started out 1-3. ticket prices decline, everything else is up. the report you been waiting for, michael mckee. do we get it right at 8:30? mike: getting it right now, as a matter of fact. almost exactly what economist forecast. on a month over month basis in march, cpi went up 1.2%, that was forecast. up .8% the month before. on a year-over-year basis, up 8.5%, so a rounding issue there that people will look for. the forecast was for 8.4%. still leaves us in the same place. this is the highest inflation since january of 1982.

the core, .3 percent, so that comes in lower. 6.5% on a year-over-year basis, lower than anticipated. tom: there is a lot of market on the move, green on the screen. s&p futures up 29. that is a genuine percentage move, up .6%, nasdaq up 1.2%. 2.71%. even a fractional dollar weakness. lisa: i just want to point out the yield move. it came in above expectations, 8.5%, but people seem to be pricing in an even higher beat to inflation. the fact that 10-year and to

have in yields tanked gives you a sense of where the zeitgeist has shifted and whether people are trying to outhawk each other. tom: i want to set up what we will hear from seth carpenter and lael brainard later today about the paycheck. a look at what average hourly wages are doing. i have near the pandemic 7.4% lift in the real wage. it is an number, doesn't matter, but it supposed to be we percent. it is -3.6%. americans are getting clobbered on wages from this inflation. mike: it is complicated because this only takes into account wages, not other ways of earning money. it doesn't take into account government transfer payments. it is not as bad as it seems when you put it together but it

shows that nobody is gaining on inflation at this point. a couple of things that people will be shocked to learn. food, fuel, housing are the main culprits for the rise. that is why they pay me the big bucks. food at home, 1.4% higher in march. gasoline up 18.3%. no one is surprised with that. however, gasoline prices have come down in recent weeks. look for a little bit less inflation in april. in terms of housing, we see rent prices were up by .4%. owners of equivalent rent, also .4%. that is continuing a streak of .4% rises for proxy of home prices. airline fares, you know that they have been up. 10.7%.

everyone is flying. a big story i saw about how the lines wrap around the airport for security these days. tom: paul donovan with that important comment on demand destruction. we will dive into this data with much better insight in the 9:00 and 10:00 hours. we will summarize with seth carpenter, chief global economist. we must speak about what ellen zentner will say about this inflation report. any indication of demand destruction? seth: that is a tricky phrase, prices have gone up so much, demand goes away, which brings prices down. there is a hit to the consumer in terms of oil prices. you were talking about where real wages are going. it is unquestionable that when

some of the categories -- energy, food, the lower end of the income distribution cannot substitute away from, that is a hit overall to consumption spending. what is more important, core underperformed and we saw the rally in rates. used car prices were down sharply. even owners equivalent rent was up a little bit. instead of a continuing upward trend to the key drivers of inflation, we are seeing a little bit of a softening. it is always hard to make a forecast, but we got to the peak of inflation, and we are likely to see things,, albeit gradually. lisa: the absolute number came in above expectations. the knee-jerk response is almost as if this is a downside surprise. what do you make of that? seth: it is the difference between core and headline david everyone knew that oil prices

have gone up, and that would show in this month's print, but commodity prices for agriculture had gone up, and that would show in this month's print. for the underlying trend of inflation that will be with us into next year, the fed may have to respond to, i think that is what the rates market is reacting to. lisa: how much can you project out from this report? it is not necessarily the peak but how quickly it comes down. on the margins, how much does your forecast change after today's number? seth: our forecast does not have to change that much. core was a little bit softer but what is important is the pattern. we are seeing softness in some of the goods, used car prices coming down. in that sense, it is a trend as opposed to a specific number does that pattern change

anything for the fed? seth: at the margin may takes off a little bit of the fire on the burner at this stage, but does not change things dramatically. inflation is too high for the fed's comfort level. even the historically dovish ones have said the same thing. in that regard, it doesn't change things much. in fact, one of the points i've been making to clients is that one month's cpi here or there will not be that important for the fed. how strong is the economy, how strong can they lean into the economy to get inflation under control? that will be the key. kailey: it comes down to this tolerance of higher prices for consumers, continuing to spend. what are your expectations around the demand picture and whether demand instruction will take form in the form of higher prices across the board? seth: our chief u.s. economist

ellen zentner and her team put out a forecast revision on friday we took down the consumption path for the second quarter largely because we saw this big spike in oil prices. a lot of that rises from the russian invasion of ukraine. not 100% but a lot has come out. nevertheless what we see in the data, when energy prices spike for supply reasons, we see a pullback in spending in the next few months. we expect to be on the soccer side for consumption. tom: talk about the social impact. the area above or below whatever the horizontal line is. one measurement of the tone of the x-axis. negative income is no small compared to what we are going through.

the agony for certain deciles of america has to be tangible. seth: no question. the past couple of years has been extra ordinarily difficult for folks, more difficult for folks at the lower end of the income distribution. the only silver lining is that we see a differential in wage growth, and it has been highest at the lowest quintile. in that sense there is a bit of comfort, but i suspect for anyone who has lost their job in the pandemic, that is not any comfort. tom: i am looking at a middle-class flat on its back on the inflation basis. seth: unquestionably. in that regard, the retreat of oil prices, some of it on the news of the coordinated release of the strategic petroleum reserve, that has to help, but nowhere near making people feel good. the economy is growing rapidly,

jobs are being created extraordinarily rapidly, but sentiment is that people are still feeling fairly hard done by. that is challenging when the macro feeling does not match the micro feeling. tom: thank you so much, seth carpenter. lisa, seth talked about what you mentioned earlier, confidence is stark. lisa: this report, again, the core reading is really the key take away. core inflation came in later than expected, which is why you are seeing futures surging, why you see yields coming in. it shows how nuanced this report is as people extrapolate out later into the year. we will be talking about this later on about how you find safety in short-term debt and a time of such volatility. tom: yields coming in with a

vengeance. to your yield shows 2.45%. the 2/10 spread is still steeper, 28 basis points. the dynamics between the nominal yield, the one that we quote all the time, and inflation guess timates out there, yes, the real yield is more negative of this report, but maybe not as much as you would expect. -.19. nasdaq leads the way 1.4%. stay with us. this is bloomberg surveillance. good morning. >> keeping you up-to-date with news. the wto has cut its global outlook saying russia's war with ukraine will slow the world to

rebound from the pandemic. the wto lowered its projection in growth for merchandise trade this year from 4% to 3%, also cited a number of downside risks including food security and possible resurgence of covid. india plans to boost exports to russia by $2 billion in the wake of international sanctions. the countries are working out a payment system. they would ship pharmaceuticals, plastics, and chemicals. president biden wants new federal rules to address ghost guns, potentially untraceable weapons from kits. the administration has been criticized for a rise in gun violence during the coronavirus pandemic. a citigroup analyst says apple could be announcing a buyback. they may boost dividend by up to 10%. second-quarter results are due after the closing bell on april 28. the company has more than $200

billion in cash on its balance sheet. demand for air travel in the u.s. is rising but not as fast as the cost of a ticket. the number of actual bookings last month rose 12%. ticket prices jumped 20%. global news 24 hours a day, on-air, and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. 120 countries. this is bloomberg.

>> all eyes will be on china because we are seeing numbers that will come out in march and

april that will come down materially there as they increase the lockdown. the lockdown in china is affecting more than one third of gdp right now. tom: some real good comments there from jp morgan on their view forward on the pacific rim and lockdown. the yield market is moving. we must touch on this before we get to greg valieva. nine basis points move from the 2.80 level on the 10 year yield down to 2.71. kailey: this market seems focused on one number only, and that is a .3% increase on the core month on month. forget about the year on year number. that's lowest price growth since september is what the market is focused on. tom: we see mr. pruden in the far of russia talking about space, nazism of ukraine.

mr. macron campaigning in france, near switzerland. met him le pen toward the english channel campaigning as well. the president of the united states will wander to i to save us $.10 a gallon with ethanol. greg valliere is with us. you and i are the only ones old enough to remember jimmy carter. what is he doing in 1978 on his term to being a one term presidency? same as joe biden? greg: largely, yes. biden needs to do something fast to rehabilitate his image in the polls. i think it is time for a staff shape up that shakeup. ron klain seems like a nice guy but somebody has to be the sacrificial lamb. secondly, biden needs to pick up

the phone and call joe manchin and say i will do what you want. you have to give me drug price controls, prekindergarten stuff, you have to tax big companies. there are things that manchin would agree to, and biden needs to get something done to show the public that he can do something, for example, about drug prices. tom: if we get a republican house or senate, how does that change 1600 pennsylvania avenue? greg: in norma sleep. the house of representatives is a likely bet to flip, then i think the biden agenda is pretty much finished. he can still do regulatory stuff, affect the financial industry, the sec, things like that, he would still be involved in geopolitics, but in terms of an agenda on fiscal policy, it would be over. kailey: is it over for his climate agenda as he looks to ethanol, taps the spr, pivoting

back to fossil fuels and look face of higher energy costs? greg: i think the environmental movement is stunned. they are on the defensive. i think biden has had to make sacrifices here. i think his need for fossil fuels goes against the orthodoxy of the environmental movement. kailey: let's talk about these contradictions. on the one hand, you have a u.s. populace that supports taking further action to support ukraine against russia. at the same time, facing price pressures at home which we saw in the 8.5% cpi number. how does the administration balance those two forces considering a lot of the action they could take is in and of itself inflationary? greg: almost impossible situation for the biden administration. i would also list on that list of things, urban crime, which will be an issue, may be among the biggest this fall. when it comes to ukraine, i

think biden is in a tough spot. he has to send more arms. i do worry, if there are weapons of mass destruction, how nato would react. tom: what does he do on crime? what does joe manchin do to help the president to fund the police, i guess is the queen way of saying it? greg: he has to look at bail. it has become too liberalized. he has to urge governors like gavin newsom that they have to become tougher -- tom: you sound like a republican. is that when joe biden needs to do to salvage this? greg: i am just saying what biden needs to do if he wants to win in november. the chances are very unlikely that he can pull it off. a drop in inflation, crime, settling ukraine would make a difference. let me make this point. history would show that if these issues are not resolved or looking better by summer, it is too late.

you cannot say in september i'm going to make changes. the public has already solidified its opinion by the middle of the summer. kailey: only a few months to go until then. that is on the domestic front, what about our broad? for u.s. allies, has the u.s. fortified its position as a world leader during this ukraine crisis? greg: i think we will have to send a lot more arms. nato will have to send a lot more. after reading the interview in the new york times, the piece from the austrian chancellor who talked to pruden yesterday, you read that and you think putin will not be dissuaded. this will get worse before it gets better. tom: thank you for the brief. we will be watching the white house with annmarie hordern. there are headlines out of the united kingdom. our english expert, jonathan

ferro, is not here to help us with them. let's struggle through this as we can. the chancellor of the exchequer is to be fined over lockdown parties. i'm not sure ifferro attended. the u.k. prime minister will receive "a fixed notice penalty" this from the bbc. kailey: this is an issue that some of us had forgotten given the more in ukraine, which in some ways was a political blessing to boris johnson, focusing on foreign rather than domestic issues. this is an investigation surrounding allegedly a dozen gatherings that happened in the prime minister's offices with his staff during a covid lockdown in the u.k. it has been an ongoing investigation. a total of 50 fines have been handed related to those parties and government buildings. but now the chancellor, rishi sunak, who has had a rough

couple of weeks, probing of his wife, he and boris johnson receiving fines. tom: we are not making jokes about it, but here are the headlines. i would respectfully suggest that jonathan ferro takes this seriously. this is a huge deal in england. people, including the extended ferro clan, or at home while they were partying. that is the tone i get from this. kailey: this is an optics issue for prime minister johnson. carrying on when people were suffering during the heart of the pandemic. families affected across-the-board. maybe that is starting to come home to roost with these fines, you are starting to see the consequence. tom: moving forward through the morning after this inflation report. significant market moves. the 10-year yield, 2.69%.

stunning move. higher prices and lower yield this morning. stock market likes it. futures up 51. the vix comes in at 22.54. stay with us on radio and television. this is bloomberg. ♪

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>> where watching future search in the opening, the nasdaq

flying near 2% after court inflation command lighter than explained -- than expected. the countdown to the open starts right now. announcer: everything you need to get set for the start of u.s. trading. this is bloomberg, the open, with jonathan ferro. lisa: would begin with the big issue come up markets focusing on one thing. >> inflation, inflation. >> inflation is a problem. it is the be-all and end-all. >> we are in a new inflation regime. >> to me, the messaging is clear. >> they need to normalize as quickly as possible. >> the fed has to get inflation