>> i do think markets have priced in a lot here. >> equity markets have had a hard run of it. >> there is a limit to how much equities will fall from here. >> the fed looks at markets closely. we do not want to destabilize them. >> jonathan: live from new york for our audience worldwide, good morning. this is "bloomberg surveillance" on bloomberg tv and radio. futures down 0.7% on the s&p. yesterday we saw a massive move higher off the back of the federal reserve decision. we need to start with the bank of england as they move interest rates to one full percentage point. from the city of london, your

guy johnson. tom: we have raised, as expected, up to 1%. that is the line in the sand effectively for the start of qt as well, quantitative tightening. the way the market is reacting right now, this is being seen as a marginally hawkish hike. we were expecting at least one member of the mpc not to vote for a hike today. that has not happened. you've had three going for a 50 basis point hike and six going for a 25 basis point hike. so more on the 50 basis point hike side than anticipated, less on the let's keep things as they are camp. we are seeing a tick higher in sterling as a result of that, and a tick lower. we were moving up and now we are moving down. we have seen a significant move higher in terms of yields on the u.k. two-year, which is what you're looking out on the screen right now.

now we are going to look at where we go from here. the market is pricing in hikes at every single ratesetting meeting between now and the end of the year. we are looking at a terminal rate midway through next year of around 2.65%. is the bank owned to deliver on that i think is the next question we have to ask ourselves. then we have to ask a question around what is happening with qt. when is it going to start? how's it going to be sequenced? what is going to look like in terms of the pace of sales on a monthly basis? all of that is still to be decided. i'm looking for details on exactly what we are going to see. but at the margin, we are seeing a hawkish hike because we got that vote count being slightly different to what the market was expecting. jonathan: i think we have to talk about the nature of the dissent -- the 50 basis point dissent. is that because they have a bigger idea of where rates for should in the year or because we should be frontloading more?

the three individuals that ultimately asked for a 50 basis point hike are not that far away from the two individuals that don't think we need anymore interest rate hikes. tom: -- guy: the frontloading question i think is interesting. this is an economy that is clearly going to slow down. that is the concern here. the question is, do we find ourselves in a position in the u.k. where, if the bank does not act swiftly, that inflation expectations are going to become un-anchored? the bank has this idea that ultimately higher inflation is going to be the cure for higher inflation and it will bring back down below target relatively quickly. is there a concern within this? we need to break down the numbers the bank of england are giving in terms of expected inflation to be able to understand the answer to that question. i don't know the answer to that question. i think we will learn a lot later in the press conference

and the subsequent interviews. tom: what i see on my bloomberg screen i have never seen. what guy johnson and jon ferro from england, to the two of you, i have never seen. we have 25 and 50 bps move, including catherine mann, and i'm looking at growth forecasts that are resoundingly difficult. bank of england next year goes from a 1.25 down to 0.25% growth. i have never seen a rate hike like this into those forecasts ever. jonathan: catherine mann can speak for herself, but i think overwhelmingly there is consensus that this bank of england is worried about decelerating growth in the british economy. that is why i ask how much distance is there between the so-called hawks and the so-called doves on the mpc at the moment. because i'm not convinced that saunders for a 50 basis point

call today, the ultimately they want to take it much further beyond that because of what is happening with growth. guy: but the danger is that if inflation becomes un-anchored, that's going to be an even bigger threat to growth. the bank of england finds itself in probably the most difficult position amongst the major central banks at the moment. it does have this deceleration. panetta at the ecb was talking about the fact that the eurozone is in de facto stagnation. you are definitely seeing that here in the u.k. at the moment. how do you balance those issues out? if you take your foot off the brake when it comes to rates, do you end up exacerbating the growth slowdowns as well? is that growth slowdowns going to be even greater? i think that is going to be the battle they are challenged with here. tom: guy johnson from queen victoria street, thank you.

to me it is a pressure cooker on the stove that your mother had and you thought it was going to blow up and take out half the house. the pressure release valve here is sterling. does this kind of set of headlines get you to a 1.20 or 1.19 weak pound? jonathan: threatening to break 1.25. what we are seeing play outcome of this division, some people saying that we are done here, something we should have done more today. it is just the politics, the economics of stagflation ultimately, that we got weaker growth matched with higher inflation and a central bank that is not really know what to do about it, and a bias for some on the committee to say if we are going to do a lot, let's frontloaded and wait. lisa: i think that is the issue, it is unclear what they can do, and there are no good options. i think it is interesting that sterling is weakening. this idea that even though this perhaps was a more hawkish 25 basis point hike, the response

is sort of the opposite of what you, and i wonder again whether rate hikes can really fortify the currency, whether that is something that you really want. do you want a strong currency or a weak currency in the era of inflation? jonathan: off the back of the rate outlook which gets revised higher this morning. i want to turn to sebastien page, chief investment strategist and head of multi-asset at t. rowe price. this is a tough moment for central banks, and some might say they got themselves into this mess to some extent. for the u.k. they face upside risk to inflation digitally and downside risk to growth. your view on what policy is going to look like in that world, and ultimately what it means for risk assets. sebastien: the discussion on the u.k. is interesting. i like to look at a "bloomberg surveillance" measure, the five-year five-year forward. the five-year five-year forward inflation and the u.k. is around 4.7 percent.

that is high. compare that to the u.s., where the five-year five-year forward is at 3.2%. the signal i am getting from this is that growth is even more fragile in the u.k., and the view is that the boe won't be able to be as aggressive as the fed. that also feeds into the weakness in the pound that you were just talking about. lisa: will the weakness in the pound actually help the economy or hurt the economy? sebastien: it can help in terms of exports for sure, but it also feeds into inflation, which forces the hand of the boe, and then it gets complicated. if you look at the big picture, markets got drunk on liquidity post-covid. i know you were talking about tom doing out earlier this week, and you mentioned a hangover. tom: oh, thank you. sebastien: i don't know if that is the case, but right now we are going through a hangover in world capital markets, and it

has been remarkable in the sense of both stocks and bonds being down at the same time. tom: sterling through 1.25. i will call an important level, 1.2450 on weak pound. sebastien, you own the high ground on this. what does it mean for risk assets? what does it mean for stocks? does the market valuation, if we get a set of currency depreciations off of these absolutely historic central bank moments, can the stock market adapt on valuation, on multiples to sustain a level market or even a modest single-digit bull market? sebastien: really good question. we entered the year positioned for this in our tactical portfolios. under to stocks and within bonds , underweight duration. what is interesting is we tend to be contrarians. look at valuation opportunities.

we look 12 months out. normally we would be leaning in both stocks and bonds, and what is interesting is not we are doing. it is what we are not doing. we are actually buying back treasuries, closing our underweight's. we are not closing our underweight's in stocks. i said back in november, inflation is the number one risk for markets. i continue to say this. inflation is the number one risk for markets, and the key question that is debated on your show all the time is will the inflation shock lead to a recession, a growth shock. jonathan: great to catch up with you, as always. sebastien page of t. rowe price. we've got a growth shock in the u.k., and these forecasts you indicate are dreadful for growth into 2023. think about where we were at the start of 2022. some people in the u.k. were looking for a six handle on gdp. that has been revised aggressively lower. we've effectively got the bank of england saying that growth is

going to stagnate. tom: it is not the same economy. there are some huge difference is here, including export-import dynamics. but take this moment. our american viewers and listeners are going, so what? it's england. this could be an american debate 6, 9 months from now. if you get a mix of u.s. gdp forecasts with a fed that is rising into 4%, 6% inflation, maybe that is where you get to the equivalent of this morning and may. jonathan: by the same magnitude, perhaps not. tom: agreed. jonathan: we have not seen peak inflation by any stretch, and you got a bank of england effectively saying growth is going to get put a bad, and a central bank that is totally divided about what to do about it. i would love not to your necessarily from governor bailey, just the three that dissented and looked for a three

basis point move, whether that is just about frontloading and then they are done after that, or whether they are going to be pushing for hikes through the rest of the year because of where inflation is. we have been worried we would have a federal reserve at the end of this year that would have to choose between growth, supporting it, and inflation, containing it. that is the decision the bank of england has to make right now. lisa: this has to do also with supply chain disruptions and eggs and us shocks and whether they take the view -- and exogenous shocks and whether they take the view that if it is to curtail demand. if they continue to curtail demand, they will take that road. home energy prices rose by another 40% in october. this is one of the headlines coming from this. just to give you a sense of what the pressures are. so what will hiking rates actually do to really curtail energy shocks? this is all about dampening demand at a time when post-tax disposable income is declining. the fed is not trying to go that

same route. jonathan: these numbers from the boe, i don't think i've never seen anything like this, to see these kind of forecasts come it is a double did inflation, we could hit 10%, the economy could shrink. tom: this is absolutely original, where we are right now. this is in none of the textbooks. i'm sure some historian is going to tell me in 1872 it was like this. i don't know. i have never seen what is on the bloomberg screen right now. can we say sterling is yet to get a bid, 1.2477? jonathan: that does not call. what a call -- that does not look good. what a call from kit juckes of socgen. andrew sheetz of morgan stanley coming up in the next hour. good morning. this is bloomberg. ♪

>> if that path happens to evolve to levels higher than neutral, we will not hesitate to go to those levels. if higher rates are required, we won't hesitate to deliver them. jonathan: that was chairman powell. that was so yesterday. let's get to the bank of england. what a move we have seen. sterling, -1.4%. a 25 basis point rate hike, not the news. there were three individuals looking for a 50 basis point rate hike. they did not get it.

but look at these forecasts, look what they would have been hiking into if they had went 50. they believe inflation could peak at 1020% in the fourth quarter -- at 10.2% in the fourth quarter. tk, that is a mess of a decision at the bank of england. tom: you wonder where the economic theory is, whether it is out of cambridge, oxford, wherever. on bloomberg radio, the way you look at sterling, and every pair is different, is to two or two four digits. so 1.2459. when we went to break it was 1.247 at -- 1.247x. those are called pips, and we are down 20 pips. that is a huge, persistent weakness. jonathan: kit juckes of socgen

said this decision has "little scope for a hawkish shock. what it does have scope for is economic this appointment. cable is more likely more in danger of breaking 1.20 then euro-dollar is a breaking parity." we are not far away from it right now. tom: another beating has become a historic meeting at the bank of england. dumb question, does he do a press conference? jonathan: i believe we do hear from governor bailey. lisa knows. lisa: i just sit here with a spreadsheet. tom: jack fitzpatrick joins us from washington. i've never seen the cover of "the washington post" such a mess. the supreme court uproar, the election uproar, you've got johnny depp and what's her name, i'm sorry, heard, i can't remember. let's focus. what is the biden administration focused on? jack: the biden administration

is i think trying to turn its focus from a few different issues towards the campaign trail. the immediate stuff that they are clearly focused on is ukraine. if they are going to get bipartisan agreement to help ukraine do this bill as soon as next week, the $33 billion requested for ukraine, how much get slashed onto that? that's to what you are referring to with the so many different stories it is difficult to focus on. the combination of ukraine needs , they had a covid funding bill stall, a series of other things, the title 42 immigration decision that republicans have pushed back on and some democrats. on capitol hill, all of those have melded together. that is the one thing that might slow down progress on ukraine. but ukraine is the easiest thing

for them to focus on because that is where a lot of agreement is. tom: amber heard, lisa. i loved what she did in "pineapple express." jonathan: i just heard from a bloomberg subscriber, and i got to quote them. the irony of telling jack to focus. [laughter] tom: "pineapple express" was oscar worthy, i'm sorry. continue. lisa: i'm focused on how the white house is going to spin this labor market report right now. this is what i'm focused on, and i think it's really driving the narrative in a nation that is torn between momentum and inflation. how will the white house spin a labor market report that is actually better than expected? is that not optimal for them right now? jack: they have tried at least in passing recently to spin the inflation story and say we were very aggressive in the fiscal

response the recession and the pandemic and got an employment -- got unemployment very low. that is not some thing they have dedicated themselves to as their messaging focus. the president has acknowledged the amount of bad news and instead of trying to turn everything toward any positive job reports or positive economic news, he has talked about inflation, he's talked about gas prices, so you will probably, if there is good news, you will probably hear them play up the low unemployment in the country, but they have not entirely dedicated themselves to trying to turn the page on inflation. they are pretty focused on addressing the sort of negative flipside. jonathan: thank you, as always, down in washington. just running through some of the political news and economic news of the day. got to keep returning to the bank of england. they are everything the fed

fears it will be months down the road. this is everything that people worry that the fed could be. tom: i said that. you weren't listening. jonathan: i was. i replied to it. tom: oh, thank you. jonathan: 10 point 2%, fourth quarter of 2022 on cpi. 2023, contracting by a little bit. but you got a central bank saying the economy is going to contract. do you know how rare that is a year out? tom: i've never seen it. jonathan: and a committee really divided on how much we needed today and whether we should pause now. tom: so what happens at this press conference in six minutes? jonathan: the challenge that any central bank leader has in a news conference like this is to try and reflect a consensus when there isn't one. he's got to try and do that today. tom: where is the consensus? jonathan: there isn't one. tom: is this voting what the fed is? jonathan: i'm not sure how much distance there is between the two.

i wonder how many of those three, if they've got their 50 basis points, would have also said we need to pause rate hikes. it is going to be interesting to see if we get some clarity from governor bailey on that. we also have to have a deeper understanding of the reaction function, if growth really disappoints, yet we are going to see cpi prints like that. are they done? lisa: is this a concession that inflation is the biggest concern, and that the only way to curtail it is to send the economy into recession, that it will push it into something that lowers demand? tom: no banker ever wants to send their economy into recession. lisa: nobody wants to come up but if your priority is inflation versus a long-term deeper recession, that is something very much in the zeitgeist. jonathan: my question, how does the chancellor respond? tom: my email is heating up, and it is over the $9 million number

on the jersey. i'm looking at madonna and a $9 million jersey, and i'm sorry, it works. jonathan: i'm not responding to that. i'm letting that go. for our audience on radio, you don't want to know. this is bloomberg. ♪

jonathan: live from new york city, good morning. we retraced lower on the s&p, down 0.7%. on the nasdaq 100, down 0.9%. hard to take these moves too seriously off the back of what happened yesterday, a massive breakout on the s&p i almost 3%. the biggest one-day pop going back to spring 2020. in fact come around about two years ago. at the front end of the yield curve in the treasury market, powell burying the prospect of a 75 basis point rate hike, and yields came aggressively lower. this morning, up by a couple of basis points to 2.6647%. for me, the big story is on fred newell street in london -- on

thread needle street in london at the bank of england. this is what you do not want to be when you grow older. you do not want to be the bank of england if you are the federal reserve. this is everything the fed and investors fear. calling for double-digit inflation year end, a peak north of 10%, downside risk to growth, calling for a contraction in gdp in 2023, a divided committee, and this story right here, sterling on a day when we get an interest rate hike negative to 1.2442, -1.5%. a news conference with governor bailey that is going to be absolutely fascinating. tom: it has gone from interesting to historic. i really want to make clear, talk to me a little bit about this with a 1.2441. it is not brexit kind of moves and the sweat around that moment in june a number of years ago, but what does a 1.23 sterling, if we get there, signal? jonathan: it signals some real

economic pain. that is what kit juckes of socgen was talking about this morning. this is about a central bank hiking into economic weakness, and this, how it is playing out, is a movie that the ecb will be watching with their hands over their eyes. this is something they don't want to see either. tom: explain this to us as governor bailey, a wonderful gentleman, sits down at the press conference. that is not governor bailey, on our radio, but we are doing the introductions. let's do the compare and compare trust -- and contrast. why is this different? jonathan: because they've had to hike interest rates for all the wrong reasons at a time when growth is going to be a lot more painful. governor bailey, i think this is probably one of the hardest news conferences he's had to do for a long time. in fact, since he's held this position. i think this is as tough as it gets for this governor. tom: it is going to be interesting to see. the visible dissent very much

different than the federal reserve system. the stock market futures, -31. jonathan: just a bit softer after the big move yesterday. we will bring you the headlines from the news conference. let's get you some movers and catch up this morning with kailey leinz. kailey: there are a lot of movers out there this morning, including some positive ones on the back of earnings. albemarle is one of the big outperformer's, up about 14%. it is the number one miner of lithium, which is needed for electric vehicles. demand is strong, price is up, and that is helping the company with a beat on its forecast. it was also a beat for strong demand for solar products, allowing the products to pass through higher costs, up about 12.7 percent. still an upside mover would be twitter. elon musk securing more in financing from the likes of finance, brookfield, and sequoia. maybe removes a little bit of doubt about his ability to

actually close that, but even with a 1.76 percent gain this morning, we are more than four dollars below the deal price of $54.20 a share. there are some downside movers on the back of earnings, and among those are at and ebay. both giving weak forecasts. that pandemic boom and shopping starting to unwind. cognizant technology, this is an i.t. services company, cut its guidance for top and bottom line. as for the reason why, the company saying on the call that it is because of compensation pressure driven by the continued labor supply and demand imbalance. really interesting commentary out of corporate america ahead of tomorrow's jobs report. tom: thank you so much. on bloomberg radio and bloomberg television, we've got bank of england starting the first headline from governor bailey, saying the bank of england is navigating a narrow path on policy. we are going to navigate quickly

here to distressed debt in america. winnie cisar joins us, global head of credit strategy at creditsights. i look at the bloomberg total return index, full faith and credit, the corporate credit quality market, and where you are, the more distressed market, i see distressed -8%. is that a bear market in your world? winifred: it is not a mayor burkett -- not a bear market in our world. . it is a massive outperformance versus higher-rated credit. so the distressed market is having a comparably decent year so far, although negative total returns. jonathan: i think we've got some disruption, some technical difficulties here with winnie cisar of creditsights. i'm not sure we can reestablish that connection anytime soon. tom: we will get back to winnie cisar, who is really quite good, as is lisa abramowicz come away

from full faith and credit. quickly here, there seems to be a three-part bond market. do i have that right? lisa: yeah, but the scenario that the bank of england is something that is very scary to the ecb, but also here in the u.s., people are watching with a wary eye. what does stagflation mean in terms of all of the corporate debt that has been raised? what if the fed keeps hiking rates and you get we is in the economy? i think that is what is keeping a lot of people up at night and what you are seeing in some of the spreads starting to widen out, basically a gauge of how much credit risk is start to increase. i've got to say, this bank of england decision is absolutely amazing. jonathan: it is nuts. i think we've got to be careful with the line which because they are not forecasting a recession per se. the definition, two consecutive quarters of negative growth. they are essentially forecasting stagnation and a small contraction next year, but i think the bottom line here is this is every thing we have been talking about the year so far,

which is upside risk to inflation, downside risk to growth, and a central bank caught in a classic dilemma. what do you do about it? at first look, they don't really know. it is something governor bailey is a knowledge and right now, that the peak in u.k. inflation is going to be later than in other economies. we believe here in the united states that we have already seen the peak year-over-year because of the base effect. you've got a governor here that does not think we have seen the worst of it. this is really problematic as they look to set policy today. tom: when the facts change, governor bailey is going to change. i believe a guy said that a few years ago. i looked back at trade-weighted sterling week or two ago, and to get back to the debacle of the early 1990's, it needs to depreciate about 8%. i don't know where that is, but it is way under 1.20. it is not that we are gloomy, but the vector is in place for week sterling as of this

morning. jonathan: as of right now we are seeing one of the biggest one-day move slower in cable since september 2020. governor bailey making another headline here, talking about the growth, the u.k. growth expected to slow sharply. there's not some smooth glide path here. they are looking for a sharp slowdown in the quarters ahead. lisa: how do they then justify raising rates? is it just that they think inflation is that much harder for the economy to handle and that much more difficult, that they will do anything to stave that off in the near term? or are they saying that if they allow the short-term decline or stagnation, does that lead to a softer downturn and a quicker recovery? these are some of the things i want to hear from him as he parses through this very difficult decision. jonathan: we've also got to the about the other side of london. get over to westminster and sick about the chancellor right now -- and think about the chancellor right now. how does the chancellor think about this moment as his bank of england is staring down the barrel of economic stagnation,

staring down the barrel of inflation north of 10%? governor bailey saying he recognize the hardship many are facing in the u.k.. he is unelected, and to some degree unaccountable. for this government, they face a really tough decision. part of the reason people like citi are negative on sterling right now is not just because of this story at the moment before our eyes. it is because the fiscal offset just is not there at the moment. are we going to see one, and can they deliver one after what we have seen over the past couple of years? that is where the doubt is. tom: one of the things i would want to emphasize, people in fancy suits and bowties get on the plane at jfk, we go over to london and think that is england, like we go to hong kong and think that is china. exports as a percentage of gdp in the united states, 11%, 12%, 13%, whatever the number. to the island nation it is what, 30% of what you are doing? it is a huge difference, and those dynamics, particularly with the continent, we have not

even mentioned euro sterling dynamics, i can't say enough how it is a different challenge for governor bailey that it is for chairman powell. jonathan: they all have their own unique problems, but they share a similar dynamic at the moment, and we keep going over this. it is downside growth risks, upside inflation risks. talked about what this might mean for the federal reserve. will they/multi-experience this for the years to come? for the ecb, i think that is what many are grappling with right now going into june. this is the story they face right now, an economy that, in the words of an official from the ecb this morning, this economy is facing stagnation and and inflation print heading in the wrong direction still. that is the problem that the ecb and the boe have got that maybe the fed does not have. the fed might have the comfort of getting some inflation prints year-over-year that start to decline in the months ahead. governor bailey is telling you today that he does not have that luxury. tom: a bit of history here. i rumor the moment where

catherine mann became acclaimed in economics. she's one of the rare people who has done not one, but to come about three giant things in academic economics. a monograph, unafraid to say how many years ago, she was like 15 when she wrote it, is a trade deficit sustainable. that speaks to the trade balance reported by the u.s. yesterday and the challenges that dr. mann and governor bailey have. jonathan: sterling just about clinging onto 1.24, the pound against the u.s. dollar, and down by 1.7% on that currency pair. guy johnson is going to touch base with us very shortly to run us through this news conference, and we will continue to talk about the possible potential parallels further down the road for what might or might not happen here in america. futures down on the s&p by 0.6% or 0.7%. this is bloomberg. ritika: keeping you up to date with news from around the world,

with the first word, i'm ritika gupta. elon musk has now secured about $7.1 billion in new financing commitments for his proposed $44 billion takeover of twitter. amongst of the investors named our binance, brookfield, and larry ellison trust. musk is now in talks with twitter founder jack dorsey on contributing some of his shares towards the deal. it is the most aggressive action indicates to fight inflation. chairman powell and others raised rates by half a percentage point and signaled they would keep raising rates at that pace over the next couple of meetings. powell implied the moves could hurt economic growth. opec and its allies are expected to ratify another small increase in oil production when they meet today. that meeting comes a day after the eu announced its plan for a phased man on russian crude -- a phased man on russian -- phased ban on russian crude. berkshire hathaway has bought up

almost $6 million more in shares in occidental. occidental was the best performing stock in the s&p 500 during the first quarter. the price has regained the most in more than three weeks at a time when there's growing concern about a food crisis. a heat wave has hurt indian crops this spring. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this is bloomberg. ♪

>> going back to the 1930's, we have never been able to reduce inflation by more than 2.5%

without inducing a recession. so even if we don't get close to the 2% target, it is very likely that we will have some kind of an economic slowdown well before we get to the desired inflation target. jonathan: he wasn't talking about the bank of england. he might as well be. good morning. after a big move higher yesterday of almost 3% on the s&p 500, the nasdaq 100 and by about 0.8%. yields higher by a couple of basis points to get the main event looks a little something like this. sterling very briefly raking -- briefly breaking 1.24 and having a look at 1.23. all the wrong things happening in the u.k. today. tom: it is amazing, you wonder what the value of the pound was in the 1930's.

now we are down where we are a dollar in change. 1.2399 on sterling. i digress for a moment and come back to the fed and what we observed yesterday off of the taylor rule and the great separation of the theory and where we are, kriti gupta. kriti: a historic day for the fed yesterday. we had the 50 basis point hike, the first in 22 years. have to talk about how we got here. the spread between the fed funds rate and cpi at the largest ever. basically, what you see is going back even to the 1970's, a steep drop starting in 2020 and it comes to this spread. it begs the question, is the federal reserve behind the curve? we hear that all the time and the commentary. some thing that stuck out is when chairman powell said monetary policy is working through expectations to a large extent. we can actually see that happening as they address this issue of the spread being so historically wide.

how did they get back to the normal? does it just applied to the federal reserve or central bank around the world? tom: thanks so much. opec with some headlines. we will get these out to you. $111.30 on brent crude. there really is no other story right now. we go from the fed yesterday, the bank of england today. what will be the surprise in jobs tomorrow? jonathan: let's get to guy johnson in london. you and i have both shared that room with the bank been in governor many times over the last decade or so, with governor king, with governor carney, and all kinds. brexit, time after time there were tough news conferences. i can't think of a tougher news conference than this one for this governor in his tenure. tom: absolutely. this is clearly an incredibly divided mpc, probably the most divided i think i have ever seen . it is ironic in some ways that the bank is celebrating today 25

years of independence. this is a really difficult situation that the bank finds itself with here. my initial reaction was it was a hawkish hike. clearly wrong. look at what is happening in the market right now. i don't know where the bank is going to go next. the market is still pricing 118 basis points of hikes between now and year-end. that could be way off the mark. is the bank of england done? is the bank of england going to deliver further hikes? governor bailey talking about risk to inflation in the near term. he's talking about the inflation pain that the u.k. population is going to feel, but he's also talking about the idea that when inflation comes down, it is going to fall precipitously. the idea here seems to be that basically the bank of england is going to use inflation to crush demand in the economy and bring inflation back down to target and potentially below target. the risk around that is massive.

if you end up un-anchoring inflation, the risk of a wage price spiral is lurking in the wings. tom: jon mentioned this earlier. i think we have a real understanding of the relationship of mr. powell with secretary yellen, with the administration in america. what is the relationship of the bank of england to mr. sunak, chancellor of the exchequer? guy: i am going to dodge this, and the reason i am going to dodge this is because there are polls open here in the u.k. today. as a result of which, talk of fiscal policy is going to stray us into an area where i think regulators are going to have a little bit of an issue with us. so let's park that for just a moment. tom: fair enough. guy: but clearly that is an issue that other central banks are going to be thinking about.

you look at what is happening on the other cited the english channel, you thick about what the ecb is doing right now, they find themselves in a very similar position. fiscal is going to have to do the heavy lifting for the ecb, but maybe we are going to see that -- certainly we are watching carefully. tom: is this like if guy screws us up with the election today, does he go to london or is he forced to watch tottenham? jonathan: i will try to keep guy out of trouble. it is not clear to me how much distance there is between the dissenters today. there was a set of individuals, the three that wanted the 50 basis point hike, and the two that wanted it to be overcome at a signal to the market we are done now. do we get an understanding of that from governor bailey in this news conference, how much distance there is? tom: we don't know who those two are -- guy: we don't know who

those two are, and i think that is significant. it could be those that are voting for a 50 basis point hike, you frontloaded and then you are done. but i come back to this idea that the market is still pricing 118 basis points, still looking for significant hikes from here. if we are going to change that, that is going to be huge for the market in the bank of england. once again we are flip-flopping. we don't know what the reaction function of the bank of england is. we don't know what guidance actually really looks like. it is interesting they have not made a decision on when they are going to start qt. i don't know what that distance is. this is an unbelievably murky picture surrounding the mpc right now. this is an unbelievably divided mpc. we seek further clarity. who is it that has decided that we don't need any more from here? are they the same people, as you suggest? could be a possibly. we find ourselves with a lack of clarity that the market is

struggling to price, and as a result of which, i think the instinct is to look at the economic numbers the bank is projecting and say if those are the numbers, the bank is going to find it really hard to hike into a recession. jonathan: awesome to catch up with you, as always. looking forward to the show a little bit later. guy johnson picking things up later, taking you into the close , and on bloomberg radio a little bit later as well. the issue for a lot of people today is how transparent the bank of england is being here. the dynamic is tough. upside risk to inflation, downside risk to growth. ultimately at the same time, you've got a governor that can't really offer you a consensus because there isn't one. howdy reflect the consensus when there isn't a consensus answer? tom: is there a consensus in washington? jonathan: i think there's consensus further down the road. this division right now at the bank of england, the uncertain outlook led to a range of views on the mpc. that was governor bailey moments ago. that outlook right now for this

british economy and for the economy around the world is incredibly uncertain. cable, 1.2382%. you gotta move on pound sterling of 2% against the u.s. dollar futures down 0.5% on the s&p. from new york, this is bloomberg.

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>> there are areas of the global equity market that have priced and what we think is the worst case an area. >> at least some of this inflation is temporary and will start to ease. >> i think the job of the fed is to show they can bring inflation down. >> we are very sensitive to a little bit of loosening of this fed vice we have been caught in. >> this is not a fed that once to do shock and awe. this is a fed that wants to control the marketplace, let the medicine take hold. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. jobs day