beautiful windows. all of a sudden, discreetly, they are off together. when the presidents argue like cats and dogs, is it pretty much a venn diagram? jason: the strategy, universal tactics are being discussed. lisa: we are moments away from fed chair jay powell. really, the question has been how long you hold rates at a high level. the terminal rate. we expect to hear more from fed chair jay powell? jonathan: we will hear from the chairman of the federal reserve. let's listen in. >> today, my remarks are shorter, my focus narrower, and my message more direct. the open market committee's

overarching focus right now is to bring inflation back down to our 2% goal. price stability is the responsibility of the federal reserve. it serves as a bedrock in our economy. without price stability, the economy does not work for anyone. in particular, without price stability, we will not achieve a sustained period of strong labor market conditions that benefit all. the burdens of high inflation for heaviest on those who are least able to bear them. restoring price stability will take some time and requires using our tools forcefully to bring demand and supply into better balance. reducing inflation is likely to require a sustained period of below trend growth. moreover, there will very likely be some softening of liver market conditions. while higher interest rates, slower growth, and softer labor market conditions will bring down inflation, it will also

bring some pain. these are the unfortunate costs of reducing inflation. but a failure to restore price stability would mean for greater pain. the u.s. economy is clearly slowing from the historically high growth rates of 2021, which reflected the reopening of the economy following pandemic recession. while the latest economic data have mixed, in my view, our economy continues to show strong underlying momentum. the labor market is particularly strong, but it is clearly out of allen's, with demand for workers substantially exceeding the supply of available workers. inflation is running well above 2%, and high inflation has continued to spread to the economy. while the lower inflation readings from july are certainly welcome, a single month improvement for a short of what the committee will need to see

before we are confident inflation is moving down. so we are moving our policy stance purposefully to a level that will be sufficient but restrictive to return inflation to 2%. at our most recent meeting in july, the fomc race the target range of our federal funds rate to 2.5%. that is in the economic range of estimates of where the federal funds rate is expected to settle in the longer run. in current circumstances with inflation running far above 2% in the liver market extremely tight, estimates of neutral are not a place to pause or stop. july's increase in the target rate with the second increase in as many meetings. another unusually large increase could be appropriate in our next meeting. we are now about halfway through the intermediate period. the september meeting will depend on the tell of the of the

outlook. at some point if the stance of monetary policy tightens further, it likely will become important to slow the pace of increases. restoring priced ability will likely require maintaining a restrictive policy stance for some time. the historical record caution strongly against prematurely loosening policy. most recent individual perspectives from the june sep showed the medium federal funds rate running below 4% through the end of 2023. we'll update projections at the september meeting. our monetary policy deliberations and decisions build on what we learned about inflation dynamics from the high and volatile inflation of the 1970's and 1980's, and the low and stable inflation of the last quarter-century. in particular, we are drawing on three important highlights.

the first lesson is if central banks can and should take responsibility for delivering low and stable inflation. it may seem strangely that central bankers and others once needed convincing on these fronts. as former chairman ben bernanke has shown, both propositions were widely questioned during the great inflation period. today, we regard these questions as settled. our responsibility to deliver price stability is unconditional. it is true that the current high inflation is a global phenomenon and many countries face inflation higher than that seen in the united states. it is also true that the current high inflation in the united states is the product of strong demand and constrained supply, and the fed's tools were principally on aggregate demand. none of it diminishes the federal reserve responsibility to carry out our assigned task of achieving price stability.

to better align with supply, we are committed to doing that job. the public expectations about future inflation could pay -- play an important role in setting the path of inflation over time. many measures will overturn inflation expectations which appear well anchored. households, businesses, forecasters, and market-based measures as well. inflation has run well above our goal for some time. if the public expects that inflation will remain low and stable over time and then have some major sharks, it likely will. unfortunately, the same is true of expectations of high and volatile inflation. during the 1970's, as inflation climbed, the anticipation of high inflation became entrenched in the economic decision-making up businesses and households. the more inflation role -- rose,

the more people expected it to remain high, and they built that belief into wage and price decisions. as former chairman paul volcker ticket, a tight rate of inflation in 1979 -- inflation feeds on itself. part of the job of returning to a more stable, more productive economy must be to break inflationary expectations. one useful insight into how actual inflation may affect expectations about its future path is based on the concept of rational inattention. when inflation is persistently high, households and businesses must pay close attention. when inflation is low and stable, they are free to focus their attention elsewhere. former chairman alan greenspan put it this way. for all practical purposes, priced ability means expected changes in the average price level are small enough and gradual enough that they do not materially enter business and

household financial decisions. of course, inflation has everyone's attention right now, which highlights particular risk. the longer the current bout of high inflation continues, the greater the chance that expectations of higher inflation will become entrenched. that brings me to the third lesson which is that we must keep at it until the job is done. history shows that the employment cost of bringing down inflation is likely to increase as higher inflation becomes more entrenched. the successful volker disinflation of the 1980's followed multiple failed attempts to lower inflation over the previous 15 years. a lengthy period of very restrictive monetary policy was ultimately needed to stem high inflation, and to start the process of getting inflation down to low and stable levels until the spring of last year. our aim is to avoid that outcome.

these lessons are guiding us. we are taking forceful and rapid steps to moderate demand so it comes into better alignment, and to keep inflation expectations anchored. we will keep at it until we are comforted the job is done. thank you. jonathan: the chairman of the federal reserve in jackson hole, wyoming, with a pretty strong message for this market, this country, and maybe the world. we have more work to do. tom: i'm thinking the next press conference should be eight minutes, 38 seconds. jonathan: that would be good. i will get some of the price action for you on the back of those comments. yields higher particularly up the front-end. yields up by around seven basis points. on the tenure, up by about four basis points. the equity market is shaping up. about 40 minutes into the

session. we pull back, but not in a major way. the nasdaq is down. how do we come through the next couple of minutes? lisa: this is what we have been hearing all morning. for some time, restrictive policy. we need to not loosen quickly. we are not going to cut rates quickly. try to send a hawkish message. the people still think they're going to get back to a soft landing? is that the bounce back we are seeing? jonathan: how many times have we heard the fed chair talk about the strength of the underlying economy? it it it again there. tom: remember the data, the inflation? i thought it was interesting, not only the breadth of the speech, but he and the people advising him -- boy, was it structured.

a first lesson, a second lesson, a third lesson. jonathan: mike mckee, there was a moment at the very start of the speech where he acknowledged the pain currently and the pain to come in this economy. is he setting us up for something later this year? michael: he is speaking in fed euphemism because he cannot say recession. he is basically making the point that we are ok with that, and we expect that to happen. we are going to see some people lose their jobs. inflation is going to come down. what we are going to keep at it until it does. of that will cause pay in the economy. i think the idea was to take people by the throat and shake them. get the message this is where we are. tom: for regime change, a

different way of thinking -- the theoretical or process regime change for the fed. michael: between here and there, there will be higher interest rates, pain. will he bring inflation down? you have to get through the first situation first. the problem the fed has faced is that the market has been fighting them. we seem to have slap him upside the head and hopefully got their attention. lisa: we are down about a 10th of a percent now. is this the message they want to see? are people not buying that the fed is going to allow this kind of duration in the labor markets?

what is the market saying that is different than what jay powell is saying? michael: we have had so long a period of low rates. we had a number of instances in which the fed funds rate came into play, notably in 2018. we want to see proof, not just words. people are going to test the fed on this. there is nothing they can do, the committee, to prove. it is going to take time. the market is going to argue about this, but i do not think you will see them runaway in the direction they were going to say. jonathan: they are still hiking interest rates. i don't think many people by that. what happens when you get a week number? there is a real belief that is going to be the bad news and

good news story. lisa: we have heard all morning -- what happens when you get unemployment but inflation is still high? that is the conundrum. people have the belief that we are going back to what we always know. jay powell is not necessarily buying that. jonathan: we had the federal president telling us what they are going to do. michael: i think that is the reason powell went to length to explain why he would back off. powell says you cannot go backward. you have to keep at it. that is the message they want to deliver. we are going to bring inflation down. we are not going to change our minds. tom: you look at the academic data with benjamin friedman, one of my first interviews -- a

giant on growth. can they pull this off with recession growth? whatever america is feeling, can they pull off all of this, given tepid growth? michael: that remains to be seen. that is the part wall street is challenging. that is the part i will try to push back against today. you talk about under trend growth. you cannot come out and say recession is likely. he could sort of hint that this is going to happen and we are going to push through it. tom: great coverage today. is this the most controversial market economist in america today? jonathan: mike mckee are chairman powell? tom: let's bring in the bloomberg economics writer with an exceptionally aggressive

writer -- outlook for inflation. let me begin with the simple question. if we get on and on long interest rate-- an anna wong interest rate regime, what happens to american economic growth? anna: as powell says, what is the bedrock of american growth? it is price stability. it would be good for american growth if it was price stability. tom: but what would it mean for unemployment and jobs? when you work through three quarters and a 4% -- a 5% interest rate, how do you model that with labor in america? anna: it is about real interest rate. even if underlying inflation is running at 3%, a 5% nominal

interest rate is the real interest rate. if it is a real interest rate of 2% or 1.5%, if that is the case, i think that would be a normal way of things. as the fed is tightening, there will be impact on the labor market, and that is the cost the fed will pay for being slightly delayed in tightening monetary policy. lisa: this was by many accounts a quite hawkish speech. i'm looking at the s&p down a quarter of a percent. is this your perspective economically? anna: i think the market is slowly getting the message that the fed is looking at 2023. i think if i had to rate it as

hawkish on a scale of 10, i would say it is six. the first lesson that monetary policy alone cannot bring down inflation. everybody assumes that lesson likely won't be repeated. what i think the lesson that could be repeated, and he did not talk about this -- they did raise nominated -- nominal interest rates well into a recession. it generated one of the steepest recessions the u.s. has ever seen, back in 1974. you cannot say the fed will be ready to hike well into a recession and -- yeah. i think that is a statement. tom: i'm seeing a significant market reaction. we have a 10 year yield that i think is profoundly not a small matter.

jonathan: i do think the perceived emphasis of this fed chair is important. in a news conference at the left fed meeting, there was a feeling that if he kept talking about neutral, which implied for some people that maybe it was always -- i think what this has done is correct the news conference. michael: one line i wondered about -- was he repeating the idea that at some point monetary policy changes will slow down? i think that was one of the lines that was misinterpreted by wall street the first time he said it and i was surprised he said it again. if you are looking to make the case that the fed is going to be too easy, that is one of the things you can use as your proof. we are not going to do 75 forever, but the markets could take that differently, and i don't think that's the impression he wants. jonathan: dare i say that you think this is somewhat of a

cleanup act for the last news conference? anna: i definitely think so. he said with the july print that the labor market is still strong. he did hint that the neutral rate, the short-term neutral rate could be higher. i think they are previewing that in the fomc that could be revised higher. jonathan: anna along of bloomberg economics with her thoughts. tom: the interest rate debate, help me with the names. there is a group, with j.p. morgan clearly there. there are other groups saying 3.5. jonathan: we have a perfect

guest in just a moment. tom: an anna wong is way up here. dudley abbott put up there. but there is real dispersion. jonathan: let's take as a given that we have a strong underlying economy. what does that imply? do you want to get demand daryl, rates up? if you believe the underlying economy is strong, there is work to do. tom:

flat on their negative real wage growth? something a little concerning on that front which is that inflation is the last thing to move. you have to see the weakening before you see inflation really come down anymore material way. if that is the case, we have a long way to go and a lot of weakening to see in that data that we are not going to get in real time. jonathan: the difficult part for markets to swallow is when you get the weak economic data. we will start with the unemployment claim. if inflation is still sticking, are we still went to raise interest rates? that is when the penny will drop for a lot of people. lisa: especially when the new consensus is that they are going to raise rates not beyond four, maybe to 3.5, and sit there. that is the new consensus. that is popular. michael: powell is hoping to get that up there. jonathan: they are not going to listen until we see the economic data and they turn around and say we have been consistent about this. from bloomberg, anna, i would love your take on the fed speech from the last 20 minutes. >> i think the most important thing from the treasury market and the two-year yield a second ago -- the full court press seems to be for fed members.

whether it is three and three quarters, somewhere around there -- for something like the 2-year note, i think fair value has to creep up every will see yields above 2.5%, 3% for the two-year yield. that will likely continue to flatten the yield curve a bit further. you have seen some of that reaction over the last 20 minutes since the speed from jay powell dropped. jonathan: can you give me a number where this is going? now at -32 basis points. what is the number you have in mind? ira: i think about -60 will be the trough in how inverted the curve gets. the longer the fed keeps that rate, and the market expects the fed to keep the terminal rate at 4% for nine months or a year, the longer that in version can remain.

we saw a lot of volatility in the yield curve recently. positioning is so one-way right now. we're thinking the curve will flatten further. we have people taking risk on and off, particularly this very low liquidity august reading. lisa: do you think there is enough consensus? we have moved a lot. we have moved to a point where fed officials are telegraphing. do you think this is actually going to yield to lower volatility in the all-important rates market in the next two months? ira: the two-year yield volatility is not what is driving the inversion of the yield curve going from -20 basis points to -40 basis points. it is the longer end of the curve. the market is sometimes thinking

the fed is not going to go far enough, and the 10 year settles off. other times you see data that suggests we are headed into a recession, and then people by the 10 year and you see big rallies. at this point, i would agree with this point that the fed expectations are anchoring the two-year yield. it will be important through labor day. tom: we see the bloomberg financial conditions index become a little more accommodative. translate the signal that we get from financial conditions that won't get low like the chairman wants? ira: i think moving in financial conditions is really about the credit spreads and the equity market. we have seen a rebound in those markets and a lot of financial

conditions. you can use those as a baseline for how easy it is for people to borrow. that means the federal reserve will probably have to hike a little bit more. i tend to be in the 4.5% camp for where we will see the terminal rate. the fed has to do the job of tightening financial conditions because the market is not doing it for them. i think that means the fed is going to have to go a little beyond what it is currently doing. jonathan: ira jersey of bloomberg. might sound a little controversial just 16 minutes before federal powell heads to the september meeting. the ecb meeting is taking on more importance at the moment. lisa: i underplay that. the euro story is a euro story. there is a possibility of a 75 paces point rate hike being covered by the ecb. jonathan: you know who is us

shortly? there we go. coming up from jackson hole, this is bloomberg. ♪ pst. girl. you can do better. at least with your big-name wireless carrier.

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jonathan: live from jackson hole, wyoming this morning, good morning. this is bloomberg surveillance. alongside tom keene and lisa abramowicz, i'm jonathan ferro. moments ago we heard from jay powell. >> the federal market committee's overarching focus right now is to bring inflation back down to our 2% goal. price stability is the responsibility of the federal reserve, and serves as the bedrock of our economy. without price stability the economy does not work for everyone in particular without price stability we will not obtain a sustained period of

market conditions that benefit all. the burdens fall heaviest on those who are least able to bear them. jonathan: that was chair powell, jay powell, the federal reserve chairman. the market reaction has not been big. lisa: tom picked up on the front end of the yield curve, because that is the most interesting move out there. reaching close to the year highs. at what point do we get that going beyond? with some kind of credence given to what they are saying? jonathan: have you seen what is happening in europe? lisa: that is the story this money. jonathan: the two-year in germany, 17 basis points. we are through 1% again. tom: the character of the energy prices there are not parabolic. there is math we don't need to go into. they are becoming elements of what steve hankey at johns hopkins talks about, where they

shipped from a cute parabola to something different, more urgent. jonathan: do you know what we were on the first day of august? 26 basis points. tom: remember the headline this morning? jonathan: sure, they have an energy problem. mike: it is a dollar problem. the stronger the markets think the fed is going to be, the tougher it is for the europeans, because they are much less competitive in terms of selling. jonathan: mike, we came into this and if you had asked me in 2020 could we go a whole cycle what that the ecb hiking interest rates again i would have probably said yes. now we are talking about the prospect -- i'm not saying it's going to happen, but perhaps -- 75 points and 950. lisa: reuters reporting that officials want to discuss 75 basis points. that has triggered a one in too chance of pressing into the

market that the european central bank will raise rates to 75 basis september. we had been talking about the fed. nowhere was the ecb drink -- the ecb. tom: have to wait for the data to determine 50 or 75. mike: it is interesting, the futures markets are still priced right in between 50 and 75. with europe, the data we know are bad. they are ahead of us. jonathan: mike, you alluded to it. does the ecb have a fed problem? mike: the ecb does, the bank of england does. the strength of the dollar is a real problem for all of these countries, and it is only getting stronger, because the fed is perceived as being more hawkish. tom: a single line within three or four paragraphs, note it is

all about energy. the geometry of the energy charts is not -- jonathan: it is converted. is it inverted? tom: the cliches or anomaly, or pick what have you, it is vertical. jonathan: 15 basis points on the front end in germany. this is 30 minutes after powell at the ecb would take over the headline. lisa: you are seeing the response, which is interesting. jonathan: let's get you up to speed on the market action with kailey leinz. >> it has been a roller coaster. after chairman powell said we are going to get instructive, stay there for a while. he saw stocks dropping, but in the markets seem to question whether or not they knew that all -- knew that already. we are up about -- we are down about 1.4 percent on the s&p 500, as we digest that that pivot narrative might be dead.

those tech-heavy indexes are -- specifically at the short end, what you guys have mentioned. the two year yield is up substantially after his remarks. we are south of 342. the 10 year is up about three basis points. so again, a more inverted yield curve. you guys were talking about the euro. the dollar right now is weaker on the day. the dollar index down about .3%. tom: kailey leinz, think you so much in new york. there are people, there are signposts along the way. there is research where you stop and say, that was a number of months ago with pre-missouri, truly one of the great cause of 2022, on the dynamics of the yield curve. readjust here off of powell's speech.

readjust the dynamic between the short term two year yield and the benchmark 10 year. >> sure, thanks for having me. the front-end is all about near term. i think we got a few clues from powell's comments today. he is acknowledging there could be pain ahead, and that suggests tolerance. he is also talking about being restrictive for quite some time. the idea that the fed will take rates up to terminal and quickly retreat, he is pushing back against that. that front end is still biased higher. we are looking for rates to continue to rise. 3.7 5%, or something in that range. i think the long end is a lot more accurate. i don't think long-term neutral rate is higher. there could be a higher short-term neutral rate, but the long-term neutral rate, the fact that treasuries are still a

haven asset. the fed is telling you that is much further away. i think long in treasuries are safe. the long end, i think, is much safer than that front end. tom: the fancy word for pointy is stochastic. and curve inversions are almost always in every case stochastic. do we have to get used to this? if we have a longer fed regime, are we going to have longer, deeper curve inversions? priya: i think inflation is likely to make this longer. inflation is inherently more sticky and a lagging indicator. inflation might be the last thing to respond, and the fed is telling you it is probably going to be number one. i do think motions have historically been short-lived because inflation has not been a problem. the fed has flexibility to respond. they are telling you if

inflation does not accelerate that mandate is lopsided, and therefore a period of sticky inflation will mean that inversion lasts for much longer than the markets are pricing in or people are looking for. jonathan: given how they are setting up their reactions here and how little the market seems to be listening to them, how do you think this market would respond to a bad labor market print, a bad payroll print on september 2? andrew: -- priya: define which market. there could be some risk assets comforted by a weaker number, because then that might mean the fed may not hike as much. i would argue it would be risk-negative. i think bad data is bad for risk assets, and treasuries, i think it is good to belong treasuries, but the front-end, i think jay powell is telling you inflation is still the data print that the

market will respond to. that is what the fed is watching. a weaker payroll report is agreeing with weaker wages, and ultimately weaker inflation can allow the fed to slowdown. but not with inflation running aside is -- high as it is right now. i think that cpr report is probably the linchpin for the 75 or 50, and we did not get much from chair powell. i think they are trying to move us out of the base of hikes to that endpoint and how long we stay there. lisa: priya misra, we are in jackson hole talking about the fed, talking about the united states. we need to pivot to europe. because that is really where the incredible action is, at least in markets today, as people start to think about a 75 point basis point hike by the ecb. do you foresee this as a real possibility and something that

could sustain the moves we have seen that are quite dramatic in the german bond market, in the upon -- the italian bond market, and the euro? priya: we are still looking for 50. when you are starting out you could make the same case for the fed. they have gone, the first hikes have been 75. i think it is a possibility. do we need to set the market up more? they also need to look at consequences. the ecb is in a much harder position, because they are dealing with an energy crisis that is only going to get worse as winter sets in. our thought is that 50 is still a sizable number, especially for the euro zone that has been dealing with negative rates for so long. i think if they set the market up, they talk about how they are going to address the problem, because they are related.

75, the periphery is going to underperform. i think the -- i think if they are able to set it up -- there is a lot of time between now and september -- it is possible, but that is not our base case. lisa: how much of this is resulting from the strength we are seeing in the dollar, from the fed policy today? is that is what is forcing us to have this conversation about a 75 point race -- 75 point basis point hike in europe? priya: the dollar is responding to the diverging economic environments. the fed has a really strong labor market during i think that is what is strengthening the dollar my creating the issues for the rest of the world. they are going to have to respond. i don't think it changes fed policy. our other central banks responding to the fact that they have an inflation problem that gets worse? no, yes. i think that they are not targeting any effects, but the

fx channel will impact the economy, and that is what the central banks are -- input into the idea of going more than 50. tom: if europe -- i'm going to go to priya -- if europe does not act bold, if the united states keeps on this track, what does mark mccormick safer td securities? what other ramifications of a resilient or even a dollar to strength? priya: i think ultimately there are self-limiting aspects to strength. it tightens conditions over time. so it is not something that can happen right away. there are some limits, but in the near term, especially as the market grapples with the fact

you are not going to get the fed responding to slowing economic conditions on the growth front, the dollar tends to be a safe haven asset. we are positive on the dollar in the near term, but there are limits. the markets are forward-looking and at some point we realize those limits are being felt in economic channels. i think that is why there is a limit to it, but i don't think we are close to that yet. tom: let me flip the tables here. i am seeing ig and the distressed people, how they interpret full faith and credit, how do you attribute the price declines, the giant, historic air market of corporate paper, and a little bit of a rally recently, how do you interpret the losses we have seen in the ig market? what does that signal to you? priya: i think most of it is an interest-rate story.

inherent interest rates risk bonds. it is not as much the default risk. default risk is only just started to get repriced higher. it is the fact that interest rates have risen, and funds have seen outflows, so it is a supply-demand issue for ig corporate that has resulted in those higher rates, or lower prices, as you talk about. i don't think recession is being priced in. if growth starts to falter, which is our call, and we start heading into a recession and we see the fed not responding because they are worried about inflation, i think that is when default risk starts to price. for me to be positive on credit here, even though the interest rates -- we talked about, the 10 year is probably fair around 3%. but that default risk premium can dry if the economy starts to slow. i think that is the key to watch. a lot has been done on the interest rate front. on the growth side, is that

getting priced in appropriately? jonathan: you and congratulations on an absolutely brilliant call on this yield curve. priya was looking for 50, maybe a deeper inversion of that, and we go 43 after those comments. mike mckee, one thing we have not mentioned, -- [laughter] mike: looking at the overall sentiment numbers, a rise 50.2 from 58.1, so people are feeling better about the economy. expectations are higher, and it is a gas story. one year ago it was 5%, now down to 4.8. people think inflation is going to be lower, and they are happier. tom: are you suggesting that the narrative we have spun for two days is now old news? mike: absolutely. lisa: which one? [laughter] jonathan: last month for every

single data point there is a brand-new story to talk about. and one thing of the last month that totally blew up everything was the employment report. it was the labor market report. it was payrolls. september 2, what are we looking for? 300,000? anywhere between 200000 and 300,000, mike, does that speak to what the chairman is talking about? mike: he talked about how the economy has slowed but the labor market remains strong. that is a reason they can keep raising rates. the ecb report, while incomes as a holder not go up much, reaches and salaries up for -- wages and salaries were up in july. i did not look at the annualized. tom: it is surveillance. you can make up a number. jonathan: in full disclosure, one person makes it up. one part of the show is made up. lisa: i want to go back to the university of michigan. it suggests the importance of

gasoline prices. this survey tracks more closely gasoline prices. i'm trying to be really generous today. fed policy is targeting gas prices. how much change in gas prices the other way could reset these expectations? mike: they absolutely fear that. the fed cannot do anything about gasoline prices. but we have seen the refiners ramp up production in the united states. we have a totally different energy picture than what is going on in europe. they are still above where they were before the crisis began, but people are looking at the direction at this point, which is due to market forces, not the fed. fed does worry if something goes wrong the prices go back up, they have a bigger problem. jonathan: here is a snapshot of market forces now. equities down by 1.5% on the s&p. the nasdaq down by 1.9%.

if you are just tuning in, here is a snapshot of what chairman powell had to say. chair powell: central banks should take responsibility for delivering low and stable inflation. it may seem strange that central bankers and others once needed convincing on these two fronts. as ben bernanke has shown, both propositions were widely questioned during the week --during the great inflation period. our september meeting will depend on the totality of data and the impending outlook. at some point, as the stance of policy tightens further, it likely will become appropriate to slowed -- to slow the pace of increases. there is clearly a job to do in moderating demand better alignment supply. we are committed to doing that job. jonathan: the chairman at the federal reserve in jackson hole about 40 minutes ago. mike mckee, pushing back against this idea of prematurely loosening policy at a time when the market was starting to price

in rate cuts in 2023? mike: they have a problem with that, because obviously it works against what they are trying to do. he has not convinced them yet, because futures are still pressing in cuts in 2023. the proof is going to be in the pudding. now they have to walk the walk. and keep rates steady. jonathan: this speech will take on a different importance, i would suggest a fresh importance, when we get that economic data. right now it is a proof me moment. you agree? priya: absent -- mike: absolutely. jonathan: prove it to me once you see labor markets going the other way. mike: with all of our fed guests, the balance sheet, the head of mortgages for hfm financial says the biggest move has been in the mortgage markets today. spreads have compressed because powell did not say anything about the balance sheet and there was nothing about selling mortgages. [laughter] jonathan: can we get chairman powell back out? mike: that market is happy he

did not talk about it. jonathan: andrew hollenhorst with us now from city. you are looking for 75 basis points in september. you hear what you wanted to hear from this fed chair? andrew: i think what we heard today was a change in tone or than any new information. i think that is important. that is what we have been highlighting ahead of this speech. the idea this was an opportunity for the fed to recalibrate and re-message short, narrower, more direct. that is what cheer -- fed chair powell gave us, and really did not give any opportunity for a dovish interpretation. a lot of the phrases were phrases he had used before. a lot of this was verbiage her before, but the typical conversation after fed speakers, i hear from clients, and i think it was hawkish, they read something different that was dovish. there is no room for that. the kicker was quoting paul

volcker. it is clear where chair powell is moving here. i think he is being cautious and trying to have a continuous movement towards a more hawkish tone and a more hawkish policy orientation. that is there, but he did clarify this idea that at some point they will slow down. some analysts took that to mean they would slow down in september. here he clarified that there is a choice between 50 and 75. it is going to come down to the data. consensus expectations are around 300,000. i'm not sure the number will slow enough to say we have this under control. lisa: we are looking now at the nasdaq. the initial reaction was tepid, and now it has accelerated in terms of decline. have we fully assess what chair powell was saying in the bond markets with the front end going to 3.42%, even your view we

could get higher than that in the next year or so? andrew: i think it does come back to the data, and markets need to be convinced by the data. we have fed rhetoric more clearly pointing in the position of a further tightening of financial conditions. it is also interesting chair powell mentioned economic projections. in july he said there is a good baseline for policies going to play out. what he said in this speech was, we are going to update those expectations, those projections at the september fomc. so clearly keeping the door open for a more hawkish policy orientation. i think the interpretation of the data -- so, we talked more inflation, slower in july, you are going to get a softer core inflation reading again in august. the underlying strength, it looks like there is a lot of underlying pressure that's going to be hard to get down. powell mentioned inflation had

not changed after that. what is the inflation data go? tom: one final question. if we get a sustained 90 day average, 280,000 nonfarm payrolls, what does that do to the call? andrew: i think it really leaves our call intact? . who beyond that next year. with that kind of a number we would be telling you the job market is still creating jobs at a pace that is pushing the unemployment rate lower. you know the unemployment late -- unemployment rate is at a level generating excess wage pressure. we hear from chair powell even more clearly from that president bostic, even as the job market slows this is a fed that is going to leave rates higher and they are looking for that slowdown in the job market, because that is where it -- where there is a supply-demand imbalance. that is where the economy has to

go to bring inflation down. jonathan: andrew hollenhorst with some big calls. thanks for being with us today. got enough time to do thoughts around here. for that i want to say thanks to everyone behind the camera. this beautiful view did not happen on its own. there is about 20 different cameras and a ton of equipment behind us. today it was raining so much we had to go inside. we want to see how quickly these guys could put up a tv studio. if you need some furniture done at home. [laughter] lisa: they are shaking their heads. tom: they moved the mountains closer than the day before. lisa: how did they get that to happen? jonathan: final thought? tom: the dow down 400 points. seriously, folks, what is important is we did not need the gulfstream because we are carbon neutral. jon and i throughout on the same flight. jonathan: i think my flight leaves in about an hour.

mike: you look at the markets and what is happening now in the bottom line is, message received. the market at least for today, that jay powell's message. lisa: for now. mike: that they are going to stay the course. it is not mario draghi and whatever it takes, but close enough for the fed. tom: thank you for your leadership at jackson hole. and when you go to center next year in portugal, you have got to where the -- [laughter] mike: the cowboy hat? jonathan: lisa? lisa: my final take away is the length of time. right now we are hearing a fed that is saying we are not cutting rates next year. just cut it out. and a market that is saying, don't have it right. tom: i thought she was flying out. jonathan: it is very much about the data. in whatever you believe here today could change on september 2 when we get the payrolls report. he could change again on september 13 when we get cpi. but ultimately, mike, it's going

to come down to whether you take these guys at their word. what they are telling us repeatedly, consistency -- it is not just the core of the fed -- regional president as well -- if things get bad and inflation is a sticky going to keep hiking. mike: we will see. september 21 is the next time. i think they are set up to 75. if the numbers come in strong. but not pushing back hard against that. the november is interesting because it is right before election day. they are not trying to please candidates, but they do not want to be part of an election discussion. lisa: my final point is if you look at all of the data, this cpi print is going to be the one to watch. that is what everyone has been saying. mike: the only disappointment is we did not see a moose behind us. jonathan: we didn't. and what happened to walk? mike: that is coming up. [laughter] lisa: we will do it.

jonathan: for the whole team here, thank you very much. for you at home, thank you for sticking with us. thank you for choosing bloomberg tv and radio. from a beautiful jackson hole, wyoming, this is bloomberg. ♪ this is xfinity rewards. our way of showing our appreciation.

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guy: european stocks are slumping into the close. we have french power prices one euro head north of 1000 euros. have the ecb talking about 75 basis points at the next meeting. we have that eight minute speech delivered by jay powell at jackson hole. it is a packed hour coming up. the countdown to the close starts right now. announcer: the countdown is on in europe. this is bloomberg markets "european close," with guy johnson and alix steel.