this is bloomberg surveillance. we are live on tv and radio. i am alongside tom keene. the focus is not on the building behind us this morning, but on number 10 downing street. tom: it is a movable story. we will go to that. it will be with us through surveillance, but a lot more going on in the economy, in inflation. let's not forget the jobs reports for america. >> looking forward to catching up with the economic council director. a bit of perspective -- there is a mechanism to deal with these things for the british public. they are staring down the barrel of another conservative prime minister. >> he is fighting the mechanism. i was stunned by what ben wallace said. it was the first thing i thought of. this is essentially the defense minister. how does boris johnson affect international policy, particularly the war in ukraine, where he is provided leadership? jonathan: with great leadership. he has been a tremendous ally to the ukrainians. i don't think that will change for the british government. what we need to focus on his policy and how it will change with a new prime minister. with the new chancellor. he will be different from what we saw from boris johnson. tom: the shock of corbyn to johnson, the linkage of those two, together. it is unprecedented. >> i would agree with you, but we understood the corbyn philosophy and ideology. do you understand what it was under boris johnson? tom: i feel like a foreigner with that. we are starting with sterling little stronger. there is lots of talk about, but the market is all we have to grab onto. jonathan: if you speak to people in foreign exchange, we've been talking about foreign-exchange, they will not talk about the political situation. the does not come up. it on about governor bailey and central-bank policy, that brings in the euro. i can't figure out whether the central bank rate hikes -- 100 do you do, whether it is the u.k., europe, or the united states? tom: how do you run a bond bull? with the washington monument behind us, jefferson and the distance, they're not running a bond book, are they? but the volume and bonds, i've never seen. >> the federal reserve has been running a bond book. one of the biggest on wall street. help me bring in the fed. yesterday, the minutes confirmed what a lot of people were already thinking. this federal reserve is determined to hike interest rates again by 50 or 75 basis points. tom: is it already dated? is it already old news that they have to reform their narrative, their story, as a staggered one. jonathan: think about the context. it is important. just by definition, but there is a window of a couple of days before the fed meeting where they switch from 50 basis points to 75. the minutes were colored by that shift, and from here, what are we looking at? subtle signs of deceleration in this economy. subtle signs in this economy that this administration will have to deal with. just subtle signs. but not big enough in the view of citi, bank of america, to stop the federal reserve from hiking again. tom: that is british furred data dependency. they are staggering from dated to data. claims today -- it is not a presumed jump. it is to 20. that is a good number. that is something jerome powell will a cat, but the jobs report tomorrow is really important. the subtle detail were talking about. jonathan: would you defined labor market data as closing the barn door? if you think about it that way, tom. if her way for the labor market to break, then have it we already committed to being too late with too much damage? tom: that is the discussion. the bottom line is that the central bank -- imagine how they feel this morning with the nation. essentially collapsing. the bottom line is that they wait for the data. that is what they've always done and what they will always do. jonathan: it's a news that the attention is firmly elsewhere. equity futures are slightly positive for most of the morning. we talked a lot about the euro, the $101. i'm not used to a euro-dollar. we are at 1.02. on the 10 year, they are climbing by three or four basis points. here's another number. we have to get used to this. 99 on w ti. up on the session by eight tenths. that is the price action. i think we can get you a morning briefing. good morning kaylee. >> there is a lot going on. starting at 7:31 a.m.. we get the minutes from the june meeting. their equivalent of the minutes. how do they ts up for 50 basis points in september, and how are they thinking about fragmentation? all of this becomes more interesting as you pointed out, because the euros hanging at its weakest level since 2002, and it 832 a.m. eastern time, we are looking at initial jobless claims. 230,000 is the number economists are expecting, but that tease us up for the payroll report tomorrow. finally, we have the fed, but as tom alluded to, we will get updated thoughts from christopher waller and jim bullard later i. waller be producing -- participating in an interview. there will be an initiative for a .75 basis hike this corporate we will be paying attention to their remarks. jonathan: thank you. just look at the bond markets. point 2%. negative six basis points. tom: greater curve inversion is interesting, and for the pros, each nuance of curve inversion matters. it has given ways ever so slightly before we dive into the number 10 downing street. the yen is jonathan: giving way. we are looking for a statement at noon. jonathan: will get the latest report is 40. we can do that with lizzy burden at number 10 downing street. i want to come straight to you. the pressure is building for yesterday. what is change this morning? lizzie: there was a business as usual cabinet meeting. a newly repointed, less than 48 hours in the post, and his colleagues to him that he needed to root -- resigned, and that was the turning point where boris johnson realized he needed to do the thing he taught he would never possibly come. we didn't see a typical boris johnson thing, but it is almost elbow to elbow in the press. on downing street, the crowds are gathering beyond the security gates at the end, and there is no sign of a podium yet, but the speeches expected in the next couple of hours, there's also a report that or chanson has been to see the queen as a courtesy to tell her that he has planned to resign. it is a culmination of the scandal, the crisis, and the cost of living. tom: i was taken aback by the comments around boris johnson that it is over, and perhaps ben wallace, who runs defense for the prime minister. who is advising him now in these delicate moments be or the statement? who are the people in the room giving boris johnson counsel? anna: a lot of people have been trying to give them counsel over recent days, and the pressure has been building. we saw images yesterday of various members of the cabinet going to number 10 downing street to try and offer their wise words, to tell him that the game is up, the fight is over, but he was not listening. some of the words i was struck by, some of the words of the chancellor, as lucy said, 48 hours and post, he wrote a letter this morning saying that he publicly once the prime minister to resign. he told them that in private yesterday, but the prime minister was not in the mood to listen to him, that if someone is been friends with for decades, and he recently promoted him to that position of chancellor. now coming out, saying it is time up. that was the final straw, and one of the voices that may be cut through. jonathan: thank you. coverage continuing throughout the morning pretty here from washington dc, before you move on to d.c., can we just sits on what has been happening here? think about this. a newly minted chancellor, and that he tweets this. 24 hours after he gets the position. under prime minister boris johnson, read this. prime minister. this is not sustainable, and it will only get worse for the conservative party, and for the whole of the country. you must do the right thing, go now. that is the chancellor of 24 hours ago. what is so important is that he speaks for a certain part of great britain. they are watching the follies and for looseness of it. this is a guy who threw her on a boat, and speaking of english, with a number of years, was fluent, educated, started businesses from scratch, and it was hugely successful. he is a self-made guy look at a fancy guy who went to oxford, going down in chaos. jonathan: it would be interesting if he retains that post under another prime minister. i'm not sure. what i'm trying to understand, and what we are meant to get this morning, is some kind of economic outlook. something from the premise turn chancellor. that has all change, but will there be a shift from chancellor to chancellor. tom: do we get another season of the crown? jonathan: how and we have to wait? that is the most american thing we've said. i don't see a gets more american than that. from washington, good morning to all of you. i'm tom -- i'm with john -- i am with tom keene read this is jonathan ferro. a morning with full life coverage. outside of the white house. this is bloomberg. >> keep you up-to-date with news around the world. oris johnson is calling -- calling it quits. he asked to resign after unprecedented waves of resignation. he plans to stay on as caretaker leader until october, but some in the party are questioning whether he should. last month, officials solidified the results to raise rates to prevent inflation from being entrenched by the policymaker meeting. this pertains to the credibility to control rising prices, crucially, with 2% inflation, critical to achieving maximum employment. the fbi director is escalating a dispute between the u.s. and china, over hacking. the companies aim to ransack their intellectual property really -- property. chinese spies are sweeping through everything, from fortune 100 companies to startups. the u.s. and allies are exploring ways to limit russian oil revenues without hurting their own economies. bloomberg said they tried to cap the price between 14 and $16 a barrel. they will ban insurance and transportation services need to ship russian oil. that is below the price. bloomberg says british airways has come to one of the union representatives with employees. that could avert further disruption. that is due to a staff shortage. the union said that check and staff at the airport will walk out during peak occasion. spread global news, 20 for our the day, and i'm bloomberg quick take, powered by more than 2700 journalists and analysts in more than 100 20 countries. i'm ritika gupta. this is bloomberg. >> this recessionary fear is overtaking the market and convincing us that it is going to be something cataclysmic that is going to happen, and we think that is not going to play out, and those kinds of -- that portion of the pullback, you get the money back, and the stock market will rise between now and then. jonathan: the chief u.s. equity strategist. live from washington, i am jonathan ferro, together with tom keene. constructive on the equity market, looking for 4300 on the s&p 500. that forecast is coming in down from 49. look at the equity futures. positive by 1/10 of 1% on the s&p 500, and a decent run of gains coming into thursday. three straight days of gains, and it is a little higher. a couple of basis points. on the 10-year. >> the big stocks are doing better than the nasdaq. the dow and s&p actually have a better percentage change then on the normal market. >> what do make of the optimism? we have to slow down, but not adjust the earnings outlook. >> it is coming down to nominal gdp. it was brilliant yesterday. we have the measurement of the real economy, doom and gloom. but a measurement of inflation, and how much of that is productive for corporations? >> you think we've had recession trade? we look at the bond market, and maybe you can make the case, but at the equity market, can you actually make the case that is what we see? >> i don't know. i think again, we have to wait for first earnings. you see it from the bank it you set it up for it up for. but it is absolutely critical. >> july 14. jp morgan. >> i did not know that. >> july 13. big week. >> are on top of it. in my application? >> you are, with a sigh of relief. lisa abramowicz is back as well. >> now, very important conversation. we are continuing to follow the united kingdom, but we must stay on the stock market. anthony meyer is a chief strategist. he has been absolutely brilliant about having the courage to be in the market. he writes of a summer rally. what kind of rally will it be, and how do i have the courage to place new money and this time of fear? >> is you know, i have been on the sidelines, and the issue is that you have a pretty severe restriction in money availability, not just from the fed, but from the market equity lines, all the things that generate the backdrop really remains pretty to us, great. that said, there are conditions, and we look for at the bottom, and i think you have to differentiate to bottom versus the bottom that is an oversold enough condition. we have that, for sure. number two, you need the idea that the fed, people believe that the fed may be discounted, near the ed of their tightening, and that has been that way with the drop of rates and commodities, you have a belief that we could have a soft landing. >> look. with the soft landing, and economics, it could pivot off of jobs today. there is a statement of the labor economy. does it mean anything to equity strategist? are you already looking beyond tomorrow? >> i think you have to look beyond tomorrow because they are highly revised numbers. we've been doing this for multiple cycles. we are old enough to have been through multiple cycles together. typically, the guidances out there about the dip, and money availability. but that has not been true. this year, we have stayed on the sidelines because when you look at real liquidity, which is readily available versus what is being used for economic output, you have a historic rise coming out. every recession we have comes from a unique reason, whether it is the crisis, 9/11, the financial crisis, the pandemic. the solution to the recession is is always the same. throw as much money as you can to lower interest rates, and the only thing to answer your question directly, that can allow us to look through the coming slowdown in equity and earnings, that is when the fed signals major change. i've been doing this since 1987, and i cannot remember a major correction in the market, where the bottom did not come with a signaling change from the fed. >> you have to work out what is going to stimulate that change. what would be the catalyst for that? what is the number? maybe that doesn't come from the s&p 500. i know that typically would look to credit. it has been wider through the 2018, yet the federal reserve will not pivot, so tell me, where is the tipping point. where's the -- pivot point for you? >> with lower economic activity, which isn't necessarily tomorrow, the fed is been very clear. they said that they have withdrawn, based on mortgage rate movement. they have withdrawn accommodation faster than they gave in 2020. think about that statement in terms of trillions of dollars, and last week, with the risk of not having stable prices, it is greater than the risk of recession. the idea that we are going back to an older area, where you invert the curve intentionally, and shut down the economy for inflation. you have a generational low of gdp. generational low. today, we have a generational high. i think the risk is that we have already likely gone too far. given what has taken place. that to me is really going to be over the course of the rest of the year. we're going to find some pretty sharply slowing economic data. >> awesome to catch up. the last piece of that, but awesome to catch up. thank you. he's not alone. i've heard this in the academy as well. he said look at the destruction that has taken place. look what has happened in the market. bonds, crypto. look what is happening with housing, and think what it will do to the consumer, ultimately. >> the really good idea is the courage to be in the market, and you have to have a set up, you have to have a story. his is fundamentally, this is a fed that will blink rate that is a question for jobs day, tomorrow. that is a question for all of our analysis earnings. what are those items that change the fed. i'm not sure i know what they are. >> is that a question for the white building behind us? ask that the political question. were going to hear from white house officials, folks, and the first thing out of the mouth would be what have we done about a gallon of gas? what here that. it has come down. >> petrol has come down. >> petrol. is that a big enough difference? >> for certain people, speaking of simple political dialogue, on 6000 presley avenue, that is all that matters print we will look at a complex dialogue. >> looking forward to catching up with members of this administration. we will do that throughout the morning. we will also be catching up with the director of the national economic council prayer to of that is coming up. the morning from the nation's capital with tom keene. i am jonathan ferro. this is bloomberg surveillance. psst. girl. you can do better. ok. wow. i'm right here. and you can do better, too. at least with your big name wireless carrier. with xfinity mobile, you can get unlimited for $30 per month on the nation's most reliable 5g network. they can even save you hundreds a year on your wireless bill, over t-mobile, at&t and verizon. wow. i can do better. yes, you can. i can do better, too. break free from the big three and switch to xfinity mobile. >> live from the nation's capital, good morning. alongside tom keene, i am jonathan ferro. together with kailey leinz back in your city, and in this market, we have lots to talk about. >> we always have a lot to talk about these days, and even with all of that, a fear of recession, first and foremost, in addition to turmoil, we have three days of gains on the s&p 500. those gains are continuing in the session this moring. we are up eight points on the s&p futures, or .2%. the same for the nasdaq 100. we are getting a look at the small caps. they are up about 3/10, but were a lot of volatility has been concentrated is in the bond market, and we have had minutes yesterday. you saw massive move at the short end of the curve, as the fed talks about the opus of inflation. they are teeing up a move of for teen or 75 basis points. coming up in three weeks, and as a result, you have even more deeply inverted yield curves. a two year treasury yield is only up about basis way or two, but it is north of three sent, where is the 10 year yield is trading at 295. at two 30 year yield at 14, so the yield curve reflects the concern that they are moving aggressively. that may cause an economic slowdown, little bit of pressure at the longer end. when it comes to the political situation, our focus is in the u.k. with boris johnson planning to resign at some point today. you saw much stronger on the back, and fluctuation, but the pound is stronger by .7% against the u.s. dollar. we are trading right at the 120 level. the question surrounds the trajectory of fiscal policy and monetary policy as resignation comes with the u.k. dealing with a serious cost of crisis? . >> thank you. we are still waiting to hear from the prime minister, potentially the next 30 minutes. there been reports that midday local time, we will hear from boris johnson. >> and in the early morning in new york, you wonder what he will say. i have memories of you covering this out of our london shop, but david cameron came out, a very changed david cameron. how does orest johnson adjust. it is a huge mystery. >> you don't have to think that far back. for the prime minister, from conservative to conservative, it just shows you the moment we are in. >> ok. >> this has happened many times in the last few years. it is the war of the roses. >> is that how you're going to characterize the situation? i'm going to speak to an expert on the lancaster's in europe. also game of thrones thrown in here as well. adam pozen should always be with us in washington. he is the president of the peterson institute. a bank of england policy committee maker. and with the institute, he is provided economic leadership, and timely leadership as well. a root canal was done at the royal college of surgeons recently, and he gave an important speech. you spoke about what prime minister johnson wants to do. make it a global britain. how much damage has this premise are caused in the effort of the united kingdom to move forward? >> thank you for having me. this prime minister who thinks he's a president has caused untold damage. the situation of brinksmanship over northern ireland was huge. it undermines trust and uncertainty for investment. it shows how damaging brexit is that on the one hand, northern ireland is doing better than the rest of the u.k. because of the non-implementation, and even his crazy breaks it responded saying he cannot implement it because it will make inflation go higher. >> can the parliamentarian system survive modern news flow, modern acuity, the speed of information today? i make a joke about the wars of the roses, but it is not funny. the lancaster's and york's had time to breathe. >> this glorious summer is already coming to an end. as jonathan was saying, you have turnover in prime move -- prime minister so appealing. it is not just there. we have politicians dislike them both parties in the u.s.. we have from a wind a few weeks later, complete setback in parliament. we have a genuine, like the 70's, a crisis of democracy. there is a famous report talking that sam huntington and others wrote for the commission back and 73. >> you're killing me. you're just killing me. >> is clashing with me. i'm going to save you both. >> on the policy front, on fiscal policy, what's the mechanism to deal with this? you understand the perspective. there will be a new leader of the party in a prime minister. there will be pressure to call for an election. i don't know if that will happen. what we need to work out from the physical side, is what is the optimal fiscal policy to address the policies we have in this economy? problems that are not unique to the u.k., and similar to the europe and united states. i cannot work out what the policy setting should look like. what we should be asking for the next government. >> is a tough situation. gradually right. because it has shrunk itself through brexit, we are more vulnerable to being an echo chamber. as i argued last month, when inflation hits the same as everyone else, it gets to inflation. the residence more, and it rattles around in the u.k. because you have a more limited labor market because they have shut out the eu workers. you have less input and more expense inputs because of the brexit redtape, as well as the pricing. what you need is a fiscal policy that has to accept that's the reality. the biggest thing that they can do is keep the physical balance on the right track because they are small now. you can see the pressure on the pound. it has popped up a little, with a prospect of course johnson's departure, but in the end, they have to avoid overheating. more than anyone else, at this size. >> the governor i brought this up a few years ago. the speed limit has changed. >> once you become supply constrained, and perhaps from at least so, you begin to bump against this inflation problem. perhaps more often than not. i wonder if we have broken into a new regime that is going to stick around. i wondering if you are thinking about that dynamic, or is that a problem we all share? >> it is unique to the u.k.. that is in a word, but apparently it is the u.k. and not europe. we are making a mistake, if we think were in a new inflation regime, in general. we will fall back, but in the u.k., you fall that -- back towards the 70's. you need to worry more. i've been saying this since exit. we are seeing it now. as one eye on the pound, one eye on inflation, and in a way that we did not before. >> let's catch up on the theme of the last couple of years. no one has captured this more than you. we had the courage to begin to consider for percent inflation is a goose out of the great financial crisis. you have carry that forward, saying that it is 3%, and i see entire world and the entire zeitgeist catching up. refresh that right now. it's jerome powell going to 3%, or institutionally, does he have to stick with 2%? >> he's going to have to stick with 2%. what i've been hoping is that we would have a little bit of inflation, and that would allow him to opportunistically say, we are above three, were not going down to two. given the credibility concerns which are overdone, but are real, they're not going to be able to say that. they can't say that until the next strategic review, which is 20 242025. what they can do is what is likely to happen is that they will bring inflation down, and maybe in the second quarter of 23, and maybe third quarter, they will get it down, so it down, so discerning with a three. there may be a recession echoes with it, and at that point, they're not going to ease up before that, but they will ease up, and it will do factor look like three. >> have to be careful here, but we have a cardinal surveillance rule. we don't do differential equations with the white house in the background, ever, but it is really important. 9% inflation. it is highly nonlinear, highly non-smooth to bring it down. which inflation points matters to you, right now? wax is a 5%, is it the first takedown, or do we have to wait wait wait, to get down to 3%, to get any sense of the market #once you are at five, and below five, and it is trending down, you should have the market calm. >> you are seeing the calm in the long bond. not calm about the recession, but calm about inflation, and all of the forwards. that is what you are seeing. they just have to, the big issue which goes to my colleague, how much wage inflation is there going to be? the big differences that we all got that right, that peterson said we will have a much higher, and they did their job,, but how costly would be to bring it down, the terminal rate. i take the under, versus larry, because i think the wage inflation will tail off. if it turns out that labor costs are still going up, and a few months, rather than starting the trend down, then olivier and larry are right, and we're going to see positive, real rates. there is hope we don't have to go all the way there. >> the pay way -- is tomorrow. what we have seen his decent gains on the payroll front. unemployment has stopped coming down, even as we have achieved that, and wages have not accelerated it for some people, sitting here, we might say, this labor market is not as tight as we thought it was. what is your take from just looking at the data? wax just looking at the data, it is screwy data. what we got is a labor market number, which generally is the reliable data for the u.s. or any major economy. rely on labor markets to tell you what's going on, and they have been truly out of whack. on paper, a contraction in the first quarter. yet, we see these incredible labor market numbers. we see vacancy ratios, meaning number of jobs available to jobseekers, at levels we have never seen before. we have new papers coming off of peterson, looking at this, and probably next week, they basically say, you have to take this serious. the labor market is tight. i more of the persuasion that if you look at the numbers, something wrong with the numbers. >> if you are policymaker, how do you interpret this information? we have heard from chairman powell who is looked at consumer expectations on inflation. that's new to all of us. that is a little thing and a data point we used to pay attention to, and that is a difference between 50 basis points. >> i think focusing on that data point, using it to explain the 75 versus 50, that was a mistake in communication. but they've gotta be focused on are two things. if gotta be focused on unit labor, meeting productivity, wages, and they've also have to look at the longer-term expectations of the bond market. both of those are looking flat. >> very quickly. we have an experiment underway behind us. the central bank in that sector of treasury. how is it going? >> i think her signature issue, which is the international corporate tax deal, was the right priority for her. for this country. i think she did a good job getting as far she is gone, but somehow, you have to get the senate to buy it. i think the american rescue package was too big and too short a time. but that was foreordained. >> has she served her --. >> i don't talk about individuals. i don't, even individuals i respect greatly, or because of it. >> john asked if i should step aside. >> is like trump. they dragged them out kicking and screaming. >> if tom is like trump, can we put that in play for the rest of the day? wax briefly, what would you call the american rescue plan? i greatest permit? >> i'm trading get that out. it was pelosi and schumer with acceptance that that was the end. whether or not, i have no idea what went on in the white house or treasury, the decision. but the biggest issue was, once the plan was clear, it falls on the fed. the fed should have been worrying more in forecasting inflation. >> this is been wonderful. thank you. we are still dealing with the consequences right here, right now. >> there's no question. the mystery is what will the labor market do. that is the jobs. from the nation's capital, good morning. payroll friday, coming up, tomorrow morning. >> he is not only lost all of his popularity in the country, he lost his ocular to he and his own party. a majority of conservative voters now want boris johnson to resign. it is surely at this point his tenure written in days, not even weeks. >> may be minutes or hours. that was the eurasia group. the president weighing in on the prime minister at number 10 downing street. from washington dc, good morning. i'm with tom keene. i am jonathan ferro. here's the s&p 500. coming into three days of gains, just a little bit firmer. higher by 1%. continuing to grind higher with two basis points. that curve inversion, it is very much an issue. >> three things this morning. the feature is a curve inversion where every basis point counts. a basis point is 01 percentage points. >> thank you. to go from five basis points to zero is .05, and we have come much further than that to a -.07. i'm also watching the end, we've got to remember, it very quietly, three or four days in a row, we have seen these lift, and the vix is under 27. that is not a small number. >> in 101 for the rest of the morning. >> we have bond market 101. >> you said that, not me. >> let's continue, and we continue with what is going on in the united kingdom. it is truly expert with a founder and geopolitical to strategist. for fordham global. we are thrilled that you could brief us on what you observe from london. thank you so much for joining us. the distinction at the moment is perhaps, we have seen the prime minister walkout, from 10 downing street, speaking to the nation or his party, or to the world. who will he speak to? >> he is obsessed with the idea, and he is a u.s. presidential style mandate. he keeps talking about how many millions of voters voted for him, but that is not the systems we have in the united states. parliamentary democracy, and pushback, including with your own party about how he sees the mandate, but his time is up. he has resigned as the leader of the party. he still believes that possession is 9/10 of the law, and he seems determined to stay in number 10 until october. this isn't u.s. style politics, and i think it is important for your viewers to understand it is a different system. >> ben wallace, the defense minister was scathing about the idea of staying in office through october. how can he have power, as a lame-duck prime minister, particularly given the war in ukraine? >> it is an important question. the difference, compared to the u.s. situation, lots of people comparing what is happening in the u.k. to trump, when there are a lot of differences. next one is that the parliament is on fire, and people are kind of breaking into it. then wallace is in good company. amongst conservative mps, and cabinet members, talking about how the prime minister should not stay in office that long, and it may yet case that leadership contest is move forward, and i think there is an element of vanity in place because if johnson leaves now, he ends up with a dubious distinction of having served a shorter term as prime minister than either his predecessor, theresa may, or gordon brown, the former labor minister. >> if i am in the market this morning, i will find is either depressing or entertaining it but ultimately, i will be trying to work out whether a fiscal shift is in store for the next government. do you think there is a fiscal shift brewing here in the united kingdom? a change something else? >> that is where there are limits to the comedy aspect. the economist front covers says that lots of jokes are going on, and this is a prime minister who has styled himself as being like his banter, and that sort of thing. the city has not taken this too hard. we have seen a little movement in sterling, but investors, u.k. investors, they have been hoping for a successor to johnson, or his new chancellor, and that might not make good on promises to raise taxes, and this is raising concerns about the state of the u.k., and public finances, market expecting 50 basis points with cuts, or heights, in august, with the bank having been. how does this affect all things? that is where the uncertainty of postponing the leadership contest until october is very problematic. i think you will see an inclination from conservatives to want to avoid triggering a new election. by trying to give out more goodies, at a time where the country can't afford it. >> what are the goodies that they can actually deliver? you said at the end, they cannot order it. what can they do? for many people in the u.k. right now, they have bills to pay at the end of the month. energy prices are going up to it they could go up again before the end of the year and a material way. what can they do to support the british economy? what can they afford to do? >> all they can do is buy time. this is what we have seen this prime minister try to do. inflation and strikes go hand-in-hand, so we have a summer of discontent, and airline chaos this summer, and it is going to upset a lot of people, and it is not just the rotation factor. it is real pressure on households. resetting the income tax threshold will be something that they will be inclined to do. to not raise taxes. i think no one is talking about this, but whenever i see this kind of dislocation, i wonder what industry might be on the sharp end of the windfall tax. that tends to be low hanging fruit. but the summer of discontent with strife is followed by giant -- a tough winter. as opposed to other european countries, with russian gas is, the u.k. is already talking about rationing, and possibly not meeting its obligations with other countries. taking over the leadership of the u.k., it will be a bit of a poisoned chalice, but politicians get into politics -- power first, and they work and what they're going to do. that straits. >> is not going to change. tina fordham. that was a headline just as we crossed the terminal. it prime minister is considering whether he can stay on as a caretaker. at the same time as the opposition party. >> i'm baffled. i know you are. on a july morning in washington, this is original politics, and for american audience, it does bring back to america. these are things that are unimaginable, that are processed, and i can't believe i'm saying that with what we've gone through, with resident biden, president trump, in moments before that. >> i keep stressing there's a mechanism to deal with this. we don't understand the sequence of events from here. the timeline for that sequence of events. there are things that need to be dealt with, but right now, if you don't have a government in place to deal with that, --. >> what is a caretaker government? do they have double-digit inflation? >> they made for the rest of the summer. that is the problem. there are many. let's be clear about that. the futures up .2%. good morning. i am jonathan ferro. this is bloomberg surveillance. >> the market is really pushing the fed right now. saying how much longer can this great hiking cycle lasts. >> anything that sense the economy is taken out of the economy. take a deep breath, and don't be so negative on risks. so far this year, we think that the economy will be able to withstand higher interest rates. >> right now, i think we can say, we are not currently in a recession. >> this is bloomberg surveillance with tom