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.

guy: stocks slumping on both sides of the atlantic. we are seeing it here in europe. i think it is not just what we have seen at jackson hole today. there has been some european influence. four: -- 4.26 is where we are training. influences here. we are seeing some euro strength today. you can whisper it, but i think it is happening. i think the reason is not what happened in wyoming, it is what is happening in raeford. there is talk from the ecb -- in frankfurt. there is talk from the ecb. the ecb is looking at 75 basis points at the next meeting. that is now priced at 50-50. we are trading north of parody. you are getting a huge move in the front end of the curve here in europe. we are north of 1000. 1130 is the current price.

we are up by 25% today on the french power prices. 25% in a day going up. this is unsustainable, and as somebody pointed out, we are all going to need bigger computer screens if we are going to track what is happening with french power prices. a lot of what the news flow looks like today not only comes from jackson hole, kailey, but i think it also comes from europe as well. i think the ecb story is front and center. kailey: it feels like europe and the ecb are trying to steal the u.s. and jerome powell's thunder. but there is that speech from chairman powell. the idea they are going to get restrictive, they are going to stay there, and they are not going to prematurely ease. that pivot narrative, put it to bed. that was the message from chairman powell. you are seeing equity markets down hard. the s&p down. an even bigger decline for the nasdaq, because there are stocks that are more sensitive to

higher interest rates. you are seeing rates move up, though not dramatically. it seems like the equity market has more work to do catching up. we are up on the 10 year treasury yield, while the two year is up a bit more. about four basis points. you were speaking about the euro strength. the translation is a weaker dollar. the dollar index is down by about .1%. guy: we have been waiting for that speech all week. it lasted just eight minutes. just over eight minutes. it was certainly short and to the point. jay powell speaking in wyoming, talking about where monetary policy is going and how long ultimately if he gets up to the terminal rate will it stay there? data dependency remains key. chair powell: restoring stability will require maintaining a restrictive policy stance for some time.

historical record cautions strongly against prematurely loosening policy. guy: joining us now is daniel tarullo, former federal -- fed board governor. thanks for time today. perfectly timed, this conversation. your reaction on what we heard from jay powell? daniel: i think today's speech was about the fed as an institution much more than it was about the economy. last year it was all about the economy. this year was about the fed and its credibility. the fed has obviously had a little bit of difficulty with messaging in recent on. the sense that there might be a pivot towards a looser, at least less-restrictive policy. what jay powell did today was to come out and reinforce the message that other members of the fomc have been giving him the last few weeks. first, he made the economic case for why inflation and fighting inflation needs to be front and center for fed policy.

second, on behalf of the fed he took institutional ownership of the responsibility for getting inflation down. third and probably most important, what you and your colleagues have been talking about in terms of market reaction, he tried to get the strongest message of the reserve resolved to continue to fight inflation as the two of you had just said, even after headline readings have come down. kailey: he said they are going to get restrictive and stay there. what is restrictive? what is your guess of where the terminal rate will ultimately be? if he says they will stay there for a while, what duration are we talking about? dan: you know, that depends obviously on one ends up happening with the economy. something else i noticed about this speech and the brevity is important because it allowed him to leave a lot of things out as well as to put things in. there was very little detail on

the economy other than obviously the basic condition, but he also, i think, successfully avoided trying to give a form of forward guidance either on the terminal point for the duration of that qualitative comment he made about restrictive for some time. i think they are trying -- at least he is -- trying to move away from too much focus on particular numbers, whether it is 50 or 75 in september, or 3.5% as a terminal rate, and emphasize data dependence. i don't think as jay powell left the lectern today he knows where the fed is going to end up. i think he knows what he is looking at, that i don't think he knows where they are going to end up. guy: he led with the issue of pain. he said this is going to be a painful process. we don't know where we are going to end up, but it is probably

going to be painful, the journey, to get there. he talked about the labor market. how much -- how may people are going to have to lose their job to get inflation back down to 2%? dan: you know, guy, there is really not much basis for making a prediction like that. unless you think the phillips curve has been resurrected in the last couple of years. we do not have a very good -- the models are not going to give a very good sense of whether unemployment needs to get to 4.5 percent or 5% in order to achieve the conditions he spoke about. that is going to depend on many things, probably. part of which would be, will people come back into the labor market? what happens with inflation expectations? what happens in the rest of the world? again, i don't think i'm in a position, nor is anyone else, to

put a number on unemployment. again, i think that is part of what powell was trying to achieve today, just to deflect attention from particular numbers and emphasize the conditions they wanted to end up with. kailey: they stand by one number consistently, and that is 2% as a target for inflation. if we cannot get a sense of what level of unemployment that would require, do they also need to abandon a 2% inflation target if we are looking at an economy in which inflation may be structurally higher post-pandemic? dan: there is a chance that a year or two, or 2.5 years from now that question is front and center. that is, whether the target ought to be changed. but i don't think that they need to address that right now, and i'm definitely sure they don't want to address it right now. but you raise the issue of what

things look like on the others of this tightening cycle. considerations such as whether the background conditions, which were disinflationary for so long have now become inflationary with the retreat of globalization and demographics, and political intentions apparently becoming more of a background condition as well. they may well have to revisit their framework pretty quickly after they get themselves through most of this tightening cycle. because i think there is a fairly widespread view that the august 2020 framework is probably not one adapted to current conditions. guy: he will be interesting whether we end up with structurally higher inflation as a result of the factors you talked about. the speech was quick today. do you think policy should be similar? should we be thinking along the lines of jim bullard and getting rates higher quicker to avoid

the issue of embedded inflation into society? embedded inflation expectations into society? dan: again, one of the corollaries of what he was saying today was trying not to get people so fixated on whether september is 50 or 75. that they can calibrate their meeting to meeting moves based on whatever data points they are putting the most emphasis on. he is trying to avoid having markets read too much into one fomc decision or certainly one data point coming in. so i don't -- i think he did a very good job, by the way, of maintaining optionality. the other thing to keep in mind is, he is the chair. he is the only person authorized

to speak for the entire committee. but it still is a committee. and sometimes people, i think, have the impression that the chair dictates that the committee just follows. and that may have been more true 20, 30, 30 five years ago. but i can tell you from experience it is not true now. and paolo is very good at forming a consensus. but that means he cannot just decide, here is what we are going to do. he has to listen to everybody, interact with them, and then he makes a proposal, which reflects his views also those of the members of the committee. kailey: it is an excellent point, but from the fed speakers we had earlier, it did not seem like they were singing the same tune. raphael bostic saying we should stay there for a long time. jim bullard saying a similar thing. so it does feel like there is a

consensus at least about getting there and holding rather than cutting right away, which is what the market has come to anticipate. dan, you are talking about how the data rolls in, and it feels like the data that rolled in at 10:00 a.m. eastern was overshadowed by pal's speech. inflation expectations did take down. is that all gas prices? what is your read on that? dan: it's a good question, and i have always been a little nervous about relying too much on inflation expectations as a guide to policy. you know, intuitively of course you can see how the expectations of businesses and households matter for the future course of inflation. but we don't have a very good idea of what changes expectations, and i think there is a fair amount of evidence for the proposition to which you just alluded, that at least for short-term consumer inflation expectations gas prices have a very, very big effect.

and, of course, those fluctuate with much less attention, or much less impact by monetary policy than supply issues. guy: final quick question. is the government helping at this point to fight against inflation? what do you think, as you sit there at harvard law school, of the debt forgiveness plan announced by the president this week? dan: well, obviously as everyone has noted there is a difference in opinion among economists, and some of that crosses party lines as to what the near to medium term inflation effects are going to be. my guess is -- and this is sort of stepping out of central banking and stepping more into washington observer -- my guess is that the administration had some form of student get --

student debt forgiveness as a priority. given the things -- given the way things are in washington, and you see the opportunity to achieve one of your priorities, have to be some pretty good reasons not to seek that opportunity. and i think the delay was probably in substantial part due to the fact that the president and his staff were trying to shape the program so that the issues of equity and inflation would be at least addressed. and, personally, personally based on what i have seen so far i would not expect there to be a significant near-term in fact -- effect on inflation. but as with so many other things, we have not had something like this, so people have to analogize to one-time tax rebates or something like that. kailey: we have to leave it there, but thank you so much for giving us your valuable insight and reflection on gerald -- on

chairman powell's speech today. that is dan tarullo, a former federal reserve governor. now that powell has spoken, how can markets react? it is not great for equity markets. the nasdaq 100 down 2.5%. we will get the take from scott chronert, citigroup strategist, coming up next. this is bloomberg. ♪

chair powell: the first lesson is that central banks can and should take responsibility for delivering low and stable inflation. the second lesson is that the public's expectations about future inflation can play an wharton role in setting the path of inflation over time. if i inflation continues, the greater chance that expectations of higher inflation will become entrenched. that brings me to the third lesson, which is we must keep at it until the job is done. our job is to avoid that outcome by acting with resolve now. kailey: that was chair for jay powell speaking in jackson hole. the markets are deciding they don't like it too much. we are down 2% on the sp -- on

the s&p 500. it's get more with scott chronert, citigroup equity research strategy had. your reaction to chairman powell? scott: a little bit of context here. first let's think about how we got to the current we are responding to, and that is we had a selloff with mid-june lows. you got interest rates peaking around news inflation -- precipitated a 50% or so rally in the s&p a week or so ago. we put out a note suggesting that our 4200 year end target had been reached, but really what it sets up is we think increased volatility around perceptions of this dynamic between interest rates, earnings growth expectations, and

valuations. what you got today pretty clearly is a view that he knew to expect at a minimum another 75 basis point hike in the september meeting, which is what we have been projecting, but also i think the important narrative here relates to this higher for longer interest rate backdrop. that is an incremental area that is going to get attention, with the offset in the more aggressive the fed has to be in dealing with inflation from a longer-term perspective, that is actually a constructive set up, but again, that gets beyond most of our investment horizons at this point. guy: is everett -- is everybody in the equity market on the same page, that the fed is going to hike and keep rates high even if the data starts to deteriorate? the expectation, the muscle memory has been data comes in bad, fed reacts. are we done with that, and has everybody got the memo?

scott: i think most people have gotten the memo. whether it has become ingrained in terms of investment behavior -- investor behavior is a discussion point. i think we all understand and appreciate that inflation backdrop that we are considering right now and investing around is novel to most folks investments. i do think that we have to be prepared for a situation where your terminal interest rates are probably higher than we have gotten accustomed to prior to the covid circumstance, the pandemic. and the implication for that -- and this is what we want to emphasize in terms of your point , navigating this going forward, is that in our view what we are starting to talk more about is, we have to expect lower than otherwise growth on the others of this. and at the same time we probably have to expect lower than

otherwise valuation paradigm around u.s. equities. that is where my attention is going. we are likely to see recessionary conditions in the first half of next year. earnings expectations need to get ratcheted down versus where consensus is currently. but we do think that as we get further into this that the perspective of plateauing interest rates is enough to stabilize valuations while we have our way through recession circumstances. kailey: another conversation to be had other than the impact of federal reserve policy on rates is the impact on foreign exchange, specifically the dollar. seems like every person i talked to says the dollar is not done. we have not seen pete dollar strength. how do you factor that byproduct of a hawkish fed into an equation and corporate profit expectations? scott: it is two-pronged.

what i would say generally speaking is, we look at the dollar direction differently from an equity lens. we think the dollar is mostly akin to improving investor confidence in the global growth circumstance. that typically will precipitate a risk-on trade within u.s. equity markets. if you look at the stronger dollar circumstance, which i think is justified based on relative rates and other metrics, it raises this issue of, is the u.s. the best house and they will -- best house in the global neighborhood? there is that discussion apply. my colleagues on the fixed income side have noted i'm going from outside the u.s. into the u.s. fixed income despite the stronger dollar. so i think there are a few dynamics. much attention gets placed on the translation effect of earnings. we are less concerned about that. you think that is priced in quickly, and a different discussion from a longer-term growth trajectory.

at a minimum what i would fall back on here is looking at the dollar i think a stronger dollar is positive for u.s. versus the rest of the world. and a falling dollar on the others of it actually precipitates a little bit more of a risk-on trade more broadly. guy: we are going to leave it there. early appreciate your time today. really appreciate the work you do. scott chronert, city research u.s. equity head. this is bloomberg. ♪

guy: european markets are about to close. it is turning out to be an ugly afternoon for equities. and like shell are doing well compared to the rest of the market. the dax is down hard today, down by 2.3%. cac is down by 1.9%. closes coming up next.

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guy: powell, williams out and about, looking for bears, potentially. taking a look at the wildlife in jackson hole, wyoming following jay powell's eight minute speech. as we heard from l dudley, these are the people you want to be listening to, paying attention to. they are the most influential voices at the federal reserve. and they are out and about and having a walk. we were waiting for the walk. we wanted to see whether they would be wearing cowboy hats, that they would make the walk, which they traditionally do, and what they will be checking out. i would love to be a fly on the wall to hear exactly what the conversation is about. but we will continue to monitor

what is happening in jackson hole. i think jay powell, maybe trying to catch a flight there. i'm not entirely sure. we will watch out, kailey, executive but is happening out. we will hear from loretta mester in a moment. for that let me show you what is happening with the markets quickly. this is the picture in europe as we come into the close. it is a negative one. part of it is what is coming out of jackson hole. part of it is what is coming out of europe. equity markets are soft today. the ftse having a slightly better day. some of the big energy stocks doing fairly well in europe. that is boiling that market, which has become the safe haven of europe. let's work our way through the price action quickly so we can get to loretta mester. most of the day we were waiting -- we were on board, we were waiting for power. don't get much of a reaction. we also get news about 75 coming from the ecb. then we go down fairly hard.

let's take a look at the stocks in the sector story we are watching around all of this. this is the grr. everything is in negative territory. energy doing the best right now. at the bottom you have retail, travel, and leisure. let's quickly move onto the last board, to quickly show you what is happening there. we are watching euro-dollar, positive on the day. you have the german two-year rising quite sharply. the french power prices blistering higher. that is the real story out of europe right now. that is what provided the energy story and the inflation story out of europe. it's turn now back to jackson hole. mike mckee sitting down with loretta mester. mike: we would like to welcome our viewers and listeners worldwide to bloomberg as jay powell's speech this morning, as guy mentioned, a very short speech. eight minutes 38 seconds. it was six pages long.

his previous speeches have been 15, 16 pages long. in a very direct message -- stayed the course. we want to welcome cleveland fed president loretta mester. you were in the room. did he give, from your perspective, the way you look at markets, that he give the message that you felt needed to be given? loretta: i think there was a very strong message, and i'm certainly allying with that. this is not a sure campaign. it is going to take time and more fed attention to get inflation on a trajectory down to our 2% goal. we are all in and we are going to be resolute. i thought the passage was strong and right. mike: from your point of view what does that mean? loretta: resolute means this is not a quick fix. you're going to have to bring rates up and continue doing that until we see compelling evidence that inflation is moving back down toward 2%, and until it does we are going to have to just be very resolute in that

being our goal. the july inflation report was welcome news, but we really cannot let thinking substitute for compelling evidence. we need to see a lot more data. i need to see a lot more convincing evidence that inflation is moving back down. mike: do you have a feeling about september 21? you have more evidence in the cpi report before then, are you leaning one way? loretta: i want to wait until the data comes in. the markets assume that it is 50 or 75. it is going to be one of those two, that i think we are going to have to move interest rates up, so i want to see that data. i will assess it, get the decompositions of the inflation data more carefully, and also the inflation expectations data is very important as well. mike: we had good news on that front today. the michigan number has come down. obviously gasoline. but they are still elevated. do you have any concerns at this point that we have seen any kind

of expectations get built in? loretta: i do think the upper range of being longer-term inflation expectations being consistent with 2% inflation, i don't think they are over that range yet, but i think we have to take it very seriously when we see those levels being elevated and sustained, because if inflation expectations were to move above 2% or long-run run 2% inflation, and getting inflation back down will get that much harder and painful. so that is why i am very focused on that as well has the other data on inflation, to be able to assess how much demand moderation is happening, how much supply chain is happening. because we really have an imbalance in demand and supply. of course the fed tools work on the demand side. mike: lowering gasoline prices is the one thing you cannot control, and that is obviously a

danger going forward. you don't know what is going to happen. loretta: there are upside risks, because we know the situation with ukraine and the russian supply of oil, that is going to be, you know, those numbers are coming out, or that environment means that probably gasoline prices may not be sustained at lower levels. again, i don't think this is a time to declare victory over inflation. there is a lot going on in the economy that will effect inflation, and we have to be very resolute. if you look at service inflation, windsor very elevated, and rents flow through into those underlying inflation numbers with lag. again, i think there is reason to be cautious on declaring inflation has peaked, and cautious in thinking it is on a trajectory moving down. i really need to see convincing evidence of that before i would say that we can ease off of our needs to raise interest rates. mike: the chairman says the goal

is to get rates to a slightly restrictive stance, which he said look at the summary of economic projections from june and it was around 3.5%. but he caveat at that by saying september 21 you have a new set of projections. have you changed your view on where you think the terminal rate needs to be? loretta: there is a lot of confusion about what that -- that is a long run, you know, there is a long-run neutral and a short run neutral. and if you think about where inflation expectations are and you think about what the real rate of neutral, that is about half a percent. we are still in negative real rates. we have not even gotten to a neutral in that sense, a fed funds rate. we are going to have to move rates up. i think we're going to have to move them up, and this is based on my current read of the data. and probably need to hold them there next year.

so in other words, move them up to slightly above 4% sometime early next year, and keep them there in order to get this inflation under control and back down to 2%. mike: the markets looked at what the fed has been saying about that and say, we don't think they can do that, we are going to see recession going forward. are you willing to go into recession to maintain rates at that level? loretta: i think we are going to have to assess demand versus supply, right? the imbalance there. i think we have to see inflation coming back down, because even if growth -- and i do think growth will be slow. i'm not projecting a recession, but i do -- but i do think we are going to have below-trend growth this year and into next year. but i think that is necessary in order to get inflation under control. you will see increasing in the unemployment rate. but i don't think excess of in terms of either a pullback in

growth or labor markets, you know, being totally disrupted. because the labor market is so strong right now. it is very tight. have labor demand out placing -- outpacing supply. our policy is intended to work on that demand side. but there is also reason to think it may not be prolonged or deep slowdown. he could very well be that we have to have some slowdown, but it will not be one that is a painful one in terms of the longevity or deepness. that said, we are going to have to have that. if we don't have that i don't think we are going to get inflation back down, and that will create more problems. we will not be able to get the strong labor market conditions we had in the last expansion unless we get inflation down. mike: we are speaking with loretta mester, the president of the cleveland federal reserve bank. who was in the room as jerome powell spoke today.

some advocate for a go slower approach, because they are concerned about long run lags. some of the others we talked to say that is not really an issue, because policy lags are much shorter these days, so we don't have to worry year from now we are going to be choking the economy. when you fall on that spectrum? loretta: i do think because of the forward guidance the fed gave you saw the financial markets react, probably sooner and more sharply than typically. but that does not necessarily mean the real economy is going to -- the effect of the policy changes on the real economy are going to happen faster. i'm agnostic on that. even when you say variable lag, it is the long and variable part. 18 months is still a long time, so that is not a frame i am using to sort of determine where i think appropriate policy is. rather, i'm going to be looking at the data and what is it -- what it is informing me about the outlook. i know people say, why you

looking at data that is the past and not looking forward? i am looking forward, but the data helps inform my outlook for the economy and assess the risks of that outlook. i'm looking forward, and i think we have to. for example, i don't believe we are going -- it would be appropriate to continue raising rates until inflation is down to 2%. we are going to at some point have to pause, keep rates probably at an elevated level for some time, and then make sure inflation is on a downward trajectory. mike: what do you see or what are people telling you in your district, both businesses and consumers, about how they feel about the economy? there is a potential self-creating problem there. loretta: i think there is a lot of concern about the future. if you talk to businesses now a lot of them say, you know, things are still really good. i have a backlog of orders, i think activity will stay

relatively strong this year. it is about the future. it is about what is going to happen next year and going forward. sam on the consumer side when you talk to households. they are struggling with inflation. inflation is very painful. that is why it is so imperative to get that inflation under control. again, most of it is not about the current situation. it is really, what is the future going to bring? that is why it is important for the fed to be doing actions now, so that the future can be a better future. mike: thank you very much for joining us today. loretta mester is the president of the federal reserve bank of cleveland. a busy day. jay powell telling the markets to stay the course. loretta mester telling us she is with jay powell. will send back to you. kailey: thanks very much to bloomberg's michael mckee with that president loretta mester in jackson hole, afflicting on -- loretta mester saying she thinks rates may need to go above 4% and be there next year.

a consistent message from the federal reserve speakers today, including chairman powell. coming up, we will have more reaction to these remarks and get the latest on europe's energy prices, as well as prices surge yet again. i let hand or grinned all will be joining us next. this is bloomberg.

ritika: this is bloomberg markets. we were looking at a live shot of the principal room. coming up, the imf deputy managing director. this is bloomberg. kailey: chairman powell has spoken, and these markets are reacting. it is a downside move for equities after the fed chairman said they are going to get restrict. they're going to stay there for some time. that is taking equity down collectively. the s&p right now down about 2%, that it is those tech-heavy indices that are more sensitive

higher rates feeling the brunt of the pain. the nasdaq and nasdaq 100 down about 2.5 percent as we see action in the bond market as well. we are three basis points higher on the 10 year. at the long end of the curve you are seeing movement to the downside. the 30 year yield is down 5.5 basis points. it is going to show you that the powell stance on inflation may lead to some growth concerns down the line. he spoke to that himself when he talked about pain that may -- that may need to be the cost. let's get more on that fed speak. alejandra grindal is joining us. she is ned davis research chief economist. what do you make of the job the chairman gave today? what grade would you give him? alejandra: met expectations, pretty much. you have to realize that we get really excited about these jackson hole speeches because often we do get some new and insightful information. but most of the time you and up

not getting a whole lot of surprises. that is essentially what happened. recall that last month the fed has perhaps given an impression to markets during its last meeting that it was intended to go toward a pivot. i personally did not feel that way, but at the same time it is up for interpretation. since then we have had a lot of fed presidents who have tried to downplay the notion of a pivot. i think, you know, powell ultimately nailed it. guy: is the equity market appropriately valued for a fed that is going to raise rates? let's take a loretta mester's number. all we appropriately valued for that policy? alejandra: i think the ultimate question is, does this lead the u.s. economy into recession? and we cannot really make that call right now yet. however, a lot of the leading

indicators in the data we are looking at you indicate we could be reaching u.s. recession may be in early next year. if that is the case, if the fed continues to be aggressive and we ultimately end up in recession, is three tells us we could potentially see more downside in the u.s. as well as global equities. kailey: we heard from all of the fed speakers today that a recession is not their base case. do you think that is honest? you have andrew bailey at the boe, for example, in brutally honest that the -- that they see a recession for longer than a year. i'm wondering if we get that same candor from the federal reserve? alejandra: i don't think so. it is interesting how the bank of england has been honest about it. from the fed's perspective, some of the ways we can talk are that moral equation. if we say we are going to fall into recession, maybe we well. maybe they want to emit -- omit that. the probability is there and the fed knows it.

one of the most interesting takeaways at the last press conference, which to me made me think the fed was not going to pivot, is when a reporter asked, do you expect to make a policy mistake? and if so, do you expect too much or too little? of course his responses, we are not going to make a policy mistake. they have to admit that everything is going to go right. however, he did say that having inflation remain too long -- higher for too long -- is worse than economic concerns or possible economic downside in the near term. i think the language is not necessarily direct, but if you look at the underlying messages is there and is a possibility. guy: what kind of unemployment do you think we are going to have to see in the united states in order to get back to the fed's target of 2% inflation? alejandra: that is a tough story, because i think that is also what is making the decision for the fed so difficult. one of the reasons the

unemployment rate is remaining so low in the united states is because we have not seen a return in the labor force. we are one of the few economies that has not seen its labor force participation, even actual levels, get back to pre-covid levels. that is keeping that rate lower and causing higher inflation pressures, because ultimately if there is a shortage of workers you are going to demand higher wages. the fed is trying to calibrate his perfect position that people who have their jobs will keep it, however, all of that excessive demand could eventually come down. i think that is going to be difficult to do, because fed policy in itself is not super-targeted. guy: absolutely. the sledgehammer. q. very much. alejandra grindal, ned davis research chief economist. this is bloomberg. ♪

>> he did what he needed to do. it was clear that inflation is the overwhelming priority. it was clear, despite some earlier confused talk about neutral, he was under no illusions that monetary policy was in an appropriate place right now. it was clear that whatever the academic arguments about demand shocks versus supply shocks said , the fed cannot accept continuing high inflation, and had to act until it was clear that that was going away. the remarks were very concise. there was not a lot of more academic discussion, but there was a statement of being

resolute. so i think that is just right. kailey: that was former u.s. treasury secretary larry summers reacting to jerome powell. markets are reacting as well. let's get the latest with abigail doolittle. we are down hard. abigail: larry summers may be correct in terms of doing what needed to be done relative to inflation, but stocks may feel opposite. this is a chart of the s&p 500 futures, and you can see into the remarks that, basically flat, up a little bit, then nose diving. not so long ago down 2% on the week, heading to the worst week in more than two months. kailey, earlier big tech is selling off more. here it is. the nasdaq 100 down 2.4%. we have volatility higher. the vix is now at a 29 handle.

you have to you yields up for basis points. take a look at that. that is the pressure on stocks. the s&p 500 below its 100 week living average. that happened in 2020 and 2019. we have here is a second break, and that happened in 2016. in 2008 was a clear break. this is a comparison. it may suggest more volatility head, it also suggests there is some sort of floor in place. but it could be painful finding it once again. guy: thank you very much. abigail doolittle. it has been an interesting afternoon. not only have we had jay powell i'm a which is a slow burn in terms of the market reaction, you also have french power prices surging, and there is no talk of an ecb 75 basis point hike in september. kailey: a massive day for banks, but now that it is over, we get to go on vacation. you have to do radio.

i'm going to hang things over to david westin. general david petraeus will be joining him here in the u.s. have a good weekend, everyone. this is bloomberg. ♪

>> from the world of politics to the world of business, this is balance of david westin -- power with david westin. david: from bloomberg world headquarters in your tower television and radio audiences worldwide, welcome to balance of power. we had furred -- have heard from joe jay powell on inflation. this is what he had to say. >> some point as monetary policy tightens further, it will likely be appropriate to slow the pace of increases.