WEBVTT - Daybreak Weekend: US Election Preview, BOE Decision, Japanese Autos 0:00:03.040 --> 0:00:05.480 This is Bloomberg day Break Weekend, our global look at 0:00:05.519 --> 0:00:07.520 the top stories in the coming week from our day 0:00:07.560 --> 0:00:09.879 Break anchors all around the world, and straight ahead on 0:00:09.920 --> 0:00:13.200 the program, a look at Tuesday's US presidential election and 0:00:13.240 --> 0:00:16.440 what could be at stake for the US economy. Also 0:00:16.480 --> 0:00:20.079 a preview of this week's Federal Preserve Policy meeting. I'm 0:00:20.120 --> 0:00:23.200 Tom Busby in New York. I'm Stephen Kyle in London. 0:00:23.239 --> 0:00:26.119 Work calculating the size of the Bank of England's but 0:00:26.400 --> 0:00:27.200 just headache. 0:00:27.400 --> 0:00:30.200 I'm Charlie Pellett, looking ahead to earnings from some of 0:00:30.320 --> 0:00:35.280 Japan's biggest automakers and the state of the gold trade. 0:00:37.200 --> 0:00:41.280 That's all straight ahead on Bloomberg Daybreak Weekend, The business 0:00:41.320 --> 0:00:45.280 news you need to wrap up your week. Available on Apple, Spotify, 0:00:45.440 --> 0:00:48.800 the Bloomberg Business Appen everywhere you get your podcasts. 0:00:54.080 --> 0:00:56.600 Good day to you. I'm Tom Busby. We begin today's 0:00:56.600 --> 0:01:01.000 program with this Tuesday's US presidential election and what each candidate, 0:01:01.080 --> 0:01:03.440 if he or she wins, is hoping to do for 0:01:03.480 --> 0:01:06.800 the economy. For more, we turned to Mark Niquette, Bloomberg 0:01:06.880 --> 0:01:10.240 Real Economy Team reporter. Mark. Thank you for joining us. Well, 0:01:10.280 --> 0:01:12.559 we're getting down to the wire. Right now, this election 0:01:12.600 --> 0:01:14.800 looks like a toss up, just a few key swing 0:01:14.840 --> 0:01:17.800 states likely to decide the outcome. I'm going to ask 0:01:17.840 --> 0:01:20.360 you where the economy is right now. One candidate calls 0:01:20.360 --> 0:01:23.240 it a disaster. I don't think that's true, but why 0:01:23.240 --> 0:01:24.640 don't you tell me where we are now? 0:01:25.080 --> 0:01:29.040 We kind of have a disconnect between an economy that 0:01:29.560 --> 0:01:33.320 economic indicators show is doing well and is strong, and 0:01:34.040 --> 0:01:38.800 public perception is measured by poles that the economy is 0:01:38.840 --> 0:01:39.880 headed in the wrong direction. 0:01:40.200 --> 0:01:43.880 We had a spate of economic reports this week that 0:01:44.720 --> 0:01:49.240 would be otherwise you'd think encouraging for Kamala Harris, showing 0:01:49.280 --> 0:01:54.880 that the economy is doing quite well. We had a 0:01:54.960 --> 0:01:59.680 GDP report yesterday that showed an annualized rate of two 0:01:59.680 --> 0:02:03.320 point eight percent in the third quarter, consumer spending was up. 0:02:04.200 --> 0:02:08.639 On Tuesday, we had a Consumer Confidence report showing that 0:02:09.120 --> 0:02:12.280 consumer confidence increased in October by the most since March 0:02:12.320 --> 0:02:16.200 twenty twenty one. And we had a PCE report, you know, 0:02:16.320 --> 0:02:21.000 so called core personal consumption Expenditures, that showed that overall 0:02:21.040 --> 0:02:24.720 inflation was down to two point one percent, the lowest 0:02:24.800 --> 0:02:29.160 since early twenty twenty one. But despite these good economic numbers, 0:02:30.000 --> 0:02:34.200 polling continues to show that voters think the economy is 0:02:34.240 --> 0:02:37.960 headed in the wrong direction. They're still stuck on you know, 0:02:38.080 --> 0:02:43.079 high prices and you know a sense that inflation rate 0:02:43.160 --> 0:02:46.840 that we've seen come down hasn't translated into their everyday 0:02:46.880 --> 0:02:49.600 purchases of gas and groceries. So that's sort of the 0:02:49.840 --> 0:02:52.640 backdrop for the presidential election where you know, we have 0:02:53.080 --> 0:02:56.600 a race where voters say the economy is their biggest issue, 0:02:56.919 --> 0:03:02.120 and polls, including our poll Morning Console, show that voters 0:03:02.480 --> 0:03:05.359 trust Trump Donald Trump more than Kamala Harris. 0:03:05.040 --> 0:03:05.720 On the economy. 0:03:05.800 --> 0:03:08.320 Well, because of that, let's talk then about what each 0:03:08.440 --> 0:03:12.080 candidate is promising to do. You're right, former President Trump, 0:03:12.160 --> 0:03:14.799 many believe he handled the economy better right now, though 0:03:14.800 --> 0:03:18.280 it seems to be banking on punishing import tariffs as 0:03:18.320 --> 0:03:21.800 his chief economic plan. Tariff certainly have their benefits, but 0:03:22.200 --> 0:03:24.040 is this really going to move the needle on inflation 0:03:24.200 --> 0:03:25.799 and household budgets. 0:03:26.040 --> 0:03:30.040 Well, if you talk to most mainstream economists, they'll tell 0:03:30.080 --> 0:03:33.600 you yes, that there's even forecasts out there that will 0:03:33.639 --> 0:03:37.400 calculate what impact the proposed tariffs that President Trump, former 0:03:37.440 --> 0:03:41.720 President Trump has promised on the campaign trail, What impact 0:03:41.720 --> 0:03:46.119 they would have on the increase in inflation and decrease 0:03:46.160 --> 0:03:50.440 in gross domestic product. The expectation from most economists is 0:03:50.480 --> 0:03:54.520 that when you put a tariff on at the size 0:03:54.560 --> 0:03:57.680 that President Trump is talking about, ten to twenty percent 0:03:57.800 --> 0:04:03.120 on all imports, on imports from China, that's just going 0:04:03.200 --> 0:04:06.880 to drive up prices because you know foreign countries, foreign 0:04:06.880 --> 0:04:09.920 countries don't pay the tariffs. Importers pay the tariffs, and 0:04:09.920 --> 0:04:14.120 they're passed along to consumers. So the rising prices will, 0:04:14.400 --> 0:04:18.080 some economists predict, will lead to even stay inflation. Now 0:04:18.120 --> 0:04:22.360 that the president's former president and his supporters would argue 0:04:22.360 --> 0:04:26.240 that the inflation didn't spike during his first term when 0:04:26.240 --> 0:04:30.479 he put in tariffs on China and aluminum and steel imports, 0:04:31.279 --> 0:04:34.680 and that you know, their projections are that the tariffs 0:04:34.680 --> 0:04:37.880 will actually help with reshoring of manufacturing and creating of 0:04:37.920 --> 0:04:42.400 manufacturing jobs in the US and actually increase economic growth. 0:04:43.120 --> 0:04:45.200 So we'll kind of have to wait and see if 0:04:45.360 --> 0:04:48.000 former President Trump wins and he does put these tariffs on, 0:04:48.360 --> 0:04:50.919 you know what impact they would have, because while his 0:04:51.000 --> 0:04:53.599 supporters say that, you know, there wasn't a spike in 0:04:53.600 --> 0:04:56.240 inflation during his first term because of the tar see 0:04:56.440 --> 0:05:00.520 put on. What he's talking about enacting if he elected 0:05:00.560 --> 0:05:06.680 to another term is substantially higher and broader. Essentially, his 0:05:06.800 --> 0:05:11.599 proposed tariffs would hit all three trillion of US imports annually. 0:05:12.400 --> 0:05:15.719 That would have a staggering, staggering, presumably a big impact 0:05:15.800 --> 0:05:16.400 on economy. 0:05:16.680 --> 0:05:19.119 Vice President Harris has promised to tackle the high cost 0:05:19.120 --> 0:05:22.680 of living by boosting new home construction, going after corporations 0:05:22.680 --> 0:05:25.640 accused of price gouging, and expanding a tax credit for 0:05:25.720 --> 0:05:27.800 those with young families. And to pay for all that, 0:05:27.880 --> 0:05:31.240 of course, taxes on the wealthy. What would that mean 0:05:31.520 --> 0:05:33.080 for inflation and for the economy. 0:05:33.400 --> 0:05:35.760 Well, that's going to be the big fight next year 0:05:35.880 --> 0:05:40.720 over taxes. We have the tax cuts that former President 0:05:40.760 --> 0:05:44.320 Trump enacted when he was in office in twenty seventeen 0:05:44.839 --> 0:05:47.599 that are expiring at the end of twenty twenty five. 0:05:48.000 --> 0:05:51.880 So the next president, whether it's Kamala Harris or Donald Trump, 0:05:52.080 --> 0:05:55.400 and the newly elected Congress will have to deal with 0:05:55.800 --> 0:05:59.280 taking action on those expiring tax cuts, either extending them 0:05:59.560 --> 0:06:03.880 as President Trump has talked about doing, or changing them 0:06:04.160 --> 0:06:07.680 as you mentioned, Kamala Harris has talked about. Vice President 0:06:07.680 --> 0:06:12.240 Harris has talked about She's suggesting that the tax cuts 0:06:12.560 --> 0:06:17.159 should be limited to those making four hundred thousand dollars 0:06:17.240 --> 0:06:21.159 in the less a year, So preserve the tax cuts 0:06:21.200 --> 0:06:26.839 for middle class, but allow increases for wealthier individuals, and 0:06:26.920 --> 0:06:30.440 increase the corporate rate to twenty eight percent as a 0:06:30.440 --> 0:06:32.880 way to, as she would say, you know, have the 0:06:33.520 --> 0:06:36.960 wealthy and corporations pay their fair share, but also to 0:06:37.040 --> 0:06:41.080 rai's revenue to pay for, as you mentioned, expanded childcare 0:06:41.320 --> 0:06:44.680 tax credit, tax credit for first time home buyers, and 0:06:44.720 --> 0:06:48.039 some other subsidies that she's proposed for small businesses. But 0:06:48.080 --> 0:06:50.840 that's all going to be up to Congress, and one 0:06:50.880 --> 0:06:53.040 of the things we'll be watching to see, you know, 0:06:53.080 --> 0:06:56.200 what kind of party control of Congress we see after 0:06:56.279 --> 0:06:59.479 the elections on Tuesday. You know, we have a potential 0:06:59.600 --> 0:07:04.200 for a president elected with full control party control of 0:07:04.240 --> 0:07:07.279 Congress or divided government, and that will go a long 0:07:07.279 --> 0:07:09.560 way determining what happens with the tax bill. 0:07:09.800 --> 0:07:11.680 Yeah, you bet well, a lot to look forward to 0:07:11.760 --> 0:07:15.360 election day Tuesday, November fifth. Our thanks to Mark Niquette, 0:07:15.360 --> 0:07:18.720 Bloomberg Real Economy Team reporter. But we turned now to 0:07:18.800 --> 0:07:22.160 the Federal Reserve as policymakers meet again this week on 0:07:22.280 --> 0:07:25.160 interest rates. For more and what to expect. We turned 0:07:25.160 --> 0:07:28.920 to Stuart paul Us, economists with Bloomberg Economics now Stewart. 0:07:28.960 --> 0:07:32.560 FED Chair Jerome Pala has always maintained that FOMC decisions 0:07:32.600 --> 0:07:36.080 are data driven. And wow, did we get some kind 0:07:36.120 --> 0:07:39.040 of data point this past Friday, just twelve thousand jobs 0:07:39.120 --> 0:07:42.040 added in October. Was this just shock to you? And 0:07:42.600 --> 0:07:44.000 what does it mean for the Fed? 0:07:44.440 --> 0:07:48.120 We had anticipated actually a slightly worse jobs report. We'd 0:07:48.200 --> 0:07:52.360 expected total employment to actually decline by about ten thousand jobs. 0:07:52.960 --> 0:07:56.720 Private employment did decline during the month. A big part 0:07:56.760 --> 0:07:59.960 of that is the effect of both hurricanes Milton and Hollene, 0:08:00.480 --> 0:08:03.480 and also the strike at Boeing. We did see about 0:08:03.520 --> 0:08:08.240 forty five thousand jobs lost in manufacturing, and we think 0:08:08.280 --> 0:08:10.320 that that's mostly a consequence of the strike at Boeing 0:08:10.400 --> 0:08:14.440 and knock on effects at parts suppliers. The household survey 0:08:14.920 --> 0:08:18.560 where we see the unemployment rate actually worse in just 0:08:18.680 --> 0:08:21.320 a little bit. Now, the headline on employment rate held 0:08:21.360 --> 0:08:24.280 steady at four point one percent, but that's mostly just 0:08:24.360 --> 0:08:26.560 a matter of rounding. It's literally just a matter of 0:08:26.640 --> 0:08:30.720 a few hundreds of a percentage point that is getting 0:08:30.800 --> 0:08:33.360 rounded away. And that's keeping the unemployment rate at four 0:08:33.400 --> 0:08:35.760 point one percent, But the actual numbers do look a 0:08:35.840 --> 0:08:38.640 little bit worse when you look under the surface. Undoubtedly, 0:08:38.760 --> 0:08:42.520 the labor market is cooling. We also saw earlier last 0:08:42.600 --> 0:08:45.400 week the total number of job openings declining during the 0:08:45.480 --> 0:08:48.880 month and the quits rate falling as workers realize and 0:08:48.960 --> 0:08:50.920 as they come to grips to the fact that it 0:08:51.160 --> 0:08:54.600 is more difficult to find new employment at higher wages. 0:08:54.920 --> 0:08:57.240 The Fed is absolutely going to be taking this cooling 0:08:57.320 --> 0:08:59.800 labor market into consideration what it meets next week to 0:09:00.080 --> 0:09:01.400 make its next rate cut decision. 0:09:01.559 --> 0:09:03.320 Now, on the other hand, we have seen some very 0:09:03.400 --> 0:09:08.000 encouraging economic data as well about GDP, consumer spending, consumer sentiment, 0:09:08.120 --> 0:09:08.720 and inflation. 0:09:08.920 --> 0:09:13.839 Right, that's right, So core PCE inflation, the Fed's preferred gauge, 0:09:13.960 --> 0:09:18.040 came in a bit hot in September, and yes, you're right. 0:09:18.160 --> 0:09:21.080 Through the third quarter we did see pretty strong growth 0:09:21.120 --> 0:09:23.760 two point eight percent annualized growth on the back of 0:09:24.360 --> 0:09:28.079 about three point seven percent annualized consumer spending growth. Now, 0:09:28.480 --> 0:09:31.200 when we drill down into the data, looks to us 0:09:31.520 --> 0:09:36.920 like it's mostly employment and employee compensation income, so wage 0:09:37.040 --> 0:09:41.760 income that's supporting that spending and just an exceptionally low 0:09:41.960 --> 0:09:46.080 saving rate that it just consumers undersaving to support their 0:09:46.120 --> 0:09:49.679 spending habit. As the labor market cools, we think that 0:09:49.840 --> 0:09:52.760 that undersaving is going to go away, consumers are going 0:09:52.840 --> 0:09:55.240 to get a little bit more cautious, and so a 0:09:55.320 --> 0:09:58.719 lot of those tailwinds that have been supporting spending we 0:09:58.920 --> 0:10:01.640 think are going to fase as the labor market cool. 0:10:01.760 --> 0:10:05.840 So yes, for now, things do look rather strong. They 0:10:05.880 --> 0:10:08.599 look strong through the GDP numbers. But I think that 0:10:08.840 --> 0:10:11.079 if you're thinking like the FED, and you're thinking about 0:10:11.200 --> 0:10:13.559 what it's going to look like down the line, it's 0:10:13.600 --> 0:10:15.560 time to get a little bit more cautious to think 0:10:15.640 --> 0:10:17.600 that some of those talwinds might be fading. 0:10:17.800 --> 0:10:20.720 And the FED still has another meeting in mid December, right, 0:10:20.800 --> 0:10:24.240 So what's your gut feeling right now after in the 0:10:24.280 --> 0:10:27.600 wake of this Job's report, dismal report of. 0:10:27.679 --> 0:10:29.240 What the Fed is going to do, we think that 0:10:29.320 --> 0:10:31.840 the Fed is going to cut by twenty five basis points, 0:10:31.920 --> 0:10:36.800 So still another rate cut, still the removal of restrictive policy, 0:10:37.320 --> 0:10:40.360 not quite getting back to neutral, certainly not accommodative, but 0:10:40.800 --> 0:10:45.000 a twenty five basis point reduction for November Looking ahead 0:10:45.080 --> 0:10:48.240 to December, we still think another twenty five basis points 0:10:48.360 --> 0:10:51.520 is in play. But for a data dependent FED, who's 0:10:51.640 --> 0:10:54.760 probably going to then slow down its cadence of rate 0:10:54.840 --> 0:10:57.719 cuts in twenty twenty five, December is going to be 0:10:57.760 --> 0:11:00.320 more of a knife edge decision. We'll need to see 0:11:00.559 --> 0:11:03.360 just how much the labor market deterior rates between now 0:11:03.400 --> 0:11:03.679 and then. 0:11:04.040 --> 0:11:07.400 Mortgage rates, though, have moved the other way. Why is that? 0:11:07.800 --> 0:11:10.920 And I mean it's really got to affect housing and 0:11:11.200 --> 0:11:14.760 people's affordability, But why have we seen six weeks in 0:11:14.800 --> 0:11:17.440 a row mortgage rates edge a little bit higher. 0:11:17.760 --> 0:11:21.160 Mortgage rates tend to be benchmarked based on longer term 0:11:21.520 --> 0:11:25.320 treasury rates, So the Fed is cutting very very short 0:11:25.440 --> 0:11:28.880 term interest rates, and in fact, by running off its 0:11:29.000 --> 0:11:32.600 bond portfolio, it's putting upward pressure on long term rates, 0:11:33.080 --> 0:11:35.640 all at a time when we have on election coming 0:11:35.720 --> 0:11:40.960 up where the two candidates are spending heavy versus spending heavier. 0:11:41.080 --> 0:11:42.839 There is no austerity candidate, So I think that the 0:11:43.240 --> 0:11:47.040 bond market is looking at our fiscal situation as a country, 0:11:47.400 --> 0:11:50.480 and they're also feeling the effects of the runoff of 0:11:50.559 --> 0:11:54.079 the Fed's balance sheet, and we're getting some upward pressure 0:11:54.160 --> 0:11:58.080 on long term yields, and that's pushing up mortgage rates. Again. 0:11:58.200 --> 0:12:01.160 We think that higher long term rates, it's higher mortgage 0:12:01.240 --> 0:12:03.480 rates tends to put people in a little bit more 0:12:03.640 --> 0:12:06.520 bind So even as the Fed is cutting short term 0:12:06.600 --> 0:12:09.839 interest rates, folks are probably going to need to rain 0:12:09.960 --> 0:12:12.920 and spending just a bit more, especially as the labor 0:12:12.960 --> 0:12:13.560 market cools. 0:12:13.720 --> 0:12:13.920 Yeah. 0:12:14.040 --> 0:12:16.600 Oh, and it's cool well that two day FOMC meeting 0:12:16.679 --> 0:12:19.560 kicks off Wednesday, delay to day because of the elections 0:12:20.320 --> 0:12:23.400 decision expected two pm Wall Street time on Thursday, and 0:12:23.480 --> 0:12:27.160 our thanks to Stuart paul Us economists with Bloomberg Economics 0:12:27.600 --> 0:12:29.839 coming up on Bloomberg day Break weekend to look inside 0:12:29.880 --> 0:12:33.400 the inaugural budget of the UK's newly installed government what 0:12:33.679 --> 0:12:36.600 that means for the Bank of England. I'm Tom Busby 0:12:36.720 --> 0:12:47.240 and this is Bloomberg. This is Bloomberg day Break Weekend, 0:12:47.320 --> 0:12:49.760 our global look ahead at the top stories for investors 0:12:49.840 --> 0:12:52.400 in the coming week. I'm Tom Busby in New York. 0:12:52.679 --> 0:12:55.000 Up later in our program will look ahead to earnings 0:12:55.040 --> 0:12:57.760 from some of the world's biggest automakers. But first, the 0:12:57.960 --> 0:13:01.000 UK's new labor government has delivered its first ever budget, 0:13:01.320 --> 0:13:04.480 boasting one of the biggest tax increases in a generation 0:13:04.760 --> 0:13:08.319 and changes to the nation's much touted fiscal rules. What 0:13:08.440 --> 0:13:10.880 will the country's new economic direction mean for the Bank 0:13:10.920 --> 0:13:13.400 of England. For more, let's go to London and bring 0:13:13.480 --> 0:13:16.320 in Bloomberg daybreak, Eurobanker Stephen Carroll. 0:13:16.200 --> 0:13:19.480 Tom The UK's Chancellor of the Exchequer, Rachel Reeves, unveiled 0:13:19.520 --> 0:13:23.199 a forty billion pound package of tax rises and ramped 0:13:23.280 --> 0:13:26.360 up borrowing in a dramatic move to meet the Labor 0:13:26.440 --> 0:13:28.880 Party's pledge to rebuild the UK. 0:13:29.559 --> 0:13:29.679 Well. 0:13:29.720 --> 0:13:31.880 One person who'll be keeping a close eye on the 0:13:31.960 --> 0:13:35.160 developments announced by the chancellors the Government of the Bank 0:13:35.200 --> 0:13:37.800 of England Andrew Bailey. He and his fellow policymakers are 0:13:37.880 --> 0:13:39.959 due to make their next interest rate decision in the 0:13:40.000 --> 0:13:43.960 coming days, just shortly after the budget announcement. Although officials 0:13:44.040 --> 0:13:46.880 have already opted to lower borrowing costs this year, economist, 0:13:46.920 --> 0:13:49.360 they're warning that the pain of high rates could be 0:13:49.520 --> 0:13:53.240 prolonged following Reeves's announcement. It's all the government plans to 0:13:53.320 --> 0:13:55.840 lift borrowing by one hundred and forty two billion pounds 0:13:55.880 --> 0:13:58.839 over five years to help fund a massive program of 0:13:59.000 --> 0:14:02.320 investment and boost public services. Couples with appliged to deliver 0:14:02.360 --> 0:14:05.280 another large jump in the minimum wage, our potential threats 0:14:05.320 --> 0:14:08.280 to the BOSIM to keep inflighting low. We discussed how 0:14:08.360 --> 0:14:11.200 reads as plan my effect personal spending habits with our 0:14:11.280 --> 0:14:15.080 money distilled columnist John Steppek. Here's what he had to say. 0:14:15.520 --> 0:14:16.959 I don't get it wrong. I mean I think that 0:14:17.080 --> 0:14:19.560 it's been the direction of travel has been very clear 0:14:19.800 --> 0:14:22.320 on property for a long time. And I think if 0:14:22.400 --> 0:14:27.200 you're someone who still views residential property as a viable 0:14:27.320 --> 0:14:31.040 investment for an amateur in person or even as an 0:14:31.120 --> 0:14:34.480 investment asset, you maybe need to have a look at 0:14:34.480 --> 0:14:36.880 what's happened over the last ten years because the tax 0:14:36.960 --> 0:14:41.160 benefits have been slashed. You know, this latest move jacking 0:14:41.240 --> 0:14:44.880 up the stamp duty again is just it's sort of 0:14:44.960 --> 0:14:47.360 signaling we don't want people you own second homes. And 0:14:47.440 --> 0:14:49.880 that's before you get to local council taxes in various 0:14:49.880 --> 0:14:53.560 desirable areas. I mean, the other rabbit obviously is not 0:14:54.440 --> 0:14:58.680 it's basically saying it didn't happen. We'll defrost the tax 0:14:58.760 --> 0:15:01.440 thresholds in twenty twenty, twenty twenty night. But of course 0:15:01.560 --> 0:15:03.200 she's got you know, five years did change on the 0:15:03.240 --> 0:15:05.440 mean to put that, Yes, it. 0:15:05.400 --> 0:15:08.120 Has Boombergs John step out there. So will government policy 0:15:08.240 --> 0:15:11.000 leave the Central Bank wary over the pace of further 0:15:11.120 --> 0:15:13.800 rate cuts? It's something I've been discussing with Boomberg's chief 0:15:14.120 --> 0:15:18.560 UK economist Dan Hansen. Give us some context. What has 0:15:18.640 --> 0:15:21.720 the budget for changed for Andrew Bailey and for BOI 0:15:21.840 --> 0:15:23.240 policymakers if. 0:15:23.120 --> 0:15:25.240 You go back to the middle of September, I think 0:15:25.280 --> 0:15:28.440 it was or not long after the September meeting, Andrew 0:15:28.480 --> 0:15:32.040 Bailey gave an interview saying that policymakers could be a 0:15:32.080 --> 0:15:35.400 little bit more aggressive in terms of their speed of 0:15:35.520 --> 0:15:39.440 rate cuts. I think the budget makes that quite unlikely 0:15:39.560 --> 0:15:41.280 now in terms of how quickly they ease I think 0:15:41.320 --> 0:15:43.800 there's sort of the baseline case, and a reasonable base 0:15:43.880 --> 0:15:47.080 case is that they they may they make a move 0:15:47.160 --> 0:15:51.360 down in November, but they stick to the mantra that 0:15:51.440 --> 0:15:54.360 things will be gradual, so they're not going to indicate 0:15:54.440 --> 0:15:56.760 I don't think that they will speed up the pace 0:15:56.800 --> 0:16:00.920 of rate cuts for that happen. The data is going 0:16:00.960 --> 0:16:03.920 to have to really surprise, and it surprised a bit 0:16:04.000 --> 0:16:07.480 to the downside, but it's not really surprising to the downside, 0:16:07.520 --> 0:16:09.680 and as you just mentioned there there's this enormous fiscal 0:16:09.720 --> 0:16:12.440 stimulus that needs to be factored into their thinking now 0:16:13.000 --> 0:16:16.200 and the national minimum wage hike as well, and that 0:16:16.520 --> 0:16:18.920 just is just one more reason to think that they're 0:16:18.920 --> 0:16:19.600 going to move slowly. 0:16:19.960 --> 0:16:22.600 Let's dig into the borrowing picture and what we learned 0:16:22.640 --> 0:16:26.720 after the budget from the independent government watchdog, the Office 0:16:26.760 --> 0:16:29.160 for a Budget Responsibility that kind of crunches the numbers 0:16:29.240 --> 0:16:32.400 around the announcements being made by the Chancellor and puts 0:16:32.480 --> 0:16:35.080 them in a look of a long term context. What 0:16:35.560 --> 0:16:38.360 did they say exactly about what that spending would mean 0:16:38.640 --> 0:16:41.440 for the inflation outlook and thus the out look? 0:16:41.680 --> 0:16:43.520 Yeah, yeah, so they said that there would be the 0:16:44.280 --> 0:16:46.360 way the policy package has been set up, there will 0:16:46.400 --> 0:16:49.880 be this relatively large near term boost to the economy. 0:16:51.000 --> 0:16:53.440 So growth next year could be point four point five 0:16:53.440 --> 0:16:56.480 percentage points higher as a result of the policy package, 0:16:56.480 --> 0:16:59.920 which is a significant news. Surely, Yes, it's very significant 0:17:00.040 --> 0:17:02.880 when you're you know, when you're forecasting growth of sort 0:17:02.880 --> 0:17:05.359 of one ish percent, if you you're going to add 0:17:05.480 --> 0:17:07.680 sort of point five percentage points to it, that's quite 0:17:07.760 --> 0:17:11.320 that's quite significant. So and the thing to remember about 0:17:11.320 --> 0:17:13.200 the Bank of England, which is slightly different to the 0:17:13.240 --> 0:17:15.240 Office of a bunch of Responsibility, is that the Bank 0:17:15.280 --> 0:17:18.480 of England thinks the economy's speed limit, so the speed 0:17:18.560 --> 0:17:23.280 at which it can grow without stoking inflation is low 0:17:23.920 --> 0:17:26.400 or lower than the Office of a bunch of Responsibility, 0:17:26.440 --> 0:17:28.920 I should say, So the Bank of England thinks the 0:17:28.960 --> 0:17:31.240 economy can grow one to one and a half percent 0:17:31.359 --> 0:17:34.600 somewhere in that range a year without inflation taking off. 0:17:35.080 --> 0:17:37.000 So if you add in, as I say, this stimulus 0:17:37.080 --> 0:17:40.239 next year that you know is good and with an 0:17:40.240 --> 0:17:43.640 economy operating pretty much sort of at full employment for capacity, 0:17:44.760 --> 0:17:46.639 there is going to be an inflationary impulse from it, 0:17:46.960 --> 0:17:50.440 maybe point two somewhere between point two point four on 0:17:51.040 --> 0:17:54.119 CPI inflation over the next eighteen months or so. So 0:17:54.160 --> 0:17:56.480 that's you know, it's a significant significant boost. 0:17:57.520 --> 0:17:59.919 So for the outlook for rate then what does that mean? 0:18:00.600 --> 0:18:02.399 So I think, as I say, I think they're going 0:18:02.480 --> 0:18:06.400 to cut interest rates at the at the upcoming meeting, 0:18:06.520 --> 0:18:09.720 I think that's that's sort of pretty much a given. 0:18:10.000 --> 0:18:12.760 But I think there was there was always a question 0:18:12.840 --> 0:18:15.520 about whether this meeting they would open the door to 0:18:15.960 --> 0:18:18.240 going a little bit faster. If things allowed them to, 0:18:18.520 --> 0:18:24.080 so essentially creating some conditionality in in what they how 0:18:24.119 --> 0:18:27.680 they'll sort of respond going forward. I think the chances 0:18:27.760 --> 0:18:31.000 of that now have dropped dramatically, and there was a 0:18:31.040 --> 0:18:33.800 lot of debate in the market, and a lot of 0:18:34.160 --> 0:18:36.080 clients I speak to are sort of there's there's a 0:18:36.119 --> 0:18:38.320 lot of debate about was a lot of debate about 0:18:38.320 --> 0:18:41.680 December whether they cut again in December, particularly with you 0:18:41.720 --> 0:18:43.760 know what's going on to the ECB, potentially the FED 0:18:44.160 --> 0:18:46.600 going twice before the end of the year. I think 0:18:46.640 --> 0:18:50.119 the budget has made that significantly less likely that they 0:18:50.200 --> 0:18:53.360 go again in December. I don't think you can preclude 0:18:53.359 --> 0:18:55.640 a speeding up next year if that, but it will 0:18:55.680 --> 0:18:57.800 really be about the data. I think if you're if 0:18:57.800 --> 0:19:02.520 you're sat in on Monetary Policy Committee over the next 0:19:02.840 --> 0:19:04.480 week or so and you're going to make your decision, 0:19:04.480 --> 0:19:08.960 which is announced on the seventh of November, you will 0:19:09.040 --> 0:19:11.720 feel that the implation pitch has become a little bit 0:19:11.760 --> 0:19:13.359 more cloudy as a result of the budget. So I 0:19:13.440 --> 0:19:17.600 think for this upcoming meeting, the cautious time will continue. 0:19:18.119 --> 0:19:20.920 I mean you wonder as well whether people in thread 0:19:20.960 --> 0:19:22.600 Needle Street we are holding their head in their hand 0:19:22.640 --> 0:19:24.360 think either have to rethink all of the work they've 0:19:24.400 --> 0:19:26.600 done before in terms of projections for the economy with 0:19:26.680 --> 0:19:28.639 everything that happened in the budget because it was a 0:19:28.680 --> 0:19:30.840 big package. We expected it to be because it had 0:19:30.920 --> 0:19:35.520 been the first under this current government in the UK. 0:19:36.240 --> 0:19:38.240 But I mean, is it kind of further down the 0:19:38.280 --> 0:19:40.560 line if we think past the upcoming meeting, is there 0:19:40.600 --> 0:19:42.600 a lot in there for the Bank of England to 0:19:42.640 --> 0:19:45.440 have to try and calculate the effects of down the line? 0:19:45.480 --> 0:19:48.160 You meant in the national minimum wage increase coming, that's 0:19:48.160 --> 0:19:51.280 of course a wage inflation issue. We've got the increased 0:19:51.560 --> 0:19:54.840 payroll taxes on employers for national insurance contributions as well. 0:19:55.200 --> 0:19:56.960 Down the line, are those things that are going to 0:19:57.040 --> 0:19:59.400 have that could shift the path for where the Bank 0:19:59.440 --> 0:19:59.879 of England go. 0:20:00.240 --> 0:20:00.440 Yeah? 0:20:00.480 --> 0:20:03.680 Absolutely, I mean I wouldn't you know, I said that 0:20:04.040 --> 0:20:06.280 I wouldn't like to be in thread Needle Street, as 0:20:06.320 --> 0:20:08.640 you just said, watching that budget and sort of making 0:20:08.680 --> 0:20:10.520 the decision about interest rates. I also wouldn't like to 0:20:10.520 --> 0:20:12.600 be in thread Needle Street putting the forecast together, which 0:20:12.640 --> 0:20:15.520 is what they're going to have to do at in quickly, 0:20:15.800 --> 0:20:20.560 pretty quick order to because it would be very It's 0:20:20.680 --> 0:20:23.399 very unlikely that the forecast that gets published won't have 0:20:23.600 --> 0:20:27.040 this this impact in it. So they're gonna the Bank's 0:20:27.040 --> 0:20:29.080 going to have to work pretty quickly to get get 0:20:29.119 --> 0:20:31.959 it all incorporated. I mean, I think I think they 0:20:31.960 --> 0:20:34.720 would have been surprised. Bottom line, to sort of go 0:20:34.880 --> 0:20:36.400 to your point, I think the would have been surprised 0:20:36.440 --> 0:20:37.920 by the site. They had known there was going to 0:20:37.960 --> 0:20:41.399 be some stimulus coming. I think the scale of it 0:20:41.480 --> 0:20:46.600 will have will have surprised them. So Yeah, and I say, 0:20:46.680 --> 0:20:48.600 going back to how that that will sort of be 0:20:48.680 --> 0:20:56.560 reflected in their communication, I think, you know, cautious, cautious guidance. 0:20:56.680 --> 0:20:58.600 But also it's quite possible that we don't get a 0:20:59.440 --> 0:21:01.720 all of the can voting for a cut again, you know, 0:21:01.760 --> 0:21:03.720 you get a un get another split vote. I think 0:21:03.840 --> 0:21:05.800 it just remind us of where we were a last 0:21:05.800 --> 0:21:08.439 time around. Yeah, in September, it was it was eight 0:21:08.480 --> 0:21:12.360 to one for a hold, and I think the way 0:21:12.400 --> 0:21:15.119 the data had been moving there was there was a 0:21:15.160 --> 0:21:17.800 real possibility that we got a nine nil in favor 0:21:17.840 --> 0:21:22.920 of a cut in in November. This is all prior 0:21:22.960 --> 0:21:27.440 to the budget and I think that that in itself 0:21:27.560 --> 0:21:30.000 may have sort of sent a signal that the idea 0:21:30.000 --> 0:21:32.360 of a December cut was on was on the cards 0:21:32.800 --> 0:21:36.000 or a possibility and something that was being seriously considered. 0:21:36.760 --> 0:21:39.960 Now I think you'll most likely get some at least one, 0:21:40.160 --> 0:21:42.560