1 00:00:02,440 --> 00:00:05,200 Speaker 1: This is Bloomberg Daybreak Weekend, our global look at the 2 00:00:05,240 --> 00:00:07,960 Speaker 1: top stories in the coming week from our Daybreak anchors 3 00:00:08,000 --> 00:00:10,280 Speaker 1: all around the world. And straight ahead on the program 4 00:00:10,800 --> 00:00:13,680 Speaker 1: is inflation. What the Fed is really watching this coming week. 5 00:00:13,840 --> 00:00:15,480 Speaker 1: I'm Tom Busby in New York. 6 00:00:15,720 --> 00:00:17,919 Speaker 2: I'm Caroline Headge in London, where we're looking at the 7 00:00:17,960 --> 00:00:21,320 Speaker 2: Bank of England's inflation fight ahead of its May rate decision. 8 00:00:21,480 --> 00:00:24,480 Speaker 3: I'm Keiley Lynes in Washington, where President Biden is gearing 9 00:00:24,560 --> 00:00:27,040 Speaker 3: up to meet with congressional leadership on the debt ceiling. 10 00:00:27,280 --> 00:00:30,240 Speaker 4: I'm Ryan Curtis in Hong Kong. Where does Asia sit 11 00:00:30,320 --> 00:00:32,800 Speaker 4: on the pluses and minuses of AI. 12 00:00:37,000 --> 00:00:41,000 Speaker 5: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 13 00:00:41,040 --> 00:00:43,519 Speaker 5: E Love Them Free on New York, Bloombergen ninety nine 14 00:00:43,520 --> 00:00:46,920 Speaker 5: to one, Washington, DC, Bloomberg one O six one, Boston, 15 00:00:47,000 --> 00:00:51,800 Speaker 5: Bloomberg nine sixty, San Francisco, DAB Digital Radio, London, Sirius 16 00:00:51,920 --> 00:00:55,200 Speaker 5: XM one nineteen and around the world on Bloomberg Radio 17 00:00:55,280 --> 00:00:57,600 Speaker 5: dot Com and via the Bloomberg Business App. 18 00:01:00,360 --> 00:01:00,960 Speaker 6: Good day to you. 19 00:01:01,080 --> 00:01:03,520 Speaker 1: I'm Tom Busby, and we begin today's program with the 20 00:01:03,640 --> 00:01:07,360 Speaker 1: Fed's public enemy Number one, the fight against inflation, and 21 00:01:07,400 --> 00:01:11,000 Speaker 1: this week's consumer price index and producer price index all 22 00:01:11,040 --> 00:01:14,319 Speaker 1: about inflation. Joining me now to talk about this and 23 00:01:14,400 --> 00:01:16,360 Speaker 1: whether it's what the FED is really watching at this point. 24 00:01:16,440 --> 00:01:19,760 Speaker 1: Bloomberg's Global Economics and Policy Editor Michael McKee. 25 00:01:19,760 --> 00:01:21,319 Speaker 7: Michael, welcome, Oh, thanks Tom. 26 00:01:21,920 --> 00:01:24,400 Speaker 1: Well, we're coming off another rate hike from the Fed, 27 00:01:24,440 --> 00:01:27,360 Speaker 1: the tenth one since just since last March. The central 28 00:01:27,360 --> 00:01:30,280 Speaker 1: Bank's benchmark lending rate at a sixteen year high a 29 00:01:30,440 --> 00:01:32,919 Speaker 1: rate a range of five to five and a quarter percent. 30 00:01:33,800 --> 00:01:37,399 Speaker 1: But inflation is still hot, hot, hot. What do you 31 00:01:37,400 --> 00:01:38,240 Speaker 1: think of that, Michael? 32 00:01:39,360 --> 00:01:41,160 Speaker 8: I think the Fed has more work to do. That 33 00:01:41,200 --> 00:01:44,880 Speaker 8: sounds like Jay Powell speaking when I say that they 34 00:01:44,920 --> 00:01:48,000 Speaker 8: know that they are not there in terms of getting 35 00:01:48,080 --> 00:01:51,080 Speaker 8: anywhere near their target yet. The inflation rate is still 36 00:01:51,120 --> 00:01:54,840 Speaker 8: more than double the two percent target. But they do 37 00:01:54,960 --> 00:01:58,160 Speaker 8: have ten rate cuts in the books, rate increases rather 38 00:01:58,200 --> 00:02:02,120 Speaker 8: in the books, and that the full weight of that 39 00:02:02,200 --> 00:02:05,240 Speaker 8: has not hit the economy yet. So they're betting that 40 00:02:05,280 --> 00:02:09,359 Speaker 8: they are now in a position to be restrictive, that 41 00:02:09,400 --> 00:02:13,040 Speaker 8: the FED funds rate is a restricted level, restrictive level 42 00:02:13,080 --> 00:02:15,239 Speaker 8: now for the economy, and then it will just take 43 00:02:15,280 --> 00:02:21,000 Speaker 8: time to tighten credit conditions and lead inflation to go lower, 44 00:02:21,320 --> 00:02:24,680 Speaker 8: So they're going to wait and see. It means that 45 00:02:25,240 --> 00:02:28,560 Speaker 8: the inflation numbers become even more important. As long as 46 00:02:28,560 --> 00:02:31,360 Speaker 8: they don't go back up, then the Fed is not 47 00:02:31,400 --> 00:02:32,640 Speaker 8: going to be raising rates again. 48 00:02:33,040 --> 00:02:36,000 Speaker 1: And they have gone up, they've gone up, they've gone down. 49 00:02:36,400 --> 00:02:38,760 Speaker 1: It's very fluid the inflation readings. 50 00:02:39,320 --> 00:02:43,040 Speaker 8: Yeah, it depends on how much they were to go up. 51 00:02:43,040 --> 00:02:46,520 Speaker 8: Now we're looking for in the CPI next week a 52 00:02:46,680 --> 00:02:51,240 Speaker 8: relatively large rise in the headline number, which would probably 53 00:02:51,280 --> 00:02:55,320 Speaker 8: be attributed to things like energy and food. The core 54 00:02:55,600 --> 00:02:57,800 Speaker 8: is expected to go down, and the core is what 55 00:02:57,880 --> 00:03:00,799 Speaker 8: the Fed is more concerned with. Higher on a year 56 00:03:00,800 --> 00:03:03,640 Speaker 8: over your basis, but that's expected to decline and that 57 00:03:03,680 --> 00:03:05,720 Speaker 8: would tell them that they're still on the right track. 58 00:03:05,840 --> 00:03:07,519 Speaker 8: It's just going to take a while. 59 00:03:08,040 --> 00:03:11,320 Speaker 1: And as they always say, data dependent, and by that 60 00:03:11,400 --> 00:03:13,280 Speaker 1: late June meeting, we're going to get two months worth 61 00:03:13,360 --> 00:03:18,040 Speaker 1: of jobs data, CPI, PPI, consumer spending reports. So there's 62 00:03:18,080 --> 00:03:19,440 Speaker 1: a lot to consider for the Fed. 63 00:03:20,200 --> 00:03:23,680 Speaker 8: Yeah, one gets tired of saying data dependent, but they 64 00:03:23,720 --> 00:03:27,080 Speaker 8: really are in this case because now they've specifically hung 65 00:03:27,120 --> 00:03:31,920 Speaker 8: their next decision on the data they had been saying 66 00:03:32,040 --> 00:03:36,000 Speaker 8: month after month or meeting after meeting that they anticipated 67 00:03:36,040 --> 00:03:38,280 Speaker 8: having to raise rates more, that they weren't at a 68 00:03:38,400 --> 00:03:42,240 Speaker 8: point where they were restrictive. Now they're at that point, 69 00:03:42,880 --> 00:03:45,000 Speaker 8: and it's a question of the data telling them whether 70 00:03:45,040 --> 00:03:48,440 Speaker 8: they are accurate in estimating that or whether they think 71 00:03:48,480 --> 00:03:49,440 Speaker 8: they need to do more. 72 00:03:50,160 --> 00:03:52,640 Speaker 1: And the inflation target they have and they've had for 73 00:03:52,640 --> 00:03:56,280 Speaker 1: a long time two percent, But the latest personal consumption 74 00:03:56,320 --> 00:03:59,520 Speaker 1: expended your price index, as you said, more than double 75 00:03:59,560 --> 00:04:01,800 Speaker 1: that for point two percent in March year over year. 76 00:04:02,360 --> 00:04:04,520 Speaker 1: Now things are a lot better than they were, let's 77 00:04:04,520 --> 00:04:06,640 Speaker 1: say last summer, when there was you know, an all 78 00:04:06,720 --> 00:04:10,840 Speaker 1: time high or at least a you know, forty year high. 79 00:04:10,880 --> 00:04:13,160 Speaker 1: What are we looking to see in the consumer Price 80 00:04:13,160 --> 00:04:16,240 Speaker 1: Index on Wednesday? The PPI on Thursday. 81 00:04:16,360 --> 00:04:18,520 Speaker 8: Well, the CPI, as I mentioned, is likely to go 82 00:04:18,600 --> 00:04:22,400 Speaker 8: up on a headline basis, and the economist surveyed by 83 00:04:22,400 --> 00:04:25,800 Speaker 8: Bloomberg think it'll tick down to a three ten percent 84 00:04:25,880 --> 00:04:28,039 Speaker 8: gain for the core, which is what the Fed is 85 00:04:28,120 --> 00:04:30,920 Speaker 8: more concerned about. On a year over year basis. That 86 00:04:30,960 --> 00:04:34,680 Speaker 8: brings the core CPI to five point four percent from 87 00:04:34,680 --> 00:04:37,240 Speaker 8: five point six percent. It's measured differently than the PCE. 88 00:04:37,640 --> 00:04:39,680 Speaker 8: So the numbers are a little off, but we do 89 00:04:39,800 --> 00:04:43,600 Speaker 8: get a sort of a much broader look at the 90 00:04:43,680 --> 00:04:47,279 Speaker 8: categories of inflation in the CPI, So everybody wants to see, 91 00:04:47,400 --> 00:04:49,600 Speaker 8: you know, where inflation may be, which is why it 92 00:04:49,640 --> 00:04:52,800 Speaker 8: gets a lot of attention. The PPI is expected to 93 00:04:53,120 --> 00:04:57,720 Speaker 8: rise a little bit, but it fell in the prior month, 94 00:04:57,800 --> 00:05:01,119 Speaker 8: back in March, and so for April a small rise 95 00:05:01,440 --> 00:05:04,599 Speaker 8: isn't going to change the year over year situation for 96 00:05:04,839 --> 00:05:09,440 Speaker 8: a final demand, it'll bring it down. So at this 97 00:05:09,560 --> 00:05:12,080 Speaker 8: point it looks like with both of these on a 98 00:05:12,160 --> 00:05:16,680 Speaker 8: year over year basis, we're making progress. The question is 99 00:05:16,680 --> 00:05:18,880 Speaker 8: is it going to be enough progress or will there 100 00:05:18,960 --> 00:05:25,239 Speaker 8: be a surprise out there and will we see inflation rise? 101 00:05:25,320 --> 00:05:27,400 Speaker 8: And then the Fed have to start thinking about or 102 00:05:27,440 --> 00:05:30,200 Speaker 8: the markets at least start pricing a rate increase. 103 00:05:30,560 --> 00:05:33,960 Speaker 1: Oh well, we all love surprises, but not that kind now, 104 00:05:35,240 --> 00:05:38,799 Speaker 1: now rate increases and the converse of that, of course, 105 00:05:39,040 --> 00:05:42,880 Speaker 1: rate cuts. You spoke to Fed Shair Jpowell about all 106 00:05:43,000 --> 00:05:45,839 Speaker 1: this this past week. Let's listen now to what you 107 00:05:45,960 --> 00:05:47,320 Speaker 1: said and his response. 108 00:05:47,920 --> 00:05:51,760 Speaker 8: Can you tell us something about what your policy reaction 109 00:05:51,880 --> 00:05:55,160 Speaker 8: function is, your policy framework is going forward? When you 110 00:05:55,200 --> 00:05:57,479 Speaker 8: look at the economy at the next meeting. Are you 111 00:05:57,520 --> 00:06:02,240 Speaker 8: looking at incoming data, which is by definition backward looking. 112 00:06:02,360 --> 00:06:05,279 Speaker 8: Are you going to be forecasting what you think is 113 00:06:05,400 --> 00:06:08,719 Speaker 8: going to happen? Are you ruling out the rate cuts 114 00:06:08,760 --> 00:06:10,640 Speaker 8: that the market has priced in? 115 00:06:12,640 --> 00:06:15,680 Speaker 7: It didn't catch the last part, ruling markets have priced 116 00:06:15,720 --> 00:06:17,800 Speaker 7: in rate cuts by the end of the year. Rules 117 00:06:17,839 --> 00:06:18,920 Speaker 7: are sorry, Okay. 118 00:06:19,040 --> 00:06:19,240 Speaker 6: Got it. 119 00:06:19,480 --> 00:06:21,520 Speaker 9: That's what are we looking at. I mean, we look 120 00:06:21,520 --> 00:06:24,880 Speaker 9: at a combination of data and forecasts. Of course, the 121 00:06:24,920 --> 00:06:27,359 Speaker 9: whole idea is to is to create a good forecast 122 00:06:27,440 --> 00:06:30,040 Speaker 9: based on what you see in the data. So we're 123 00:06:30,080 --> 00:06:32,800 Speaker 9: always always looking at both, you know, and it will, 124 00:06:32,800 --> 00:06:35,200 Speaker 9: of course, it'll be the obvious things. It'll be readings 125 00:06:35,240 --> 00:06:39,240 Speaker 9: on inflation, It'll be readings on wages, on economic growth, 126 00:06:40,360 --> 00:06:44,440 Speaker 9: on the labor market, and all of those many things. 127 00:06:44,440 --> 00:06:48,400 Speaker 9: I think a particular focus for us going now over 128 00:06:48,440 --> 00:06:52,200 Speaker 9: the past six seven weeks now and going forward is 129 00:06:52,279 --> 00:06:57,400 Speaker 9: going to be what's happening with credit tightening, our small 130 00:06:57,400 --> 00:07:01,200 Speaker 9: and medium sized banks tightening credit standards, uh and and 131 00:07:01,279 --> 00:07:04,080 Speaker 9: is that having an effect on on on loans, on 132 00:07:04,200 --> 00:07:07,000 Speaker 9: lending and you know, so we can begin to assess 133 00:07:08,600 --> 00:07:11,280 Speaker 9: how that fits in with monetary policy. That'll that'll be 134 00:07:11,280 --> 00:07:13,520 Speaker 9: an important thing. I just you know, we'll be looking 135 00:07:13,560 --> 00:07:16,720 Speaker 9: at everything. It's again, I would just point out we've 136 00:07:16,800 --> 00:07:21,080 Speaker 9: raised rates by five percentage points, we are shrinking the 137 00:07:21,120 --> 00:07:25,040 Speaker 9: balance sheet, and now we have credit conditions tightening, not 138 00:07:25,200 --> 00:07:27,120 Speaker 9: just in the normal way, but perhaps a little bit 139 00:07:27,120 --> 00:07:28,960 Speaker 9: more due to what's happened. 140 00:07:29,480 --> 00:07:30,800 Speaker 7: And we have to factor. 141 00:07:30,520 --> 00:07:34,320 Speaker 9: All of that in and and make our assessment of, 142 00:07:35,360 --> 00:07:38,400 Speaker 9: you know, of whether our policy stance is sufficiently restrictive. 143 00:07:39,040 --> 00:07:40,920 Speaker 9: And we have to do that in a world where 144 00:07:41,000 --> 00:07:44,360 Speaker 9: policy works with long and variable legs. So this is challenging, 145 00:07:44,600 --> 00:07:46,840 Speaker 9: but you know, we we will make our best assessment. 146 00:07:46,880 --> 00:07:48,200 Speaker 9: And that's that's what we're thinking. 147 00:07:48,480 --> 00:07:50,840 Speaker 7: What about the idea of rate cuts. 148 00:07:51,600 --> 00:07:52,040 Speaker 6: Yeah, so. 149 00:07:54,440 --> 00:07:59,440 Speaker 9: We on the committee have a have a view that 150 00:08:01,200 --> 00:08:05,080 Speaker 9: inflation is going to come down not so quickly, but 151 00:08:05,200 --> 00:08:08,120 Speaker 9: it'll take some time. And in that world, if that 152 00:08:08,160 --> 00:08:11,360 Speaker 9: forecast is broadly right, it would not be appropriate and 153 00:08:11,400 --> 00:08:12,920 Speaker 9: to cut rates, And we won't. 154 00:08:12,760 --> 00:08:15,080 Speaker 7: Cut rates if you have a different forecast. 155 00:08:15,120 --> 00:08:18,320 Speaker 9: And you know markets are have been from time to 156 00:08:18,320 --> 00:08:21,120 Speaker 9: time pricing and you know, quite rapid reductions and inflation. 157 00:08:23,280 --> 00:08:25,840 Speaker 9: You know, we'd factor that in, but that's not our forecast, 158 00:08:26,040 --> 00:08:28,320 Speaker 9: and of course, the history of the last two years 159 00:08:28,320 --> 00:08:32,400 Speaker 9: has been very much that inflation moves down. Particularly now 160 00:08:32,400 --> 00:08:36,559 Speaker 9: if you look at non housing services, it really really 161 00:08:36,559 --> 00:08:40,520 Speaker 9: hasn't moved much and it's quite stable. And you know, 162 00:08:40,559 --> 00:08:43,480 Speaker 9: so we think we'll have to demand will have to 163 00:08:43,520 --> 00:08:46,320 Speaker 9: weaken a little bit and labor market conditions, conditions may 164 00:08:46,360 --> 00:08:48,440 Speaker 9: have to soften a bit more to begin to see 165 00:08:48,440 --> 00:08:51,160 Speaker 9: progress there. And again, in that world, it wouldn't be 166 00:08:51,200 --> 00:08:53,280 Speaker 9: it wouldn't be appropriate for us to cut rates. 167 00:08:53,760 --> 00:08:57,080 Speaker 1: Okay, so Pal told you this is no time to 168 00:08:57,160 --> 00:08:59,360 Speaker 1: cut rates, that there's still a lot of work to do, 169 00:08:59,400 --> 00:09:03,280 Speaker 1: your drive and lower. So how much worse could it 170 00:09:03,360 --> 00:09:04,199 Speaker 1: possibly get? 171 00:09:06,880 --> 00:09:09,880 Speaker 8: Well, it's hard to see it getting significantly worse. We're 172 00:09:09,880 --> 00:09:12,520 Speaker 8: seeing the labor market loosen up a little bit and 173 00:09:12,760 --> 00:09:16,920 Speaker 8: we're seeing inflation come down. Some of those two things 174 00:09:17,000 --> 00:09:21,960 Speaker 8: tied together. Supply chains have normalized, so those aren't a 175 00:09:22,160 --> 00:09:26,280 Speaker 8: major issue, and commodity prices have sort of flattened out, 176 00:09:26,320 --> 00:09:31,440 Speaker 8: except for energy. So overall, the prognosis is for inflation 177 00:09:31,559 --> 00:09:36,480 Speaker 8: to keep coming down. It's not the rate of the 178 00:09:36,679 --> 00:09:39,679 Speaker 8: level rather of inflation, it's the rate which it's moving. 179 00:09:39,720 --> 00:09:43,440 Speaker 8: That people are diverging from the FEDS view. The FED 180 00:09:43,440 --> 00:09:45,960 Speaker 8: things it will take time that they've gotten the low 181 00:09:46,000 --> 00:09:49,400 Speaker 8: hanging fruit, and it will take significant time to squeeze 182 00:09:49,400 --> 00:09:52,360 Speaker 8: the rest of the two point two percent or whatever 183 00:09:52,480 --> 00:09:56,880 Speaker 8: inflation out of the system, and the markets seem to 184 00:09:56,920 --> 00:09:59,360 Speaker 8: think that it'll go much faster than that. We'll see 185 00:09:59,360 --> 00:10:03,800 Speaker 8: a big drop in overall inflation over the coming months, 186 00:10:04,240 --> 00:10:08,200 Speaker 8: either because the FED is suggest successful or because we 187 00:10:08,240 --> 00:10:11,520 Speaker 8: go into a recession, and either way, the market wants 188 00:10:11,559 --> 00:10:16,479 Speaker 8: to price in rate cuts and the Fed is disagreeing 189 00:10:16,600 --> 00:10:19,640 Speaker 8: with that. And one of their concerns, and one of 190 00:10:19,640 --> 00:10:23,560 Speaker 8: the concerns they had in sort of announcing a pause 191 00:10:23,559 --> 00:10:26,160 Speaker 8: without announcing a pause, is they didn't want markets to 192 00:10:26,200 --> 00:10:28,320 Speaker 8: go too far. They didn't want people to start pricing 193 00:10:28,360 --> 00:10:31,400 Speaker 8: in further rate cuts. But that's exactly what happened after 194 00:10:32,320 --> 00:10:38,160 Speaker 8: pal suggested in that answer that maybe if inflation did 195 00:10:38,200 --> 00:10:41,600 Speaker 8: come down fast, then the markets might be right. He's 196 00:10:41,640 --> 00:10:44,000 Speaker 8: not arguing that it's going to but just that little 197 00:10:44,040 --> 00:10:46,480 Speaker 8: crack was enough for traders to slither through. 198 00:10:46,720 --> 00:10:50,240 Speaker 1: Michael, thank you. That is Bloomberg's Global Economics and Policy 199 00:10:50,320 --> 00:10:53,720 Speaker 1: editor Michael McKee, and coming up on Bloomberg Day Break weekend, 200 00:10:53,720 --> 00:10:56,880 Speaker 1: the Bank of England's fight against inflation. I'm Tom Busby, 201 00:10:57,320 --> 00:11:10,880 Speaker 1: and this is Bloomberg. This is Bloomberg Daybreak weekend, our 202 00:11:10,920 --> 00:11:13,280 Speaker 1: global look ahead at the top stories for investors in 203 00:11:13,320 --> 00:11:16,320 Speaker 1: the coming week. I'm Tom Busby in New York. Up 204 00:11:16,360 --> 00:11:18,920 Speaker 1: later on our program the dead ceiling and what the 205 00:11:18,960 --> 00:11:22,199 Speaker 1: fight over it means for the economy. But first, UK 206 00:11:22,320 --> 00:11:25,480 Speaker 1: economists expect just one more quarter point rate hike from 207 00:11:25,480 --> 00:11:28,360 Speaker 1: the Bank of England next week, with rates peaking at 208 00:11:28,400 --> 00:11:32,680 Speaker 1: four point five percent, very different from the marketview. For more, 209 00:11:32,760 --> 00:11:35,959 Speaker 1: we go to Bloomberg Daybreak Europe co host Caroline Hepger. 210 00:11:36,240 --> 00:11:38,960 Speaker 2: Tom, the Bank of England is deep into its drive 211 00:11:39,040 --> 00:11:42,600 Speaker 2: to tame inflation, with traders betting on a five percent 212 00:11:42,640 --> 00:11:45,400 Speaker 2: potential peak rate in the UK, but the endgame is 213 00:11:45,400 --> 00:11:48,240 Speaker 2: still really far from clear. So joining me now is 214 00:11:48,240 --> 00:11:51,160 Speaker 2: Bloomberg's chief UK economist Dan Hanson. Great to have you 215 00:11:51,240 --> 00:11:53,960 Speaker 2: on the program. Dan, the path ahead then for the 216 00:11:53,960 --> 00:11:55,760 Speaker 2: Bank of England in your view now. 217 00:11:56,559 --> 00:11:58,640 Speaker 10: Yeah, I mean, I think you're right about the uncertainty 218 00:11:58,720 --> 00:12:01,839 Speaker 10: you've got. In the last few data releases, You've had 219 00:12:01,880 --> 00:12:04,880 Speaker 10: really big surprises on the inflation front, and actually in 220 00:12:04,920 --> 00:12:07,240 Speaker 10: the most recent labor market report, you had a big 221 00:12:07,280 --> 00:12:10,320 Speaker 10: surprise on wages as well, So I think in the 222 00:12:10,400 --> 00:12:13,280 Speaker 10: very near term and just thinking about the next meeting, 223 00:12:13,559 --> 00:12:16,079 Speaker 10: I think it's it seems very likely to us and 224 00:12:16,360 --> 00:12:18,520 Speaker 10: to the market, and I think most economists that they'll 225 00:12:18,520 --> 00:12:22,480 Speaker 10: liferrates again twenty five basis points. I think the question 226 00:12:23,160 --> 00:12:27,000 Speaker 10: then is a lot around the guidance that they provide. 227 00:12:27,040 --> 00:12:30,920 Speaker 10: Are they still going to focus on the idea that 228 00:12:30,960 --> 00:12:33,920 Speaker 10: they'll only liferates again if they're surprised by the data, 229 00:12:34,280 --> 00:12:38,120 Speaker 10: and if that's the case, I think it is uncertain 230 00:12:38,160 --> 00:12:40,600 Speaker 10: whether they will raise rates again. I think there's a 231 00:12:40,679 --> 00:12:42,360 Speaker 10: question whether they want to be a little bit more 232 00:12:42,360 --> 00:12:44,960 Speaker 10: forceful this time round, given the scale of the surprises 233 00:12:45,000 --> 00:12:48,840 Speaker 10: that we've seen in the data. But I think our 234 00:12:48,880 --> 00:12:52,920 Speaker 10: base case is that they'll liferates in May, and they'll 235 00:12:52,920 --> 00:12:55,600 Speaker 10: also liferates in June. And the reason we think they'll 236 00:12:55,640 --> 00:12:59,280 Speaker 10: do that is because the data, particularly on core inflation, 237 00:12:59,480 --> 00:13:02,040 Speaker 10: has been very very sticky, and I think they'll want 238 00:13:02,080 --> 00:13:05,319 Speaker 10: to lean against that sort of risk of inflation persistence. 239 00:13:05,320 --> 00:13:07,480 Speaker 10: And I think at the Bank there is this They've 240 00:13:07,520 --> 00:13:11,280 Speaker 10: talked a lot about overtightening, but I think actually if 241 00:13:11,320 --> 00:13:14,080 Speaker 10: you look at the whole, the Committee as a whole. 242 00:13:14,280 --> 00:13:17,120 Speaker 10: I think there's probably a view that it's better to do 243 00:13:17,200 --> 00:13:18,840 Speaker 10: a little bit more than a little bit less at 244 00:13:18,840 --> 00:13:20,800 Speaker 10: this point, and as you said at the start there, 245 00:13:20,800 --> 00:13:24,199 Speaker 10: they've come so far they really want to just finish 246 00:13:24,240 --> 00:13:24,719 Speaker 10: the job off. 247 00:13:24,880 --> 00:13:27,000 Speaker 2: Yeah, I mean, the consumer price index in the UK 248 00:13:27,080 --> 00:13:30,400 Speaker 2: and double digits above ten percent. But there are concerns, 249 00:13:30,440 --> 00:13:34,880 Speaker 2: aren't there, around banks breaking particularly in the US in Europe, 250 00:13:35,559 --> 00:13:40,000 Speaker 2: consumers struggling with food and energy bills, but also rising 251 00:13:40,080 --> 00:13:44,240 Speaker 2: interest rates. How concerned do you think that the bank 252 00:13:44,320 --> 00:13:47,160 Speaker 2: is going to be about suchly financial stability and other 253 00:13:47,200 --> 00:13:49,360 Speaker 2: parts of the economy that may suffer after such a 254 00:13:49,440 --> 00:13:50,160 Speaker 2: rapid rise. 255 00:13:50,840 --> 00:13:52,320 Speaker 10: I think they'll be very, very concerned. 256 00:13:52,320 --> 00:13:52,840 Speaker 7: I said they are. 257 00:13:53,000 --> 00:13:57,120 Speaker 10: They're one of the only major central banks that have 258 00:13:57,320 --> 00:14:00,960 Speaker 10: voiced concerns about overtightening. Now, I think when they balance 259 00:14:01,040 --> 00:14:03,760 Speaker 10: the risk of overtightening versus doing too little, I still 260 00:14:03,800 --> 00:14:07,360 Speaker 10: think they're probably erring towards worrying about doing too little. 261 00:14:07,920 --> 00:14:11,080 Speaker 10: But nonetheless, even you know, chief economist Hugh pill at 262 00:14:11,080 --> 00:14:13,320 Speaker 10: the Bank has warned about it. We've got some very 263 00:14:13,440 --> 00:14:16,480 Speaker 10: vocal doves at the Bank of England talking about overtightening, 264 00:14:17,760 --> 00:14:22,200 Speaker 10: so I think events in the US will certainly play 265 00:14:22,280 --> 00:14:25,760 Speaker 10: on their mind. Here in the UK, financial conditions have 266 00:14:26,120 --> 00:14:30,040 Speaker 10: after the sort of where things reach fever pitch following 267 00:14:30,120 --> 00:14:33,000 Speaker 10: SVB and credit Swiss, things have eased off a little bit. 268 00:14:33,040 --> 00:14:35,320 Speaker 10: So I think you know there is a there is 269 00:14:35,360 --> 00:14:37,760 Speaker 10: a clear path to higher rates. That's not going to 270 00:14:37,800 --> 00:14:40,960 Speaker 10: be an impediment to than lifting rates further. I mean, 271 00:14:40,960 --> 00:14:43,920 Speaker 10: I think one one area of resilience, and they'll take 272 00:14:43,960 --> 00:14:46,880 Speaker 10: some in some ways I guess takes some comfort in 273 00:14:46,920 --> 00:14:49,359 Speaker 10: though it makes their inflation fight harder. Is the resilience 274 00:14:49,440 --> 00:14:52,760 Speaker 10: of consumer spending in the economy in general, which has 275 00:14:52,760 --> 00:14:54,760 Speaker 10: held up much better since the start of the year 276 00:14:54,840 --> 00:14:58,600 Speaker 10: than many had been expected. But as I say that, 277 00:14:58,600 --> 00:15:01,520 Speaker 10: that makes their inflation anyways, that makes her inflation fight 278 00:15:01,640 --> 00:15:05,520 Speaker 10: harder because you've got a stronger economy, a stronger labor market, 279 00:15:05,840 --> 00:15:07,960 Speaker 10: and ultimately that means it's harder to get inflation to 280 00:15:08,000 --> 00:15:10,840 Speaker 10: settle at two percent as it begins to drift downwards. 281 00:15:11,800 --> 00:15:15,120 Speaker 2: Okay, Dan, stay there. As we're thinking about the Bank 282 00:15:15,160 --> 00:15:17,320 Speaker 2: of England's decision next week, I also wanted to bring 283 00:15:17,360 --> 00:15:19,200 Speaker 2: in an interview that I did with Stephen King who's 284 00:15:19,200 --> 00:15:22,640 Speaker 2: the senior economic advisor at HSBC, so really renowned economists. 285 00:15:22,640 --> 00:15:25,680 Speaker 2: Of course you're nodding vigorously. He has a new book 286 00:15:25,720 --> 00:15:28,240 Speaker 2: out called We Need to Talk About Inflation, and he 287 00:15:28,400 --> 00:15:32,760 Speaker 2: was so interesting on this point of accountability, responsibility of 288 00:15:32,800 --> 00:15:36,400 Speaker 2: central bankers, the stickiness of inflation. Where we go from here. 289 00:15:36,480 --> 00:15:38,320 Speaker 2: Just want you to have a little listen to a 290 00:15:38,360 --> 00:15:39,560 Speaker 2: snippet from that interview. 291 00:15:40,280 --> 00:15:42,320 Speaker 11: Every crisis is different, but at the same time there 292 00:15:42,320 --> 00:15:44,960 Speaker 11: are some similarities and you can tease them out. One 293 00:15:44,960 --> 00:15:48,840 Speaker 11: of the similarities is that most crises, inflation wise, start 294 00:15:48,880 --> 00:15:51,360 Speaker 11: with us series of excuses for why inflation is different 295 00:15:51,360 --> 00:15:53,640 Speaker 11: from what people had expected. So it's energy price shocks, 296 00:15:53,640 --> 00:15:56,280 Speaker 11: it's food price shocks, it's price gouging, it, whatever it 297 00:15:56,360 --> 00:15:58,840 Speaker 11: might be. But actually, looking back through history, and I've 298 00:15:58,840 --> 00:16:01,400 Speaker 11: looked through a lot of history, it's probably fair to 299 00:16:01,440 --> 00:16:03,800 Speaker 11: say that money plays some kind of role. That if 300 00:16:03,840 --> 00:16:07,560 Speaker 11: you have overduse monetary policy, or you're debasing the coinage, 301 00:16:07,640 --> 00:16:09,880 Speaker 11: or you're coin clipping or whatever it was a thousand 302 00:16:09,960 --> 00:16:13,160 Speaker 11: years ago, what you're now seeing is a situation whereby 303 00:16:13,560 --> 00:16:16,440 Speaker 11: I suspect monetary policy which is far too loose. During 304 00:16:16,560 --> 00:16:21,080 Speaker 11: the pandemic, and in particular remained far too loose after 305 00:16:21,080 --> 00:16:23,520 Speaker 11: the pandemic came to an end. So you had this 306 00:16:23,560 --> 00:16:26,560 Speaker 11: sort of situation where by central bank has feared a 307 00:16:26,600 --> 00:16:30,760 Speaker 11: Great Depression mark too, but that never materialized. We had 308 00:16:30,800 --> 00:16:33,120 Speaker 11: a series of declines in GDP which was similar to 309 00:16:33,160 --> 00:16:35,000 Speaker 11: the Great Depression, but we did not have the multiple 310 00:16:35,000 --> 00:16:37,400 Speaker 11: bank failures. We didn't have the mass bankruptcy is the 311 00:16:37,400 --> 00:16:39,320 Speaker 11: mass unemployment. We didn't have any of those kinds of 312 00:16:39,320 --> 00:16:43,240 Speaker 11: things coming through. And as a consequence, I think that 313 00:16:43,320 --> 00:16:46,560 Speaker 11: we've ended up with excessively loose monetary conditions which have 314 00:16:46,680 --> 00:16:50,320 Speaker 11: helped drive the underlying inflation process. And of course, when 315 00:16:50,360 --> 00:16:52,800 Speaker 11: inflation first picked up, people said, it's just semi conductive prices, 316 00:16:52,840 --> 00:16:55,840 Speaker 11: it's just prices of secondhand cars or whatever. But we 317 00:16:55,920 --> 00:16:57,920 Speaker 11: now know that it's not just semi conductive prices or 318 00:16:57,920 --> 00:17:00,880 Speaker 11: secondhand cars. It's a whole range of goods, a whole 319 00:17:00,960 --> 00:17:03,640 Speaker 11: range of services, and now in some countries at least 320 00:17:04,200 --> 00:17:07,720 Speaker 11: wages also moving up in nominal terms. So inflation, I 321 00:17:07,760 --> 00:17:11,159 Speaker 11: would suggest, is much more embedded than the majority of 322 00:17:11,160 --> 00:17:13,600 Speaker 11: central bankers and forecasters expected. 323 00:17:13,800 --> 00:17:16,520 Speaker 2: Do you think that central bankers have taken on board 324 00:17:16,520 --> 00:17:20,320 Speaker 2: that idea that monetary policy was too loose for too long, 325 00:17:20,400 --> 00:17:22,199 Speaker 2: that they are partly to blame. 326 00:17:23,000 --> 00:17:25,280 Speaker 11: Well, I think that they are keen to avoid blame. 327 00:17:25,320 --> 00:17:27,240 Speaker 11: And part of the reasons for avoiding blame, of course, 328 00:17:27,359 --> 00:17:29,880 Speaker 11: is that if they're blamed, they then come under tremendous 329 00:17:29,920 --> 00:17:32,520 Speaker 11: political scrutiny. You know, what do these technocrats get wrong? 330 00:17:32,920 --> 00:17:35,320 Speaker 11: And of course the most important thing for central bankers 331 00:17:35,359 --> 00:17:38,440 Speaker 11: to try to retain the independence of the central bank. 332 00:17:38,520 --> 00:17:41,119 Speaker 11: So I think there is a weird kind of desire 333 00:17:41,160 --> 00:17:44,800 Speaker 11: to blame everything other than themselves for what is actually transpired. 334 00:17:45,200 --> 00:17:48,119 Speaker 11: But when you think about it, the fact that interest 335 00:17:48,160 --> 00:17:50,920 Speaker 11: rates remain so low for so long that during the 336 00:17:50,960 --> 00:17:53,520 Speaker 11: course of twenty twenty one, inflation was steadily picking up 337 00:17:53,760 --> 00:17:56,679 Speaker 11: in the US, in the UK, in the Eurozone, and 338 00:17:56,840 --> 00:17:59,240 Speaker 11: action in terms of monetary tithing didn't really take place 339 00:17:59,280 --> 00:18:01,240 Speaker 11: until the very end of that year or into twenty 340 00:18:01,280 --> 00:18:04,159 Speaker 11: twenty two. I would suggest that there was effect too 341 00:18:04,200 --> 00:18:06,879 Speaker 11: little action too late, which is why now we've got 342 00:18:06,920 --> 00:18:09,200 Speaker 11: the situation where by everyone's panicking about how far rates 343 00:18:09,240 --> 00:18:11,480 Speaker 11: will have to go up because you're trying to sort 344 00:18:11,520 --> 00:18:15,639 Speaker 11: of conduct a handbreak turn when the economy effectively has 345 00:18:15,640 --> 00:18:18,320 Speaker 11: been sort of not much growing quickly, but there's been 346 00:18:18,400 --> 00:18:21,560 Speaker 11: showing signs of building inflation and pressures for much longer 347 00:18:21,560 --> 00:18:22,560 Speaker 11: than people had expected. 348 00:18:22,800 --> 00:18:27,199 Speaker 2: That was Stephen King, Senior Economic advisored HSBC, who was 349 00:18:27,400 --> 00:18:29,760 Speaker 2: talking to a Soboomberg radio about his new book We 350 00:18:29,880 --> 00:18:33,199 Speaker 2: Need to Talk About Inflation, So very interesting on that 351 00:18:33,280 --> 00:18:36,719 Speaker 2: topic of course, right back to you, Dan So just 352 00:18:36,800 --> 00:18:39,560 Speaker 2: going back then to the Bank of England and talking 353 00:18:39,600 --> 00:18:42,240 Speaker 2: about the kind of bigger themes around why inflation is 354 00:18:42,280 --> 00:18:45,040 Speaker 2: so sticky right now. This is the central challenge for 355 00:18:45,080 --> 00:18:48,160 Speaker 2: economists now and to understand how sticky it. 356 00:18:48,080 --> 00:18:53,120 Speaker 10: Will remain, absolutely absolutely and I think the reason you've 357 00:18:53,119 --> 00:18:55,560 Speaker 10: had this what I would call a perfect storm where 358 00:18:56,040 --> 00:19:00,240 Speaker 10: inflation has gone up for reasons outside of the troll 359 00:19:00,280 --> 00:19:04,960 Speaker 10: of central banks, to the most extent thing through energy prices, 360 00:19:05,000 --> 00:19:10,560 Speaker 10: food prices, what traditionally we call externally driven inflation. But 361 00:19:10,640 --> 00:19:13,720 Speaker 10: at the same time you've had a very very extremely 362 00:19:13,800 --> 00:19:16,680 Speaker 10: i should say tight labor market and those two things 363 00:19:16,680 --> 00:19:20,520 Speaker 10: have combined. You've had and you've seen workers bargain for 364 00:19:20,560 --> 00:19:23,159 Speaker 10: a bigger share of the pie and you've seen wage 365 00:19:23,160 --> 00:19:26,600 Speaker 10: gains go up. So I think for all central banks 366 00:19:26,600 --> 00:19:30,000 Speaker 10: it's really a case of watching first of all, in 367 00:19:30,119 --> 00:19:32,120 Speaker 10: terms of the sort of order of where you might 368 00:19:32,160 --> 00:19:34,240 Speaker 10: see things begin. 369 00:19:34,160 --> 00:19:34,879 Speaker 7: To caol off. 370 00:19:34,920 --> 00:19:39,159 Speaker 10: You've got first it's the economy, then it's the labor 371 00:19:39,160 --> 00:19:42,119 Speaker 10: market and unemployment. Then it's wages, then it's inflation, and 372 00:19:42,400 --> 00:19:44,919 Speaker 10: it tends to sort of happen in that order. So 373 00:19:45,840 --> 00:19:50,160 Speaker 10: at least in the UK, with demands holding up, there 374 00:19:50,200 --> 00:19:53,440 Speaker 10: isn't a sign yet that the labor market can really 375 00:19:53,480 --> 00:19:57,119 Speaker 10: loosen to any great extent that will put enough downward 376 00:19:57,160 --> 00:20:00,320 Speaker 10: pressure on wage growth to ultimately deliver inflation. 377 00:20:00,560 --> 00:20:02,960 Speaker 2: Back to Togg, Dan, thank you so much for your time. 378 00:20:03,000 --> 00:20:05,760 Speaker 2: Bloomberg's chief UK economist, Dan Hanson, thank you so much 379 00:20:05,800 --> 00:20:07,920 Speaker 2: for being with me. I'm Caroline Hepge here in London. 380 00:20:07,960 --> 00:20:10,320 Speaker 2: You can catch us every weekday morning for Bloomberg day Break. 381 00:20:10,359 --> 00:20:12,840 Speaker 2: You're at beginning at six am in London. That's one 382 00:20:12,880 --> 00:20:14,040 Speaker 2: am on Wall Street. 383 00:20:14,080 --> 00:20:17,359 Speaker 1: Tom, thank you, Caroline, and coming up on Bloomberg day 384 00:20:17,400 --> 00:20:20,480 Speaker 1: Break weekend. The fight over the dead ceiling is intensifying. 385 00:20:20,600 --> 00:20:22,640 Speaker 1: I'm Tom Busby and this is. 386 00:20:22,600 --> 00:20:31,720 Speaker 5: Bloomberg broadcasting live from the Bloomberg It a active brokers 387 00:20:31,760 --> 00:20:35,480 Speaker 5: studio in New York. Bloomberg Elemon three oh to Washington, DC, 388 00:20:35,640 --> 00:20:39,000 Speaker 5: Bloomberg ninety nine one to Boston, Bloomberg one O six 389 00:20:39,160 --> 00:20:42,440 Speaker 5: one to San Francisco, Bloomberg nine sixteen to the country, 390 00:20:42,480 --> 00:20:46,800 Speaker 5: Serrius XM Channel one nineteen to London DAB Digital Radio, 391 00:20:46,880 --> 00:20:50,000 Speaker 5: and around the globe the Bloomberg Business app in Bloomberg 392 00:20:50,080 --> 00:20:53,640 Speaker 5: Radio dot Com. This is Bloomberg Daybreak weekend. 393 00:21:00,240 --> 00:21:00,400 Speaker 6: Tom. 394 00:21:00,480 --> 00:21:02,560 Speaker 1: Let's be in New York with your global look ahead 395 00:21:02,560 --> 00:21:05,119 Speaker 1: at the top stories for investors in the coming week. 396 00:21:05,320 --> 00:21:08,640 Speaker 1: The clock is ticking on the US debt ceiling. For more, 397 00:21:09,040 --> 00:21:11,159 Speaker 1: Let's head to our Bloomberg ninety nine to one newsroom 398 00:21:11,200 --> 00:21:14,200 Speaker 1: in Washington and sound on host Kaylee Line. 399 00:21:14,320 --> 00:21:16,560 Speaker 3: Yeah, that's right, Tom. We learned this past week that 400 00:21:16,600 --> 00:21:20,040 Speaker 3: the X state could be just weeks away. Treasury Secretary 401 00:21:20,080 --> 00:21:22,320 Speaker 3: Jenny Yellen writing in a letter to Congress that the 402 00:21:22,359 --> 00:21:25,040 Speaker 3: Treasury may not be able to meet its obligations by 403 00:21:25,080 --> 00:21:28,720 Speaker 3: early June, possibly as early as June first. That letter 404 00:21:28,760 --> 00:21:31,280 Speaker 3: seemed to set President Biden in motion. He called up 405 00:21:31,320 --> 00:21:34,480 Speaker 3: congressional leadership. House Speaker Kevin McCarthy, sent a Minority leader 406 00:21:34,480 --> 00:21:37,760 Speaker 3: Mitch McConnell, and Democratic leader Senator Chuck Schumer, and Congressman 407 00:21:37,800 --> 00:21:40,280 Speaker 3: junkin Jeffries and asked them to meet with him this 408 00:21:40,400 --> 00:21:43,560 Speaker 3: coming Tuesday, May ninth. It's the sit down we've all 409 00:21:43,600 --> 00:21:47,359 Speaker 3: been waiting and waiting and waiting for. The question is 410 00:21:47,560 --> 00:21:50,719 Speaker 3: how much progress can really be made between Biden and 411 00:21:50,800 --> 00:21:53,760 Speaker 3: Speaker McCarthy. They want very different things. The President has 412 00:21:53,760 --> 00:21:56,720 Speaker 3: consistently called for a clean debt ceiling raise with no negotiation, 413 00:21:57,119 --> 00:22:00,359 Speaker 3: and McCarthy wants to talk spending cuts. How do they 414 00:22:00,359 --> 00:22:02,639 Speaker 3: meet in the middle. Let's get some perspective from our 415 00:22:02,680 --> 00:22:05,960 Speaker 3: all star panel. Bloomberg White House reporter Josh Wingrove and 416 00:22:06,040 --> 00:22:09,040 Speaker 3: Congressional reporter Steve Dennis are both joining us. 417 00:22:09,640 --> 00:22:10,919 Speaker 7: So Josh, let's start with you. 418 00:22:10,960 --> 00:22:13,280 Speaker 3: I understand it is a step forward for President Biden 419 00:22:13,359 --> 00:22:15,320 Speaker 3: to call this meeting, but he called it for this 420 00:22:15,440 --> 00:22:18,760 Speaker 3: coming week, more than a full week after Yellen's letter 421 00:22:18,800 --> 00:22:21,160 Speaker 3: was delivered and the June first suggestion really came into 422 00:22:21,200 --> 00:22:21,639 Speaker 3: the picture. 423 00:22:22,200 --> 00:22:22,720 Speaker 7: Why the wait? 424 00:22:22,800 --> 00:22:24,480 Speaker 3: Doesn't this feel like a little late to the game. 425 00:22:24,680 --> 00:22:26,760 Speaker 6: Yeah, I mean we're starting to really come up against 426 00:22:26,800 --> 00:22:29,360 Speaker 6: it here, absolutely, And you know there's reasons why they're 427 00:22:29,359 --> 00:22:33,280 Speaker 6: waiting till then, including the Speaker's travel and Steve can 428 00:22:33,400 --> 00:22:35,760 Speaker 6: talk to us here shortly about how they're sort of 429 00:22:35,840 --> 00:22:38,600 Speaker 6: running out of time, that the House, Senate, and President 430 00:22:38,640 --> 00:22:41,400 Speaker 6: are all in the same city at once, so that's 431 00:22:41,520 --> 00:22:43,560 Speaker 6: sort of adding pressure to the clock. But you know, 432 00:22:44,040 --> 00:22:46,880 Speaker 6: heading into this, I think we should temper expectations because 433 00:22:46,880 --> 00:22:49,800 Speaker 6: the White House message has not been hey, we're coming 434 00:22:49,840 --> 00:22:52,000 Speaker 6: in with an offer. Hey, you know, these are the 435 00:22:52,040 --> 00:22:53,960 Speaker 6: kinds of things we hope the mcarthy is going to 436 00:22:54,040 --> 00:22:55,600 Speaker 6: negotiate on, or hey, we think we should do a 437 00:22:55,600 --> 00:22:58,960 Speaker 6: short term extension. Instead, they're saying that Biden is going 438 00:22:59,000 --> 00:23:01,960 Speaker 6: into the meeting saying he wants to underscore the importance 439 00:23:02,000 --> 00:23:05,720 Speaker 6: of not defaulting on the speaker. So you know, that 440 00:23:06,040 --> 00:23:09,000 Speaker 6: sounds like people are still douggy, and that sounds almost 441 00:23:09,200 --> 00:23:12,440 Speaker 6: like talking past each other rather than talking with each other. 442 00:23:12,480 --> 00:23:15,040 Speaker 6: So I think we should temper expectations. But there are 443 00:23:15,119 --> 00:23:17,680 Speaker 6: signs to look for as to whether they'll have some 444 00:23:17,800 --> 00:23:20,440 Speaker 6: kind of deal. The White House hasn't closed the door 445 00:23:20,480 --> 00:23:23,520 Speaker 6: to certain extreme sort of unilateral measures if it comes 446 00:23:23,520 --> 00:23:26,159 Speaker 6: to that. They haven't closed the door to a short term, 447 00:23:27,160 --> 00:23:29,840 Speaker 6: you know, stopgap type of extension or suspension of the 448 00:23:29,840 --> 00:23:32,840 Speaker 6: dead ceiling. So these things are simmering, but we're running 449 00:23:32,880 --> 00:23:35,679 Speaker 6: up against it, and there really is no sign that 450 00:23:35,720 --> 00:23:37,639 Speaker 6: you decide right now is blinking. 451 00:23:37,760 --> 00:23:40,359 Speaker 3: So, Steve if on the White House side, this maybe 452 00:23:40,400 --> 00:23:42,320 Speaker 3: is going to be more of a talking too than 453 00:23:42,440 --> 00:23:45,480 Speaker 3: actually talks or any kind of negotiation. Is that true 454 00:23:45,480 --> 00:23:47,560 Speaker 3: on the congressional side as well? Are we likely to 455 00:23:47,600 --> 00:23:51,400 Speaker 3: see budging on the end of McCarthy and also McConnell, 456 00:23:51,440 --> 00:23:52,960 Speaker 3: who is going to be in the room too, even 457 00:23:52,960 --> 00:23:55,680 Speaker 3: though largely he has been removed from this conversation so far. 458 00:23:55,920 --> 00:23:59,080 Speaker 12: Yeah, so, you know, I think the Democrats really want 459 00:23:59,160 --> 00:24:02,040 Speaker 12: McConnell to sort of roll up the sleeves and do 460 00:24:02,160 --> 00:24:04,400 Speaker 12: what he's done many times in the past and sort 461 00:24:04,440 --> 00:24:09,000 Speaker 12: of negotiate a way out of a cliff. And McConnell's 462 00:24:09,040 --> 00:24:14,919 Speaker 12: made clear to us in press conferences that he is 463 00:24:15,040 --> 00:24:18,159 Speaker 12: not going to do that role this year, that basically 464 00:24:18,200 --> 00:24:21,840 Speaker 12: he sees his role as being sort of a wingman 465 00:24:22,119 --> 00:24:25,800 Speaker 12: for McCarthy, and that any deal is not going to 466 00:24:25,840 --> 00:24:28,119 Speaker 12: come out of the Senate, even said the Senate's irrelevant 467 00:24:28,119 --> 00:24:31,639 Speaker 12: this time, and that the deal has to be between 468 00:24:31,720 --> 00:24:37,800 Speaker 12: McCarthy and Biden. The issue is that markets are already moving, 469 00:24:37,880 --> 00:24:43,000 Speaker 12: We're already seeing bond selling off for next month, and 470 00:24:43,359 --> 00:24:45,560 Speaker 12: I've covered a lot of these in the past, and 471 00:24:45,920 --> 00:24:50,960 Speaker 12: when markets really start moving, that amps the pressure up 472 00:24:51,000 --> 00:24:54,120 Speaker 12: on both sides dramatically. What we really have is sort 473 00:24:54,119 --> 00:24:57,120 Speaker 12: of like a decade long fight over the leverage over 474 00:24:57,160 --> 00:25:01,240 Speaker 12: the dead limit, going back to twenty eleven, when Joe 475 00:25:01,240 --> 00:25:03,760 Speaker 12: Biden ended up cutting a deal with Mitch McConnell for 476 00:25:03,840 --> 00:25:07,360 Speaker 12: like a ten year deal on spending cuts in return 477 00:25:07,440 --> 00:25:10,800 Speaker 12: for a dead limit increase. Right, The sort of the 478 00:25:10,920 --> 00:25:13,760 Speaker 12: lesson that the Democrats learned from that and took from 479 00:25:13,800 --> 00:25:17,720 Speaker 12: that is that that really sort of handcuffed the last 480 00:25:17,800 --> 00:25:21,359 Speaker 12: six years of Barack Obama's presidency. They don't want to 481 00:25:21,400 --> 00:25:23,480 Speaker 12: go down that road again. They don't want to be 482 00:25:23,640 --> 00:25:26,320 Speaker 12: held hostage again and again and again. And that's what 483 00:25:26,359 --> 00:25:29,640 Speaker 12: I hear in the hallways from all the Democratic senators 484 00:25:29,680 --> 00:25:32,760 Speaker 12: that they have to dig in so that even they 485 00:25:32,760 --> 00:25:35,480 Speaker 12: don't even like the idea of a short term deatlimit 486 00:25:35,560 --> 00:25:38,920 Speaker 12: because they see that as just, you know, more damage 487 00:25:38,920 --> 00:25:42,959 Speaker 12: for the economy. Even getting close in twenty eleven really 488 00:25:43,000 --> 00:25:45,959 Speaker 12: tanked the S and P tanked consumer confidence. 489 00:25:46,080 --> 00:25:47,680 Speaker 3: Well, it was two weeks before the X state that 490 00:25:47,760 --> 00:25:50,359 Speaker 3: ultimately the US's credit rating was downgraded, so it's. 491 00:25:50,320 --> 00:25:52,560 Speaker 12: Right, and you already you already have the you know, 492 00:25:52,640 --> 00:25:55,679 Speaker 12: some of the credit rating agencies making similar warnings this 493 00:25:55,760 --> 00:26:00,360 Speaker 12: time around. But you know, in the past, it's has 494 00:26:00,520 --> 00:26:07,000 Speaker 12: taken markets to put the pressure on lawmakers before they've budged. 495 00:26:07,040 --> 00:26:11,440 Speaker 12: And when you look at McCarthy, he you know, barely 496 00:26:11,480 --> 00:26:15,080 Speaker 12: became speakers fifteen yeah ballots, and it. 497 00:26:15,080 --> 00:26:16,720 Speaker 3: Was really hard for him to get the two hundred 498 00:26:16,720 --> 00:26:19,560 Speaker 3: and seventeen vote needed to pass his bill. So it 499 00:26:19,680 --> 00:26:22,200 Speaker 3: kind of raises a question of how much wiggle room 500 00:26:22,200 --> 00:26:24,760 Speaker 3: he really has. And Josh, just on the subject of 501 00:26:25,000 --> 00:26:28,080 Speaker 3: wiggling room and negotiations which McCarthy says that he wants, 502 00:26:28,680 --> 00:26:31,280 Speaker 3: why isn't the White House using this as an opportunity 503 00:26:31,320 --> 00:26:34,359 Speaker 3: to push for revenue raising measures for higher taxes if 504 00:26:34,359 --> 00:26:37,680 Speaker 3: what the Republicans are saying they ultimately want is deficit reduction. 505 00:26:37,840 --> 00:26:39,000 Speaker 3: There are two sides to that. 506 00:26:39,480 --> 00:26:42,120 Speaker 6: I think they think they would. I mean, the White 507 00:26:42,160 --> 00:26:46,240 Speaker 6: House basically wants to decouple the debt ceiling site from 508 00:26:46,359 --> 00:26:50,800 Speaker 6: the spending discussion, right they they view McCarthy as sort of, 509 00:26:50,840 --> 00:26:54,000 Speaker 6: you know, hanging the proverbial hostage up a ledge, you know, 510 00:26:54,280 --> 00:26:57,080 Speaker 6: threatening to drop them, and the White Hose says, you know, 511 00:26:57,200 --> 00:27:00,360 Speaker 6: like like you know, let go bring them back on 512 00:27:00,440 --> 00:27:02,520 Speaker 6: on TALLI ground and then we'll talk. That is sort 513 00:27:02,560 --> 00:27:04,760 Speaker 6: of where we're at on it. So you know, Biden 514 00:27:04,800 --> 00:27:08,639 Speaker 6: put out his budget has three trillion andcumulative depthicit of 515 00:27:08,640 --> 00:27:13,520 Speaker 6: reduction over ten years. McCarthy's is more in the four range. 516 00:27:13,560 --> 00:27:15,720 Speaker 6: They're completely different ways of getting there. Biden more on 517 00:27:15,760 --> 00:27:18,399 Speaker 6: the revenue side, you talked about, McCarthy more on the 518 00:27:18,440 --> 00:27:22,880 Speaker 6: cut side, and so you know they're still talking past 519 00:27:22,920 --> 00:27:25,640 Speaker 6: each other. But the whole question is is the debt 520 00:27:25,680 --> 00:27:28,919 Speaker 6: ceiling a bargaining ship or not. Biden is trying to 521 00:27:28,960 --> 00:27:32,920 Speaker 6: saddle McCarthy with this collapse that may happen here by 522 00:27:32,960 --> 00:27:35,800 Speaker 6: saying it's Republicans who are holding the debt ceiling hostage. 523 00:27:35,840 --> 00:27:39,800 Speaker 6: Democrats favor raising it or suspending it and then having 524 00:27:39,840 --> 00:27:45,000 Speaker 6: the conversation about spending. But McCarthy's position is we have 525 00:27:45,080 --> 00:27:47,960 Speaker 6: the House, we had to decide what the priorities are 526 00:27:47,960 --> 00:27:50,639 Speaker 6: for the House, and that we see these things as 527 00:27:50,720 --> 00:27:54,480 Speaker 6: Lincoln pretty intractable right now. We just don't see where 528 00:27:54,520 --> 00:27:56,239 Speaker 6: it's going to go, and of course we're running out 529 00:27:56,240 --> 00:27:58,560 Speaker 6: of time for them to stick the landing that really 530 00:27:58,640 --> 00:27:59,760 Speaker 6: is the tricky part here. 531 00:27:59,800 --> 00:28:02,000 Speaker 3: Well, it strikes me that Josh just said, you know, 532 00:28:02,400 --> 00:28:04,199 Speaker 3: they have the House, but Steve, they don't have the 533 00:28:04,240 --> 00:28:06,639 Speaker 3: House by that much. He has a very small margin 534 00:28:06,680 --> 00:28:09,080 Speaker 3: to work with, which comes back to this idea of 535 00:28:09,119 --> 00:28:10,560 Speaker 3: how hard it was to get him the votes he 536 00:28:10,600 --> 00:28:13,600 Speaker 3: needed the first time around. So realistically, where is their 537 00:28:13,680 --> 00:28:16,199 Speaker 3: room within his caucus for things to come out of 538 00:28:16,240 --> 00:28:19,120 Speaker 3: that package? What are Republicans willing to lose if there 539 00:28:19,119 --> 00:28:20,440 Speaker 3: are negotiations to be had. 540 00:28:20,800 --> 00:28:23,840 Speaker 12: You know, the thing that McCarthy has he has not raised, 541 00:28:23,880 --> 00:28:25,840 Speaker 12: like he has not said I need all of these 542 00:28:26,200 --> 00:28:29,200 Speaker 12: cuts in my bill is the only thing he said 543 00:28:29,240 --> 00:28:32,000 Speaker 12: is there cannot be a clean debt limit. And if 544 00:28:32,040 --> 00:28:36,159 Speaker 12: you think about the position McCarthy's in where he has 545 00:28:36,359 --> 00:28:42,320 Speaker 12: just a four vote majority, really he really can't come 546 00:28:42,360 --> 00:28:45,600 Speaker 12: back completely empty handed. He needs to have something he 547 00:28:45,640 --> 00:28:49,200 Speaker 12: can point to to his conference that says, hey, we 548 00:28:49,600 --> 00:28:51,440 Speaker 12: have some leverage. We're going to get some of the 549 00:28:51,480 --> 00:28:53,680 Speaker 12: things that we want, either some kind of a handshake 550 00:28:53,720 --> 00:28:59,680 Speaker 12: deal committee, you know, but also probably something real and 551 00:28:59,720 --> 00:29:02,520 Speaker 12: the in it you have anything real attached to it, 552 00:29:02,600 --> 00:29:05,520 Speaker 12: then the entire White House argument that they're not going 553 00:29:05,560 --> 00:29:09,160 Speaker 12: to give in anything for the dead limit, you know, 554 00:29:09,280 --> 00:29:12,000 Speaker 12: because then limit will be a bargaining chip into the future. 555 00:29:12,040 --> 00:29:15,440 Speaker 12: And that's where, you know, some of these sort of 556 00:29:15,720 --> 00:29:19,680 Speaker 12: break glass scenarios start looming large because if it really 557 00:29:19,760 --> 00:29:23,040 Speaker 12: is intractable and McCarthy simply will not agree to a 558 00:29:23,120 --> 00:29:26,400 Speaker 12: clean deadlimit in grease and the White House keeps to 559 00:29:26,480 --> 00:29:30,680 Speaker 12: their position, you know, then you start thinking, Okay, well, 560 00:29:30,720 --> 00:29:33,760 Speaker 12: will they do these premium bonds to pretend that debt 561 00:29:33,800 --> 00:29:35,880 Speaker 12: is not as big as it is? Will they do 562 00:29:36,480 --> 00:29:39,719 Speaker 12: a platinum coin? And until the White House really shuts 563 00:29:39,760 --> 00:29:43,760 Speaker 12: down those options, they start looming ever larger. As we 564 00:29:43,800 --> 00:29:45,680 Speaker 12: get closer to that cliff. 565 00:29:45,400 --> 00:29:48,200 Speaker 3: Diving moment yep, And we're getting closer every day and 566 00:29:48,240 --> 00:29:51,680 Speaker 3: getting closer to that important conversation happening on May ninth. 567 00:29:51,720 --> 00:29:53,840 Speaker 3: We'll see how much progress really can be made. Thank 568 00:29:53,840 --> 00:29:56,480 Speaker 3: you both so much for joining us. Can't wait for Tuesday. 569 00:29:56,480 --> 00:29:59,240 Speaker 3: Bloomberg White House reporter josh Win Grove and congressional reporter 570 00:29:59,280 --> 00:30:01,920 Speaker 3: Steve Dennis, Thank you both, and Tom, we'll send it 571 00:30:01,960 --> 00:30:02,320 Speaker 3: back to you. 572 00:30:02,840 --> 00:30:03,200 Speaker 6: Thank you. 573 00:30:03,280 --> 00:30:07,120 Speaker 1: Kaylee reporting from our Bloomberg ninety nine one newsroom in Washington, 574 00:30:07,160 --> 00:30:09,120 Speaker 1: and you can hear sound on with Joe Matthew and 575 00:30:09,280 --> 00:30:13,120 Speaker 1: Kaylee weekdays one to three pm Wall Street Time, right 576 00:30:13,160 --> 00:30:16,720 Speaker 1: here on Bloomberg Radio, and coming up on Bloomberg day 577 00:30:16,720 --> 00:30:20,080 Speaker 1: Break Weekend. How hot could tourism get in Japan this 578 00:30:20,160 --> 00:30:23,200 Speaker 1: summer and what does it mean for the country's economy. 579 00:30:23,400 --> 00:30:31,360 Speaker 1: I'm Tom Busby, and this is Bloomberg. This is Bloomberg 580 00:30:31,440 --> 00:30:33,600 Speaker 1: day Break Weekend, our global look ahead at the top 581 00:30:33,640 --> 00:30:36,520 Speaker 1: stories for investors in the coming week. I'm Tom Busby 582 00:30:36,560 --> 00:30:40,920 Speaker 1: in New York. Chatbots shaking things up in Asia, also 583 00:30:41,160 --> 00:30:44,080 Speaker 1: sounding alarm bells for some For more, let's go to 584 00:30:44,120 --> 00:30:46,600 Speaker 1: Hong Kong and Bloomberg day Break Asia host Brian Curtis 585 00:30:46,600 --> 00:30:48,800 Speaker 1: and his colleague Doug Krisner. 586 00:30:49,040 --> 00:30:52,120 Speaker 4: Tom More and more. Companies are rushing out new artificial 587 00:30:52,160 --> 00:30:56,680 Speaker 4: intelligence projects, including some in Asia, and some companies are 588 00:30:56,720 --> 00:30:58,840 Speaker 4: also holding back, preaching caution. 589 00:30:58,880 --> 00:31:03,320 Speaker 13: AI capability are moving so fast it's making some people nervous. 590 00:31:03,360 --> 00:31:06,640 Speaker 13: One example Jeffrey Hinton. He's one of the pioneers of 591 00:31:06,760 --> 00:31:10,720 Speaker 13: modern AI. He recently quit his job at Google's Brain 592 00:31:10,800 --> 00:31:13,840 Speaker 13: AI division, Hinton saying that he wants to be able 593 00:31:13,920 --> 00:31:17,760 Speaker 13: to speak out more freely about the dangers the technologies 594 00:31:17,760 --> 00:31:18,440 Speaker 13: can bring. 595 00:31:18,320 --> 00:31:20,480 Speaker 4: Dougan, I thought we would take a closer look at 596 00:31:20,480 --> 00:31:24,200 Speaker 4: some of the positives and negatives, particularly with some attention 597 00:31:24,400 --> 00:31:28,080 Speaker 4: given to Asia joining us as lad Sevov Bloomberg Tech 598 00:31:28,240 --> 00:31:32,600 Speaker 4: editor who is a specialist on artificial intelligence. So we've 599 00:31:32,640 --> 00:31:34,680 Speaker 4: had a lot of interesting points here of late, not 600 00:31:34,720 --> 00:31:37,720 Speaker 4: only the one that Doug mentioned there, but Samsung banning 601 00:31:37,760 --> 00:31:42,160 Speaker 4: people from using AI, worried about what would happen if 602 00:31:42,200 --> 00:31:46,240 Speaker 4: some of the information is stored on servers outside the country. 603 00:31:46,360 --> 00:31:48,920 Speaker 4: In your view, are we moving too fast here or 604 00:31:49,240 --> 00:31:50,240 Speaker 4: is this to be expected? 605 00:31:50,640 --> 00:31:54,800 Speaker 14: Well, with respect to Samsung, I think it's a good 606 00:31:54,840 --> 00:31:58,240 Speaker 14: precaution that the company's taking. What reedy Samsung is concerned 607 00:31:58,240 --> 00:32:00,840 Speaker 14: about it has to do with it knowledge itself. So 608 00:32:00,840 --> 00:32:04,240 Speaker 14: maybe we just dive straight into the geeky partis from 609 00:32:04,240 --> 00:32:06,320 Speaker 14: my favorite I will also correct you, I am not 610 00:32:06,360 --> 00:32:07,960 Speaker 14: a specialist in this sort of AI. 611 00:32:08,040 --> 00:32:09,200 Speaker 7: I don't think anybody else. 612 00:32:09,240 --> 00:32:12,520 Speaker 14: It's so novel, it's so new, and there is so 613 00:32:12,640 --> 00:32:14,600 Speaker 14: much that goes behind that label. 614 00:32:14,600 --> 00:32:17,560 Speaker 7: With AI. It's kind of like saying computer. It's so general. 615 00:32:17,640 --> 00:32:21,200 Speaker 14: It covers so many different applications and technologies. The thing 616 00:32:21,280 --> 00:32:23,680 Speaker 14: that we are already discussing with AI in the current 617 00:32:23,680 --> 00:32:27,040 Speaker 14: moment is really the chat GPT class is these large 618 00:32:27,120 --> 00:32:30,120 Speaker 14: language models that the likes of Google and chat GPT 619 00:32:30,240 --> 00:32:34,360 Speaker 14: developer open Ai have really popularized with respect to that. 620 00:32:34,520 --> 00:32:37,040 Speaker 14: And this is where Samsung is being cautious. If you 621 00:32:37,080 --> 00:32:40,480 Speaker 14: put any information into it, it is not so much 622 00:32:40,560 --> 00:32:43,760 Speaker 14: insecure with respect to open ai acting your information, but 623 00:32:44,400 --> 00:32:48,080 Speaker 14: that info then trains the bot to answer queries from others. 624 00:32:48,200 --> 00:32:50,960 Speaker 14: So if you're Samsung and you put any proprietary software 625 00:32:51,080 --> 00:32:54,200 Speaker 14: or code in there, somebody like me can come along 626 00:32:54,240 --> 00:32:57,280 Speaker 14: and say, hey, tell me about Samsung's proprietary code in 627 00:32:57,320 --> 00:33:01,040 Speaker 14: Android devices, and the bot doesn't have any sort of 628 00:33:01,320 --> 00:33:03,640 Speaker 14: guardrails for the most part, and it will just bid 629 00:33:03,680 --> 00:33:05,000 Speaker 14: out what information. 630 00:33:04,640 --> 00:33:08,240 Speaker 13: Has Recently, there was an open letter it was signed 631 00:33:08,280 --> 00:33:11,400 Speaker 13: i believe by Elon Musk and thousands of others calling 632 00:33:11,480 --> 00:33:15,480 Speaker 13: for a pause on development of artificial intelligence. It's a 633 00:33:15,520 --> 00:33:17,800 Speaker 13: bit like putting the genie back in the bottle. Though 634 00:33:17,800 --> 00:33:19,840 Speaker 13: at this point, don't you think is there any way 635 00:33:19,880 --> 00:33:22,800 Speaker 13: that there could be some kind of global agreement just 636 00:33:22,840 --> 00:33:24,920 Speaker 13: to slow down the rate of adoption here? 637 00:33:25,000 --> 00:33:25,120 Speaker 1: Oh? 638 00:33:25,240 --> 00:33:28,480 Speaker 7: You exactly right. There is no chance of that happening. 639 00:33:28,960 --> 00:33:33,560 Speaker 14: We have several examples here in China of start of 640 00:33:33,600 --> 00:33:36,920 Speaker 14: founders essentially saying I just needed to start an AI company. 641 00:33:37,080 --> 00:33:39,960 Speaker 14: It's once in a decade, once in several decades opportunity. 642 00:33:39,960 --> 00:33:41,600 Speaker 14: I don't have a name for the company yet, I 643 00:33:41,640 --> 00:33:43,640 Speaker 14: just knew I need to quit my previous job and. 644 00:33:43,640 --> 00:33:44,320 Speaker 7: Jump into this. 645 00:33:44,560 --> 00:33:47,400 Speaker 14: It opens up such an opportunity because everybody is the 646 00:33:47,400 --> 00:33:50,080 Speaker 14: start in line today. When you think about tech, over 647 00:33:50,120 --> 00:33:53,320 Speaker 14: the past at least decade, probably longer, there hasn't been 648 00:33:53,400 --> 00:33:57,680 Speaker 14: the opportunity for somebody to search and become the next Facebook, Slash, Meta, 649 00:33:57,840 --> 00:34:01,160 Speaker 14: or the next Google or Twitter, even just because the 650 00:34:01,240 --> 00:34:03,440 Speaker 14: leaders are the leaders. They have the money, they have 651 00:34:03,480 --> 00:34:05,560 Speaker 14: the investment, and they just keep your investing and they 652 00:34:05,600 --> 00:34:09,200 Speaker 14: keep hiring the best talent. Now, we've had big waves 653 00:34:09,239 --> 00:34:12,920 Speaker 14: of layoffs, especially in the US, with really highly experienced, 654 00:34:12,960 --> 00:34:16,720 Speaker 14: highly talented and well connected people in Silicon Valley and beyond, 655 00:34:17,360 --> 00:34:19,120 Speaker 14: and those people are now looking at AI and the 656 00:34:19,160 --> 00:34:24,319 Speaker 14: two moments coincide. So AI gives this big new opportunity 657 00:34:24,400 --> 00:34:27,480 Speaker 14: where everybody from the big guys like Google and Microsoft 658 00:34:27,560 --> 00:34:29,800 Speaker 14: and the ten sent and I Barbers here in China 659 00:34:29,880 --> 00:34:33,640 Speaker 14: starting from Crown zero effectively and seeing how they turn 660 00:34:33,719 --> 00:34:37,160 Speaker 14: the tech into something that is a product, and then 661 00:34:37,320 --> 00:34:39,520 Speaker 14: you have the opportunity for small guys to get in 662 00:34:39,560 --> 00:34:41,480 Speaker 14: there and just have a better idea. 663 00:34:42,360 --> 00:34:44,759 Speaker 4: La thanks so much for sharing your insights with us. 664 00:34:44,960 --> 00:34:48,480 Speaker 4: Flat's have off there, Bloomberg Tech Editor, I'm Brian Curtis 665 00:34:48,520 --> 00:34:51,080 Speaker 4: along with Doug Kristner. You can catch us every weekday 666 00:34:51,120 --> 00:34:54,120 Speaker 4: here for Bloomberg day Break Asia, beginning at six am 667 00:34:54,160 --> 00:34:56,760 Speaker 4: in Hong Kong and six pm on Wall Street. 668 00:34:57,160 --> 00:34:57,560 Speaker 7: Tom. 669 00:34:57,760 --> 00:34:59,880 Speaker 1: Thank you Brian and Doug. And that does it for 670 00:34:59,920 --> 00:35:02,680 Speaker 1: the this edition of Bloomberg Daybreak Weekend. Join us again 671 00:35:02,800 --> 00:35:05,279 Speaker 1: Monday morning at five am Wall Street time for the 672 00:35:05,360 --> 00:35:08,000 Speaker 1: latest on markets overseas and the news you need to 673 00:35:08,040 --> 00:35:09,920 Speaker 1: start your day. I'm Tom Buzzby. 674 00:35:10,200 --> 00:35:10,839 Speaker 6: Stay with us. 675 00:35:10,920 --> 00:35:14,120 Speaker 1: Top stories and global business headlines are coming up right now.