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Speaker 1: Good morning. It's Thursday, the twenty seventh of July in London.

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Speaker 1: This is the Bloomberg Daybreak you a podcast. I'm Caroline Hepki.

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Speaker 2: And I'm Stephen Carroll. Coming up today, concern from Jeremy

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Speaker 2: Hunt's team of top economic advisors that the Bank of

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Speaker 2: England might cause unnecessary recession from hiking interest rates too far.

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Speaker 1: Meanwhile, the Fed drops its full coast of a recession

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Speaker 1: in the United States as it hikes interest rates to

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Speaker 1: the highest level in twenty two years, And.

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Speaker 2: A warning from Britain's Met Office that says forty degrees

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Speaker 2: celsius summers could become the norm by twenty sixty. Let's

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Speaker 2: start with a roundup of our top stories. Jeremy Hunts

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Speaker 2: Council of Economic Advisors think the Bank of England might

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Speaker 2: be hiking interest rates too much. Sources tell Bloomberg that

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Speaker 2: a majority of the seven member council worry that better

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Speaker 2: than expected inflation data suggests a serious slowdown is coming.

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Speaker 2: The former Bank of England governor Mervyn King shares that view.

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Speaker 3: And I think it's quite possible that having lost control

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Speaker 3: of inflation and therefore having lost a good deal of

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Speaker 3: credibility that central banks will see that the safest course

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Speaker 3: for them is one of overkill now, so that they

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Speaker 3: do bring inflation back to two percent, and if they

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Speaker 3: carry on for the next six months or so tightening

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Speaker 3: monetary policy, it could well be that they generate both

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Speaker 3: a recession as well as a sharp fall in inflation.

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Speaker 2: Although not on the Chancellor's counsel, Mervin King's interview with

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Speaker 2: Bloomberg's Merin Talks Money podcast was cited by one senior

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Speaker 2: government official as being considered within the Treasury now.

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Speaker 1: The fears around the Bank of England's hiking cycle come

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Speaker 1: as the Federal Reserve has raised interest rates to the

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Speaker 1: highest level in twenty two years. The dollar dropped on

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Speaker 1: the news and the dal Jones not shed up its

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Speaker 1: longest winning streak since nineteen eighty seven. Chaired Your Own

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Speaker 1: Power leaves the door open to further rate hikes and

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Speaker 1: says that a cut in twenty twenty three is not

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Speaker 1: on the cards.

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Speaker 4: I would say it is certainly possible that we would

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Speaker 4: raise funds again at the Timber meeting if the data warranted,

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Speaker 4: and I would also say it's possible that we would

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Speaker 4: choose to hold steady at that meeting. We're going to

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Speaker 4: be making careful assessments. As I said, meeting by meeting.

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Speaker 1: Pal's press conference doesn't mark the end of the florry

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Speaker 1: of central banks.

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Speaker 2: Turning next to the ECB, where President Christine Legard speaks

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Speaker 2: later today after their interest rate decision. Investors fully pricing

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Speaker 2: in another rate hike from the Central Bank, with a

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Speaker 2: focus turning to the path ahead as the governing council

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Speaker 2: weighs sticky core inflation against weaker economic data. Bloomberg's Maria

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Speaker 2: today A reports now.

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Speaker 5: The European Center Bank is expected to increase rates by

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Speaker 5: twenty five basis points taken at a busit rate, to

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Speaker 5: three point seventy five percent, as it continues its most

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Speaker 5: aggressive hiking cycle to date in an effort to tame inflation.

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Speaker 5: Now beyond the monetary policy decision itself, the focus will

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Speaker 5: be on the press conference and any hints we may

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Speaker 5: get from the head of the UCB, Christian Laguard, in

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Speaker 5: terms of the future for reeds going into September. In Frankfurt,

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Speaker 5: Maria Denayo Bloomberg Daberg Europe.

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Speaker 2: Turning out of results from France's largest bank, BNP. Parry

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Speaker 2: Bar reporting better than expected net income in the second

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Speaker 2: quarter of two point eight one billion euros versus estimates

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Speaker 2: of just over two and a half billion. The bank

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Speaker 2: reporting though a lower loan last provision in the second

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Speaker 2: quarter of six hundred and eighty nine million euros as

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Speaker 2: had been expected, a figure of over eight hundred million euros.

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Speaker 2: That are also a slight miss in terms of their

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Speaker 2: thick sales and trading revenue for the second quarter. The

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Speaker 2: figure they're coming in at one point one three billion

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Speaker 2: expectation had been for one point one six billion euros.

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Speaker 1: Okay now from European banks to US tech earnings. Meta

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Speaker 1: shares climbs as much as eight percent in postmarket trading

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Speaker 1: after second quarter sales beat exceeding als estimates. The company's

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Speaker 1: new video feature, Reels, is successfully enticing both users and

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Speaker 1: advertisers to its social media platforms. Meta's CEO Mark Zuckerberg

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Speaker 1: also commented on his company's new platform and Twitter rival, Threads.

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Speaker 6: I feel like we're getting to a good place on

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Speaker 6: that with Threads, and there's still a lot of basic

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Speaker 6: functionality to build two years. Once we get to the

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Speaker 6: point where it's a hundreds of millions of people, If

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Speaker 6: assuming we can get there, then we'll worry about monetization.

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Speaker 6: But I mean that's basically the playbook that that we're

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Speaker 6: focused on.

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Speaker 1: And that was Mark Zuckerberg speaking after Meta gave a

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Speaker 1: rosy outlook for the current period the.

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Speaker 2: Pressures betting Now. Joe Lewis has pleaded not guilty in

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Speaker 2: a New York course to charges of insider trading. Bloomberg.

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Speaker 2: James Wilcock has the details.

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Speaker 7: Joe Lewis is accused of abusing his access to corporate

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Speaker 7: boardrooms to pass on inside information to his friends, staff

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Speaker 7: on his super yacht, personal pilots and romantic interests. The

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Speaker 7: owner of Tossham Hotspur Football Club has been charged with

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Speaker 7: securities fraud in the US. He pleaded not guilty and

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Speaker 7: was released on a three hundred million dollar bail package

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Speaker 7: secured by his yacht and his private jet. The Tavistot

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Speaker 7: Group founder built one of the world's biggest fortunes take

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Speaker 7: big swings in public markets where his major bets as

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Speaker 7: a currency trader. This is Attorney David Zornau. So the

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Speaker 7: US government made an egregious error in judgment charging his

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Speaker 7: clients in London. I'm James Wilcock Bloomberg Daybreak Europe.

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Speaker 1: Okay, those are a few of today's top stories for

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Speaker 1: you this morning. I thought that this report from the

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Speaker 1: Met Office comes at a timely point. It's absolutely pouring

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Speaker 1: in London. Last year's record breaking heat wave in the UK,

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Speaker 1: so above forty degrees celsius is going to be considered

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Speaker 1: normal apparently by twenty sixty. But it's not just that.

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Speaker 1: We all understand, don't we, that the temperatures in the

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Speaker 1: UK are becoming warmer, wetter and sunnier. But the issue

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Speaker 1: is that climate change, according to this Met Office report

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Speaker 1: which has just been released, is actually happening more quickly

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Speaker 1: than it is in other parts of the world. Not

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Speaker 1: exactly sure why, but it's happening faster here.

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Speaker 2: Yeah, that's right. I mean, look, this question that we

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Speaker 2: could be looking at the forty degree temperatures that we

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Speaker 2: had last is being the norm by twenty sixty and

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Speaker 2: even considered a cool summer by twenty twenty one hundred.

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Speaker 2: I mean, it's it's quite frankly extremely concerning at a

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Speaker 2: time when we're talking about you know, if we look

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Speaker 2: at what's happening across southern Europe as well, and that's

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Speaker 2: you know, sort of weather events that we're seeing more

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Speaker 2: frequently now.

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Speaker 1: Yeah, absolutely, and I think it goes very much to

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Speaker 1: sort of government policies and the idea that you know,

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Speaker 1: the commitment to net zero by twenty fifty maybe softening,

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Speaker 1: maybe you know, the evidence of how difficult it might

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Speaker 1: be to achieve that is becoming clear. I think to

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Speaker 1: have that sort of report also the kind of stock

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Speaker 1: issue of how the climate changing is affecting the UK's

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Speaker 1: I think it's very interesting for the Met Office.

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Speaker 2: Yeah, certainly is well. Let's get more detail now on

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Speaker 2: our story that advisors to the Chancellor Jeremy Hunter concerned

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Speaker 2: with the Bank of England going too far and raising

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Speaker 2: interest rates and pushing the UK into an unnecessary recession.

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Speaker 2: Our UK government reporter Joe Mays joins us with the details. Now,

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Speaker 2: good morning to you, Joe. These are members of the

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Speaker 2: Chancellor's Economic Advisory Council. They include the likes of Form

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Speaker 2: Brank of England Chief Economist Andy hal Dane. What have

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Speaker 2: they been telling Jeremy Hunter got into your reporting?

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Speaker 8: Yes, an important stress. These aren't members of the government,

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Speaker 8: but what our reporting show is that there is a

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Speaker 8: consensus view in this Council, which is that the banking

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Speaker 8: might go too quickly in terms of rising indust rates

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Speaker 8: in the coming food and that could overdo the inflation

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Speaker 8: fight and risk triggering a recession. So that's it's you

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Speaker 8: that's developed in that advisory Council and senior visuals on

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Speaker 8: the Treasury are taking that seriously that that's what our

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Speaker 8: body shows.

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Speaker 1: Yeah, I think it's an absolutely fascinating bit of reporting.

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Speaker 1: And the advisors include Andy Andy hal Dane, but also

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Speaker 1: Anna Valero for the London School of Economics who've got

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Speaker 1: the chair of GSK is one of them. P Jim's

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Speaker 1: sashil Woodwarni is also another, Karen Ward from JP Morgan

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Speaker 1: Asset Management. I mean, these are very interesting and influential figures.

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Speaker 1: What's their reasoning in your view?

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Speaker 8: Joe Mays So, I think their reasoning is that it

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Speaker 8: looks like inflation is on the way down and if

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Speaker 8: you look across the Atlantic you see the numbers in

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Speaker 8: the US coming down. I think there's a view that

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Speaker 8: the UK is on a similar path and their worry

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Speaker 8: is that given that if industrates do keep going up

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Speaker 8: and there's that lag effect, the way in which interest

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Speaker 8: rates actually affect the economy, then we could end up

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Speaker 8: in a scenario where inflation has come down by significant amounts,

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Speaker 8: comes to the end of the year following the US

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Speaker 8: and then the industry effect kicks in and it goes

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Speaker 8: too far and we will have gone beyond what's necessary

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Speaker 8: given that the inflation effect had been cooling. So yet

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Speaker 8: that's their reasoning.

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Speaker 2: Rich She's Seena and Jeremy Hunter repeatedly back to the

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Speaker 2: Bank of England's efforts to bring down inflation. Does this

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Speaker 2: open the door to a potentially more critical approach from

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Speaker 2: the government.

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Speaker 8: Well, I think it's important to stress that the Treasury

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Speaker 8: keeps saying and they tell in response to our story,

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Speaker 8: they said that they are fully behind the Bank of

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Speaker 8: England's approach and that that message being distance throughout. So

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Speaker 8: there's no kind of public divide it with with with

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Speaker 8: Governor Andrew Bailey. But in terms of whether that might

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Speaker 8: be not qushal approach, you know, in this very difficult

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Speaker 8: world of how does the government community get with a

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Speaker 8: central bank about whether it wants to change tack, they're

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Speaker 8: very aware of being people to interfere with the independence

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Speaker 8: of the bank. So if there is going to be

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Speaker 8: a change approach, it will be very subtle. You Jeremy

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Speaker 8: Hunt has these private meetings with the government, Andrew Bailey

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Speaker 8: maybe in that kind of forum with the NOD and

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Speaker 8: the Wakness kind of thing, who he talks about. Yet

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Speaker 8: it's very sensitive. How governments will you get with their

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Speaker 8: to draw bank.

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Speaker 3: Yeah.

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Speaker 1: Absolutely politically though a recession early next year would be

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Speaker 1: very badly timed for the government given when we need

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Speaker 1: to have a general election buy in the UK. Could

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Speaker 1: that mean that they put pressure on the Bank of

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Speaker 1: England over interest rates?

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Speaker 8: I mean that's exactly the issue. You can see that

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Speaker 8: from say Jeremy Hunt's perspective, if he if he if

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Speaker 8: he agreed with that analysis to the Economic Aspiatory Council,

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Speaker 8: then he would be very concerned that that interest rate

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Speaker 8: effect could the economy away. That really damaged the victory

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Speaker 8: prospects of the Tory Party. So what do you do

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Speaker 8: about that if you're the government? You know, I think

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Speaker 8: I think that is when we are in that world

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Speaker 8: of using some kind of street method to convey as

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Speaker 8: concerns bring them that mainly they might want to go

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Speaker 8: a little bit slower. Yes, you can see the Conservive

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Speaker 8: Party in government perhaps doing that but without being too

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Speaker 8: avert about it.

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Speaker 2: Okay, JOm A's are government reporter, Thank you very much

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Speaker 2: for that.

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Speaker 1: Yeah. Absolutely a fascinating look into the government a UK

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Speaker 1: advisory group worrying about Bank of England risking overdoing its

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Speaker 1: inflation fight. Let's turn our attention now, though, to the

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Speaker 1: Federal Reserve, which has raised interest rates by another twenty

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Speaker 1: five basis points to the highest level in twenty two years,

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Speaker 1: and shared your own power left open the possibility of

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Speaker 1: further hikes of Let's go to our Economy editor Jill

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Speaker 1: Desis to talk more about the Federal Reserve raising interest

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Speaker 1: rates by twenty five basis points of the highest level

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Speaker 1: in twenty two years. Jill, good morning, Thank you so

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Speaker 1: much for your time. The market reaction overall, though, has

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Speaker 1: been pretty muted to charge your own pal at the

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Speaker 1: highest level of interest rates in twenty two years. Some

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Speaker 1: attention being paid to Powell's comments that inflation wouldn't come

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Speaker 1: back to target until twenty twenty five.

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Speaker 9: Yes, so I think that the initial muted reaction was

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Speaker 9: really just because again I think, as we've been talking

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Speaker 9: for weeks, this hike has been baked in for quite

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Speaker 9: some time now. But yes, I think that those comments

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Speaker 9: were certainly the most hawkish thing that he said, that

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Speaker 9: idea that inflation is not returning to the two percent

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Speaker 9: inflation goal until twenty twenty five, because what that ultimately

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Speaker 9: implies is that even though Powell said the FED is

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Speaker 9: going to stop hiking rates in advance of reaching that target,

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Speaker 9: it still implies that those rates could be higher for longer.

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Speaker 9: And so that's now I think what investors are going

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Speaker 9: to try to bake in when exactly are those rates

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Speaker 9: going to start coming down. Certainly doesn't look like it's

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Speaker 9: going to be by the end of this year.

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Speaker 2: Jill, what about the outlook for the US economy and

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Speaker 2: all of this as well, the idea of a session

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Speaker 2: forecast being dropped.

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Speaker 9: Yeah, so I think that at that point, you know,

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Speaker 9: sort of adding to some of his positivity we've seen

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Speaker 9: on the outlook from a lot of investment banks recently,

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Speaker 9: what Powell did was, you know, sort of say that

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Speaker 9: the FED is pushing back that session forecast. We're not

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Speaker 9: going to see something this year. At this point, even

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Speaker 9: though we're looking at some cooling data on the labor sector,

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Speaker 9: there's still quite a bit of resilience. There still some

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Speaker 9: spending data that seems at least, you know, somewhat positive.

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Speaker 9: So yes, it does look like, you know, just as

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Speaker 9: we saw the IMS raised their global growth forecast just

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Speaker 9: a couple of days ago off of the back of

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Speaker 9: some more positive US data that seems to be some

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Speaker 9: positive news for the US O look going forward.

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Speaker 1: Okay, that's interesting. What about the data then to come

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Speaker 1: today GDP, personal consumption expenditures and initial jobless claims.

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Speaker 9: Yes, so what we're ultimately likely to see today is

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Speaker 9: a slight acceleration in real GDP growth. That's according to

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Speaker 9: Bloomberg Economics. But what they're also saying is that consumption

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Speaker 9: growth was probably going was probably still in the second quarter,

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Speaker 9: while you know, there's some release pent up demand for

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Speaker 9: spending in cars and travel and entertainment. Ultimately, what we're

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Speaker 9: seeing is that consumers likely increasingly we're cutting back on

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Speaker 9: discretionary good spending. So we'll have a better look at

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Speaker 9: some of that spending data, in particular one that data

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Speaker 9: comes out later today.

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