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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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Speaker 1: Day Bake You Up podcast, available every morning on Apple,

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Speaker 1: Spotify or wherever you listen. It's Friday, the twentieth of

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Speaker 1: September in London. I'm Caroline Hepkere.

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Speaker 2: And I'm Tom McKenzie coming up today. UK national debt

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Speaker 2: tops one hundred percent of GDP for the first time

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Speaker 2: since nineteen sixty one as government borrowing overshoots.

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Speaker 1: Family firms tell Bloomberg a UK inheritance tax hike would

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Speaker 1: destroy them. As consumer confidence dives on budget belt tightening, fears.

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Speaker 2: Plus to have and to hold. The Bank of Japan

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Speaker 2: leaves rates unchanged as the central Bank signals it is

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Speaker 2: in no hurry to hike again.

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Speaker 1: Let's start with a roundup of our top stories.

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Speaker 2: UK national debt has hit one hundred percent of GDP

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Speaker 2: for the first time since nineteen sixty one on a

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Speaker 2: sustained basis. Government borrowing came in higher than forecast in

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Speaker 2: the first five months of the fiscal year. The deficit

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Speaker 2: topped sixty four billion pounds between April and August. That

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Speaker 2: is six point three billion pounds more than expected Back

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Speaker 2: in March. The figures are the penultimate snapshot of public

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Speaker 2: finances before the Chancellor Rachel Reeves delivers the first budget

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Speaker 2: of the new Labor government at the end of next month.

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Speaker 2: Reeves has previously warned of painful choices in the budget

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Speaker 2: after accusing the previous Conservative government of leaving a twenty

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Speaker 2: two billion pound fiscal.

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Speaker 1: Whole well Sticking with the economic data for the UK,

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Speaker 1: retail sales picked up in August, with online and install

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Speaker 1: sales rising by one percent in August data out this morning,

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Speaker 1: but consumer confidence crashed in September amid dire warnings from

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Speaker 1: the new Labor government about those tough choices that need

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Speaker 1: to be taken to fix the public finances. Research firm

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Speaker 1: GfK said it's monthly confidence index fell seven points to

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Speaker 1: minus twenty last week. The former Bank of England chief

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Speaker 1: economist Andy Haldane called some of the government's rest unnecessary,

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Speaker 1: unhelpful and a bad idea.

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Speaker 3: Be much better to say nothing until you provide solutions

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Speaker 3: to filling the black hole, as well as revealing it

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Speaker 3: as it was that's generated fear and foreboding.

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Speaker 1: Andy Haldane's comments chime with new reporting from Bloomberg that

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Speaker 1: has found small and medium sized business owners are increasingly

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Speaker 1: fearful over reports that the new Labor government could end

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Speaker 1: business exemptions to inheritance tax.

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Speaker 2: Despite that, the Bank of England says it will not

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Speaker 2: rush to ease monetary policy. After leaving rates on hold yesterday,

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Speaker 2: Governor Andrew Bailey says he's still concerned about services inflation.

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Speaker 4: Bad job is to make sure that inflation is sustainable

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Speaker 4: at the two percent target. There are still some pressures.

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Speaker 4: We've seen. Services inflation are still elevated, so I think

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Speaker 4: interest rates are going to come down. I'm optimistic on

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Speaker 4: that front, but we do need to see some more evidence,

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Speaker 4: so of course we will be looking at this at

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Speaker 4: every meeting.

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Speaker 2: Bailey's comments sent the pound to a two year high

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Speaker 2: against the dollar. The Central Bank also maintained its quantitative

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Speaker 2: tightening plans. This would give Chancellor Rachel Reaes up to

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Speaker 2: an extra four billion pounds of much needed fiscal headroom

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Speaker 2: in her upcoming budgets.

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Speaker 1: Now to the Bank of Japan, which has left its

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Speaker 1: key interest rate unchanged today, signaling that it seems no

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Speaker 1: need to hurry with hikes after its July increased. Spook

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Speaker 1: to investors in his press conference Governor A Wader said

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Speaker 1: that there is no change in the Bank of Japan's

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Speaker 1: plan to raise rais if data stays on track towards

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Speaker 1: stable inflation. About seventy percent of economy surveyed by Bloomberg

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Speaker 1: expect another increase by December. Garfield Reynolds, who leads Bloomberg's

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Speaker 1: Markets Live team in Asia, gave us his analysis of

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Speaker 1: the decision.

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Speaker 5: There were hints that there could be some more hawkishness,

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Speaker 5: or at least some justification for hawkishness, because the boj

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Speaker 5: sounded more optimistic about the economy. It raised its assessment

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Speaker 5: for consumer spending, it sees inflation expectations moving higher in

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Speaker 5: the medium term. All of that is the sort of

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Speaker 5: thing that would set them up to your consider rate hikes.

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Speaker 1: Going forward, garthiled Renald speaking there. The Banker Japan's a

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Speaker 1: two day meeting kicked off hours after the Federal Reserve

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Speaker 1: conducted a long awaited policy pivot with a half point

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Speaker 1: rate cut. That move drove the S and p FI

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Speaker 1: founded to a new record high yesterday, as jobs data

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Speaker 1: backed the view that the US economy is headed for

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Speaker 1: a soft landing.

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Speaker 2: Francis Prime Minister says he will announce the makeup of

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Speaker 2: his new government by Sunday. Michelle Bunnyer met President Macaum

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Speaker 2: yesterday evening for what his office described as constructive talks,

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Speaker 2: during which he outlined a list of ministers. Stephanie at,

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Speaker 2: who's an MEP for Macron's party, says the new cabinet

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Speaker 2: will have to make important decisions for the country's future.

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Speaker 6: I mean it's a really hard task, I know for

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Speaker 6: the new prime Minister, and I hope everybody will be,

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Speaker 6: you know, on board and responsible to make sure that

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Speaker 6: we find, at the end of the day the right

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Speaker 6: method to enter into a more reasonable budget for France

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Speaker 6: and for Europe as well.

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Speaker 2: Stephanie jon Cortaz, speaking there to Bloomberg Television. Reports in

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Speaker 2: the French media, so the new team will largely be

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Speaker 2: made up of figures from Macon's Centrist group and Bunnia's

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Speaker 2: Conservative Republicans Party.

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Speaker 1: Now, Germany may only see a return to economic growth

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Speaker 1: later this year. That's according to a new Bloomberg survey

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Speaker 1: of economists. The country has been under the spotlight after

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Speaker 1: growth fell behind European peers. Bloomberg's here Adebayo has the story.

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Speaker 7: A recession will be narrowly avoided in Germany, where growth

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Speaker 7: will only kick in towards the end of the year.

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Speaker 7: That's according to economists polled by Bloomberg, who now forecast

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Speaker 7: stagnation in the three months through September compared with the

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Speaker 7: previous production of zero point two percent growth. The expectations

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Speaker 7: are broadly in line with the view of Bundesbang, who

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Speaker 7: said this week that German output could stagnate or decline

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Speaker 7: again in the third quarter. Despite the dim prognosis, those

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Speaker 7: surveys still expect Germany's end of year rebound to be

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Speaker 7: sustained into twenty twenty five in London to you at

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Speaker 7: a bio Bloomberg Radio now.

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Speaker 2: Staying on Germany and focused on one of its big

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Speaker 2: corporate players, particularly within the auto space as well, Mercedes

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Speaker 2: Benz overnight coming through with a downgrade to its outlook

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Speaker 2: and you can see the shares right now, one of

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Speaker 2: the biggest losers on the European stock six under currently

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Speaker 2: down six percent on Mercedes again, they lowered their outlook

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Speaker 2: with a particular line on China, so they are feeling

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Speaker 2: the pressure as Chinese consumers cut back on their purchases

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Speaker 2: of those premium vehicles. Mercedes Benz taking a knock as

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Speaker 2: they lower their expectations in terms of returns in the

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Speaker 2: main cars unit, now expected between seven point five and

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Speaker 2: eight point five percent, that compared to a prior forecast

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Speaker 2: of eleven percent. The stock down point two percent now.

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Speaker 1: Israel says that it has struck hundreds of Hezbela targets

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Speaker 1: in Lebanon, including scores of rocket launchers. It comes after

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Speaker 1: the leader of the militant group vowed to inflict a

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Speaker 1: just punishment after walkie talkies and pages exploded in coordinated attacks.

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Speaker 1: Thirty seven people died and more than three thousand people

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Speaker 1: were injured. The UK's Foreign Sexuary, David Lammi, is urging

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Speaker 1: both sides to come to the table and negotiate.

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Speaker 8: We are all very very clear that we want to

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Speaker 8: see a negotiated settlement so that Israelis can return to

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Speaker 8: their homes and indeed Lebanese can return to their homes.

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Speaker 1: Despite David Lammi's urge for calm and imminency, star looks unlikely.

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Speaker 1: While there are few signs an invasion of Lebanon is imminent,

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Speaker 1: Israeli officials have said that diplomacy with Hesbela is failing

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Speaker 1: at a moment, we are going to bring you more

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Speaker 1: details on the UK's national debt. It's the number, it's

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Speaker 1: around number one hundred percent of GDP. What does it

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Speaker 1: actually mean. Well, we're going to bring in Bomboths GUFUK

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Speaker 1: economists Dan Hansen, who better to give you an understanding

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Speaker 1: of why that ratio is important to economists and also

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Speaker 1: in the immediate what it means for the budget in

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Speaker 1: this UK government. That in just a moment. But there's

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Speaker 1: also a really great piece on brimbd terminal that has

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Speaker 1: caught my eye. Nice photographs, lots of background of course

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Speaker 1: on the US presidential race. What would happen if Kamala

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Speaker 1: Harris actually wins, not just in terms of her personality

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Speaker 1: and the change in tone that she has campaigned on

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Speaker 1: that if she were to win, she would be a

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Speaker 1: sort of change in terms of the personality leading the

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Speaker 1: US and would be a contrast to Donald Trump as

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Speaker 1: she has advocated, but actually what she would do in

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Speaker 1: terms of the policy, taxes, tariffs and so on. There

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Speaker 1: is a debate about how tough she would be given

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Speaker 1: her background, you know, in terms of regulation and taxation

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Speaker 1: in the US. I think it's a really great piece

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Speaker 1: on the Ternel World worth reading.

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Speaker 2: There was also the event she did last night over

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Speaker 2: some celebrities of Oprah Winfrey, and it was quite revealing

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Speaker 2: actually some of the video clips of that. She seemed

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Speaker 2: to open up as ever, Oprah Winfrey managing to get

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Speaker 2: her interviewee to kind of open up more more than

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Speaker 2: they might otherwise, and she came out with a line

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Speaker 2: on being a gun owner and saying that if you

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Speaker 2: want to try and break into my house, you would

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Speaker 2: be shot. And then she said I should probably get

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Speaker 2: into drop I probably wouldn't have said that, but she

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Speaker 2: was much seened to come across much more open fielding

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Speaker 2: questions from the audience, feeling questions from those who who

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Speaker 2: were dialing as well, talked about immigration, talked about gun rights,

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Speaker 2: talks about abortion. It was pretty it's pretty interesting sit

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Speaker 2: down with Oprah, who of course has come out as

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Speaker 2: the context in terms of in support and giving her

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Speaker 2: her back to recently.

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Speaker 1: Absolutely and the criticism of Harris has been that she

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Speaker 1: has sort of campaigned essentially has a kind of front

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Speaker 1: runner in a way whilst doing and therefore doing very

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Speaker 1: few sort of forendsic. Interviews, and so that was also

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Speaker 1: the context of that quite interesting anyways, on the Bloomberg

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Speaker 1: term of this more in terms of Kamala Harris and

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Speaker 1: the analysis of what she would potentially do if she

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Speaker 1: were to win the race of the White House. Right,

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Speaker 1: that's one story. Let's also talk about the UK's national

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Speaker 1: debt picture, which has now hit one hundred percent of

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Speaker 1: GDP as government borrowing came in higher than forecast in

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Speaker 1: the first five months of the fiscal year. This is

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Speaker 1: data that just came out this morning. It also comes

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Speaker 1: as consumer confidence crashed in September amid these dar warnings

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Speaker 1: for the new Labor government about tough decisions that need

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Speaker 1: to be taken to fix the public finances. Bloomberg's Chief

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Speaker 1: UK economist, Dan Hanson is in the studio with us Fay.

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Speaker 1: Good morning to you, Dan, So firstly on the deficit.

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Speaker 1: I mean you've worked in treasury in the past, you know,

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Speaker 1: with deep knowledge of this. Just explain to the audience

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Speaker 1: why one hundred percent that ratio? Why is that important?

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Speaker 1: What does it mean in economic terms?

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Speaker 9: Well, it's sort of there's there are two numbers that

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Speaker 9: make it up. There's the top number, which is the

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Speaker 9: amount of debt to the cash value of the debt.

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Speaker 9: The government the government has, and the bottom number is

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Speaker 9: how much income? So GDP is the economy's income, so

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Speaker 9: it's a measure of affordability of that debt, so how

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Speaker 9: much income we have to service that debt. And obviously

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Speaker 9: it's very striking one hundred percent. It's extremely high. I mean,

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Speaker 9: one thing I'd say is these numbers are very much

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Speaker 9: prone to revision. And actually it's the one hundred percent

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Speaker 9: of GDP. Isn't the metric that There are various metrics

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Speaker 9: of debt that are used, and it's not the metric

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Speaker 9: that the government target, at least at the moment in

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Speaker 9: its fiscal target. But nonetheless, you're right, it is quite

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Speaker 9: a startling number. I mean, I think the interesting thing

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Speaker 9: for me from the data this morning is that the

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Speaker 9: story since the sort of start of the year, and

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Speaker 9: we've spoken about this a lot, is that the economy

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Speaker 9: has done a lot better than everyone's been expecting. But

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Speaker 9: actually that hasn't translated into the deficit falling faster than expected.

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Speaker 9: And you would expect it to, because if there's more

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Speaker 9: economic activity, that means more tax receipts, and you'd expect

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Speaker 9: the deficits fall faster. But actually what's been happening, is

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Speaker 9: that deficit's been falling more slowly than expected, and if

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Speaker 9: you look at it relative to what the OBR is expecting,

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Speaker 9: a lot of this is to do with departmental spending

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Speaker 9: and to do with public sector pay awards, which is interesting,

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Speaker 9: of course, because that's where part at least part of

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Speaker 9: the black hole that Rachel Reeve's uncovered was to do

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Speaker 9: with public sector pay and the fact that she's awarded

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Speaker 9: a big public sector pay boost at the end of July.

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Speaker 9: So you've sort of got this question now about is

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Speaker 9: departmental spending going to track well above the obr's forecast

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Speaker 9: at least in the near term, and therefore is the

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Speaker 9: deficit going to continue to sort of come down but

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Speaker 9: slower than expected.

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Speaker 2: That is one hundred percent debt to GDV for the

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Speaker 2: UK the new normal? Is it the floor? And how

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Speaker 2: do markets react to this? Guilt market seem to be

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Speaker 2: relatively relaxed about that round number in the session today.

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Speaker 2: But that's the challenge, isn't it. The international investors turn

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Speaker 2: around and say, we're not quite sure you're going to

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Speaker 2: be able to pay your debts back.

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Speaker 9: Yeah, that's always the concern, and you when there is

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Speaker 9: a when there is a concern about that, there is

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Speaker 9: an obviously a very sharp market reaction. Go back to

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Speaker 9: twenty twenty two. That's sort of a classic example of that.

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Speaker 9: I would I would say that the UK is just

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Speaker 9: I think the key point for investors of the UK

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Speaker 9: is not an outlier. All countries have this problem. I mean,

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Speaker 9: if you look, for example, in the US, it's far

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Speaker 9: worse one.

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Speaker 2: Hundred and twenty three percent debt to GDP according to

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Speaker 2: black Rock in the US.

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Speaker 9: Yeah, and the true as well is far far more concerning.

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Speaker 9: You know, running a six percent seven percent of GDP

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Speaker 9: deficit means that the path of debt is much more explosive.

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Speaker 9: And in Europe too, I mean, the general challenge across

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Speaker 9: all economies is that we have, probably apart from the US,

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Speaker 9: but certainly in Europe, is very slow nominal GDP growth

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Speaker 9: and high interest rates. So that means you have to

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Speaker 9: run a very tight fiscal stance in order to bring

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Speaker 9: debt down. And I think there is this broad there

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Speaker 9: is this question for investors now in this higher interest

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Speaker 9: rate environment, are we just going to live in a

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Speaker 9: world where debt, as Tom says, stays at these levels?

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Speaker 9: Perhaps just creeps up over the course of time. There's

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Speaker 9: always going to be this commitment to bring it down.

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Speaker 9: But because these targets are in the future, they never

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Speaker 9: really bind, so that you always have this slippage.

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Speaker 1: Yeah, two points I'd make about that. I mean, the

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Speaker 1: US operates the world's reserve currency, has the biggest, most

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Speaker 1: liquid market, so in some ways maybe it's the outline,

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Speaker 1: and the growth is strong and so on. Also, the

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Speaker 1: other argument that I've heard about that is that the

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Speaker 1: UK is not an outlier at the moment, but if

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Speaker 1: things were to change, let's say, to its other peers

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Speaker 1: in Europe, then that would be the point at which

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Speaker 1: it might become problematic, an argument that I've heard. But

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Speaker 1: the other issue is also what this spending now means

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Speaker 1: more immediately for the thirtieth of October. Yeah, so your

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Speaker 1: thoughts around the budget and what Yeah, I mean, just.

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Speaker 9: On the one, no, no, no, no, no, I just I think

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Speaker 9: on the I agree with you at the point about

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Speaker 9: the US, it probably has a sort of slightly different

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Speaker 9: it held in a slightly different regard by investors Europe.

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Speaker 9: It feels to me, at least UK relative to Europe,

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Speaker 9: there's just a lot more political capital behind fiscal sorting

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Speaker 9: out the fiscal position. In Europe, it just seems to slip.

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Speaker 9: It's constantly slipping, the plans get pushed back. I feel

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Speaker 9: in the UK there is this commitment to it. It's

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Speaker 9: very difficult, like we know it's difficult, and coming onto

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Speaker 9: the budget now we can talk about that. But I

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Speaker 9: feel like there is a political will to get the

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Speaker 9: public finance or at least look like you're trying to

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Speaker 9: get the public finances sorted. In terms of what all

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Speaker 9: of this means for the budget that we saw the

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Speaker 9: consumer confidence numbers this morning, there appears to be sort

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Speaker 9: of a sentiment shift because of what's been said around

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Speaker 9: this budget. I'd make one I think there's a really

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Speaker 9: important point to make about this is that Rachel Reeves

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Speaker 9: has been talking about all these black holes, and it's

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Speaker 9: about what she's talking about is finding taxes to fill

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Speaker 9: these black holes. But that black hole is higher spending.

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Speaker 9: So on the one hand you've got higher spending and

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Speaker 9: on the other hand you've got higher tax So it's

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Speaker 9: giving with one hand and taking with the other. So people,

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Speaker 9: and of course across the population, people will feel that differently.

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Speaker 9: Not everyone will benefit from the spending, not anyone will

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Speaker 9: have money taken away from them in terms of tax.

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Speaker 9: But if you're looking at it from a macro perspective,

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Speaker 9: which you know, if you think about the Bank of

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Speaker 9: England for example, there are these two sides of the

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Speaker 9: sort of ledger. If you like, there is spending and tax.

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Speaker 2: Then why isn't the Why why is the BOE sitting

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Speaker 2: on the sidelines? Growth is stagnating? The consumers feeling crossed?

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Speaker 2: We saw that in the survey today. We're going to

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Speaker 2: get tax sites and the budget in October. The idea

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Speaker 2: that there's there's a myopic focus on infla where's the

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Speaker 2: rest of the inflation going to come from?

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Speaker 5: Oil prices are soft?

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Speaker 2: Is the BOE at risk of a policy mistake?

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Speaker 9: I don't think that, to be honest. I sort of

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Speaker 9: take the other side of that. I think they're I think,

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Speaker 9: what's going on? This idea that it happened at the

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Speaker 9: start of the year, right everyone? What was it seven

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Speaker 9: seven cuts? Over the course of twenty twenty four it

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Speaker 9: was being priced I think in the back for the

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Speaker 9: bank it was five or six and we thought we

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Speaker 9: we sort of brought into that. We did think inflation

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Speaker 9: would fall sharply, and particularly services inflation, And you're right,

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Speaker 9: there is this what might be considered myopic view of that.

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Speaker 9: You know, until services inflation hits this number, I'm not

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Speaker 9: going to do anything, which is sort of how you

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Speaker 9: feel when you watch the bank. They're so they're so

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Speaker 9: obsessed with it. I do think that the experience of

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Speaker 9: the past eighteen to twenty four months tells us that

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Speaker 9: I think they're right to are on the side of caution.

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Speaker 9: You're right, growth stagnating, but actually relative to what you

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Speaker 9: might have expect from a five hundred basis point in

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Speaker 9: interest rate rise, that's not too bad. You know, you'd

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Speaker 9: have expected a pretty deep recession. If you'd sat here

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Speaker 9: in twenty twenty one and told me they're going to

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Speaker 9: raise interest rates by five hundred basis points, what's going

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Speaker 9: to happen to the economy, I'd have said, well, we're

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Speaker 9: heading for a really deep recession, and that that would

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Speaker 9: have been completely wrong. So the story that you know,

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Speaker 9: there are these points about the US labor market and

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Speaker 9: the light, but I think the story over the past

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Speaker 9: eighteen to twenty four months is economies have held up

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Speaker 9: remarkably well in the face of this tightening cycle. It

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Speaker 9: might be the neutral rate, sort of the long term

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Speaker 9: rate that interest rates settle at is higher. So I

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Speaker 9: think as you cut, you just need to be a

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Speaker 9: little bit cognizant of that. And from the bank's perspective

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Speaker 9: as well. The final thing point I make is that

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Speaker 9: they are there a mandate is inflation. The FED to

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Speaker 9: mandate is a dual mandate, and that that does that

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Speaker 9: one hundred percent gives them more flexibility. They can just

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Speaker 9: shift their focus. Whereas the bank cannot shift its focus

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Speaker 9: off of inflation, it's just not allowed to in terms

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Speaker 9: of its mandate, whereas the FED can can.

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Speaker 2: Shift time for a new mandate.

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Speaker 1: Yeah, that raises that issue, right that this is very.

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Speaker 2: I mean that's but are not feeling flush? No, they're not.

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Speaker 9: No, And I agree with you that in the past

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Speaker 9: it has felt like the bank has got more of

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Speaker 9: a dual mandate. You know, if there were signs of

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Speaker 9: weakness in the labor market, it would be very much

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Speaker 9: the focus. I think the lesson another lesson sitting here

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Speaker 9: giving lessons, another lesson of the past, aiming eighteen to

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Speaker 9: twenty four months, is that inflation expectations aren't that well anchored,

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Speaker 9: so they can't look through these inflation shocks all the time,

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Speaker 9: and so it means that inflation does become very paramount.

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Speaker 9: And when you do get these shocks, you do have

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Speaker 9: to you do have to respond and not not just

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Speaker 9: look through them. So there's a lot for the bank

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Speaker 9: to consider. I think they were probably right to hold yesterday.

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Speaker 9: I do think the risk is they speed up later

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Speaker 9: in the year, for what it's worth and into twenty twenty five.

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Speaker 10: Now.

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Speaker 1: We just played a little bit earlier on the program

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Speaker 1: the clip from the former Bank of Unity of economist

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Speaker 1: Andy hal Dane about his criticism of the rhetoric from

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Speaker 1: government being a bad idea and unhelpful and that you

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Speaker 1: need to be to fill the kind of black hole

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Speaker 1: of public finances before you kind of spook people about it.

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Speaker 1: Which brings me on to some exclusive Blueberg reporting from

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Speaker 1: family firms in the UK SME small and medium sized

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Speaker 1: businesses who are worried according to what they've told us

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Speaker 1: about whether there are going to be changes to the

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Speaker 1: exemption to inheritance tax for businesses that get passed on

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Speaker 1: through the generations. How likely is that in terms of

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Speaker 1: the budget the IHT changes, What are you thinking about

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Speaker 1: just give us a quick runners and riders of tax

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Speaker 1: changes that you think are going to becoming potentially.

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Speaker 9: Yeah, I think well, they basically labor box themselves into

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Speaker 9: a corner because they've said no rights in income tax,

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Speaker 9: no rights in national insurance, no rights in corporation tax,

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Speaker 9: no rights in that. So that doesn't leave you with

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Speaker 9: a huge amount. So IHT is one. I think it's

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Speaker 9: very likely. I mean the thing with it is it

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Speaker 9: doesn't raise a huge amount of money when you're talking

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Speaker 9: about twenty billion pound black holes. You know, changes to

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Speaker 9: IHT might get you one and a half two max

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Speaker 9: if you do something and that requires you to do

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Speaker 9: something quite significant as well. The other one is CGT

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Speaker 9: that I think there's going to do storry, capital gain SEX. Yes,

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Speaker 9: there are a lot of There are various things that

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Speaker 9: can be done there, the most sort of the most

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Speaker 9: high profile of which is bringing it in line the

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Speaker 9: rates in line with income tax. And the final one

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Speaker 9: is pensions and how pensions are taxed in terms of

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Speaker 9: first of all, we get you know, there's a lot

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Speaker 9: of tax relief on pension contribute private pension contributions on

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Speaker 9: the income tax side, but also on the national insurance

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Speaker 9: side employer national insurance side as well. So that's one

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Speaker 9: I think that's gonna some combination of those three. Those

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Speaker 9: three moves will will be the sort of where I

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Speaker 9: think the bulk of the money comes from. They'll be

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Speaker 9: tinkering around the edges as well on other taxes, but

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Speaker 9: that's where it all, that's where the money will come from.

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Speaker 1: Okay, putting it into clear focus. First thirtieth of October, Dan,

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Speaker 1: thank you so much for being with us this morning.

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Speaker 1: But beg's chief UK economist, Dan Hansen. Then the UK's

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Speaker 1: national debt hitting one hundred percent of GDP. The main

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Speaker 1: headline now to.

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Speaker 2: The from the UK to Japan. The Bank of Japan

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Speaker 2: has held rates steady and signaled it sees no need

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Speaker 2: to hurry with interest rate hikes. Governor Wade to emphasized

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Speaker 2: patients in the post meeting press conference. That's after a

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Speaker 2: week of central bank decisions that of course saw as

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Speaker 2: we discussed the Bank of England hold and the FED

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Speaker 2: cut by fifty basis points. Let's bring it at this

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Speaker 2: point then. Bloomberg's Europe FX and rates editor Alein Aimada,

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Speaker 2: who would have been very busy indeed this week Alean

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Speaker 2: talk to us about the BOJ decision to hold fully

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Speaker 2: expected by the economists. Did we get any clarity on

437
00:22:53,160 --> 00:22:55,960
Speaker 2: the steps ahead for the Central Bank of Japan in

438
00:22:56,040 --> 00:22:56,960
Speaker 2: the press conference?

439
00:22:58,320 --> 00:23:02,439
Speaker 10: Yeah, when it wasn't decisive on the press conference, but

440
00:23:02,600 --> 00:23:07,320
Speaker 10: he did say that upside inflation risks are receding, and

441
00:23:07,440 --> 00:23:10,000
Speaker 10: that was probably the most important part of the press

442
00:23:10,040 --> 00:23:14,359
Speaker 10: conference so far because the market saw that as a

443
00:23:14,400 --> 00:23:18,000
Speaker 10: message that they are not in a rush to high grades.

444
00:23:19,359 --> 00:23:22,760
Speaker 10: He did leave the room open for more policy moves

445
00:23:22,800 --> 00:23:27,040
Speaker 10: this year, and the market expectations continues to be one

446
00:23:27,160 --> 00:23:31,800
Speaker 10: more hike in December. But overall, what we got was

447
00:23:31,840 --> 00:23:36,640
Speaker 10: a very balanced message that this is not guaranteed at all.

448
00:23:36,920 --> 00:23:39,920
Speaker 1: It was also interesting, Aleen what he talked about when

449
00:23:39,960 --> 00:23:42,520
Speaker 1: it comes to the US economy, that the economy there

450
00:23:42,600 --> 00:23:45,159
Speaker 1: has become a little harder to read. I thought that

451
00:23:45,240 --> 00:23:48,960
Speaker 1: was quite an interesting line from the press conference. Obviously,

452
00:23:49,240 --> 00:23:50,919
Speaker 1: you know, after the Federal Serve meeting.

453
00:23:52,600 --> 00:23:52,879
Speaker 4: Yeah.

454
00:23:52,920 --> 00:23:56,120
Speaker 10: Absolutely, I think the US economy has been one risk

455
00:23:56,200 --> 00:23:59,439
Speaker 10: that they have been flagging for the Japanese economy for

456
00:23:59,480 --> 00:24:03,720
Speaker 10: a while and what the fact obviously impacts them. At

457
00:24:03,720 --> 00:24:06,199
Speaker 10: some point of the conference, it almost felt like he

458
00:24:06,440 --> 00:24:11,960
Speaker 10: was kind of criticizing the fifty base point move, but

459
00:24:12,119 --> 00:24:17,240
Speaker 10: it's definitely something that will impact what they will do next.

460
00:24:17,880 --> 00:24:21,840
Speaker 10: Let's remind that after the August turmoil, they said they

461
00:24:21,840 --> 00:24:25,159
Speaker 10: wouldn't want to hike rates in a very volatile environment

462
00:24:25,680 --> 00:24:29,400
Speaker 10: and that obviously could be caused by US policy. So

463
00:24:29,680 --> 00:24:34,320
Speaker 10: I think both central banks will have to be kind

464
00:24:34,359 --> 00:24:36,240
Speaker 10: of intertwined in what they do next.

465
00:24:37,400 --> 00:24:39,720
Speaker 2: What is your We've just been discussing the fortunes or

466
00:24:39,800 --> 00:24:41,960
Speaker 2: lack of fortunes of the UK economy, Elean when it

467
00:24:42,000 --> 00:24:44,800
Speaker 2: comes to how the markets are adjusting to the view

468
00:24:44,880 --> 00:24:47,159
Speaker 2: around the Bank of England after the Central Bank here

469
00:24:47,240 --> 00:24:50,359
Speaker 2: decided to keep rates on hold, how has that picture evolved?

470
00:24:50,359 --> 00:24:53,040
Speaker 2: What does it tell us about the outlook for interest

471
00:24:53,160 --> 00:24:54,000
Speaker 2: rates here in the UK?

472
00:24:55,480 --> 00:24:59,600
Speaker 10: Yeah, so Trader saw the announcement yesterday as a slightly

473
00:24:59,640 --> 00:25:03,080
Speaker 10: hot They did say that they will be gradual in

474
00:25:04,320 --> 00:25:08,720
Speaker 10: cutting rates, and that coming after a big move from

475
00:25:08,800 --> 00:25:13,160
Speaker 10: the FAT that felt very hawkish. So we saw some

476
00:25:13,240 --> 00:25:17,880
Speaker 10: adjustment in the rate cuts expected for this year. Before

477
00:25:18,000 --> 00:25:20,639
Speaker 10: the meeting. It was two more cuts in November and

478
00:25:20,680 --> 00:25:24,840
Speaker 10: December that were fully priced. Now the second one it doesn't.

479
00:25:24,920 --> 00:25:26,560
Speaker 10: It's not hanging in the balance. I think the market

480
00:25:26,600 --> 00:25:30,440
Speaker 10: is still favoring one in December, but there's a smaller

481
00:25:30,560 --> 00:25:34,720
Speaker 10: chance of that happening. I think the big adjustment from

482
00:25:34,760 --> 00:25:37,600
Speaker 10: now on from the Bank of England will be will

483
00:25:37,640 --> 00:25:41,760
Speaker 10: they do quarterly cuts or will they cut every meeting

484
00:25:42,040 --> 00:25:46,040
Speaker 10: starting later this year? And like Dan said or earlier,

485
00:25:46,480 --> 00:25:49,639
Speaker 10: they are really erring on the side of caution, and

486
00:25:49,920 --> 00:25:54,760
Speaker 10: maybe reasonably so, but there is some fear that later

487
00:25:54,840 --> 00:25:57,280
Speaker 10: on they will have to play catch up and accelerate.

488
00:26:00,119 --> 00:26:03,080
Speaker 1: Conclude this week, would you in terms of what this

489
00:26:03,240 --> 00:26:06,080
Speaker 1: means for you, the move from the Fed and what

490
00:26:06,200 --> 00:26:09,240
Speaker 1: has flowed from what was a very busy thirty six

491
00:26:09,359 --> 00:26:13,520
Speaker 1: hours of great decisions. What's the thinking now the end

492
00:26:13,520 --> 00:26:15,359
Speaker 1: of this week in terms of bond markets as we

493
00:26:15,440 --> 00:26:18,720
Speaker 1: go into year end. You know, the FED trajectory is crucial,

494
00:26:19,200 --> 00:26:21,159
Speaker 1: but what do you think is the big takeaway for

495
00:26:21,280 --> 00:26:22,639
Speaker 1: markets at the end of this week.

496
00:26:24,000 --> 00:26:26,080
Speaker 10: You know, one thing that is interesting is that if

497
00:26:26,080 --> 00:26:29,200
Speaker 10: you look at the amount of rate cut expected from

498
00:26:29,240 --> 00:26:32,720
Speaker 10: major central banks, it didn't really change that much this week,

499
00:26:32,920 --> 00:26:35,760
Speaker 10: which is kind of surprising because if you think about

500
00:26:35,800 --> 00:26:38,040
Speaker 10: the Fed, half of the market got it wrong right,

501
00:26:38,080 --> 00:26:41,760
Speaker 10: because the side of the cut was kind of hanging

502
00:26:41,800 --> 00:26:46,959
Speaker 10: in the balance. So I think the biggest outcome is

503
00:26:47,400 --> 00:26:51,000
Speaker 10: the central banks are willing to ease. That's pretty clear,

504
00:26:51,440 --> 00:26:54,880
Speaker 10: but they are very cautious. So even the Fed, they

505
00:26:54,920 --> 00:26:57,680
Speaker 10: did the fifty bases points, the big cut, but they

506
00:26:57,760 --> 00:27:01,280
Speaker 10: said very clearly that the market shouldn't act back of

507
00:27:01,400 --> 00:27:05,160
Speaker 10: that size going forward. The BOE also was very cautious.

508
00:27:05,359 --> 00:27:08,920
Speaker 10: The Bank of Japan is going in a different direction,

509
00:27:09,040 --> 00:27:11,240
Speaker 10: but they also said we'll watch the data, will watch

510
00:27:11,280 --> 00:27:14,480
Speaker 10: the US economy to see if they really do this

511
00:27:14,640 --> 00:27:16,880
Speaker 10: hight later this year. So I think that's the main

512
00:27:16,920 --> 00:27:17,840
Speaker 10: message for now.

513
00:27:18,800 --> 00:27:20,240
Speaker 2: I leave before we let you go. What are you

514
00:27:20,280 --> 00:27:22,240
Speaker 2: and the team going to be watching for next week?

515
00:27:22,320 --> 00:27:24,080
Speaker 2: Is there anything on the data front, on the central

516
00:27:24,080 --> 00:27:26,640
Speaker 2: banking front that we should be two in particular.

517
00:27:28,080 --> 00:27:31,640
Speaker 10: Yeah, we'll have some data. I think the crucial one

518
00:27:31,680 --> 00:27:35,359
Speaker 10: will be later on the employment report, but the market

519
00:27:35,400 --> 00:27:38,520
Speaker 10: will be very sensitive. Even in Europe to pmis for

520
00:27:38,640 --> 00:27:43,080
Speaker 10: the path for the ECB and also the central bank speeches.

521
00:27:43,320 --> 00:27:46,679
Speaker 10: They are always potentially market moving and I think the

522
00:27:46,760 --> 00:27:48,360
Speaker 10: market needs more signal.

523
00:27:48,440 --> 00:27:48,640
Speaker 1: Now.

524
00:27:49,200 --> 00:27:51,960
Speaker 11: This is Bloomberg Daybreak Europe, your morning brief on the

525
00:27:52,000 --> 00:27:55,080
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526
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