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Speaker 1: Vishnu Rawten is our guest head of economics and Strategy

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Speaker 1: at Miszooho Bank. So you know, it's never really clear.

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Speaker 1: They don't hold up a sign that says, yeah, it's

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Speaker 1: great to to to get aggressive here, um Vishnu. And

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Speaker 1: and I know that some people are looking at central

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Speaker 1: banks beginning the process of of backing off of the

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Speaker 1: aggressive nature of of rate heights. But then I I

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Speaker 1: also heard that people said, you can't read too much

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Speaker 1: into the rb A decision. They don't have anywhere near

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Speaker 1: the level of inflation in the US, does they started

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Speaker 1: earlier and such? And in the Bank of England, Well,

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Speaker 1: the story there in the UK is very is a

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Speaker 1: very sort of um idiosyncratic, singular country story. How do

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Speaker 1: you see things? Um, that's that's a really good question.

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Speaker 1: And and and I think, uh, you know, depending on

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Speaker 1: who you ask, the view will will differ substantially. So

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Speaker 1: I think the starting point is even the FED uh

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Speaker 1: you know, has has not you know, the state contrary

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Speaker 1: to the fact that they are looking at some point

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Speaker 1: when they can dial back on the pace of hikes.

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Speaker 1: But I think the message that the fattest stresses is

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Speaker 1: higher for longer uh. And they're series about both aspects

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Speaker 1: of it. The RBA may not differ very much, but

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Speaker 1: I think the RBA has expected into a higher degree

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Speaker 1: housing market risks in particular. And that's the interesting aspect

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Speaker 1: because one thought behind it is, yes, the FED is

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Speaker 1: not undeterred or noise. It's swayed by some softening and

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Speaker 1: other corners for as you rightly pointed out, due to

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Speaker 1: peculiar factors. But the question for all of us is

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Speaker 1: housing markets and wider asset markets, when do they come

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Speaker 1: into the front and center of policy making rather than

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Speaker 1: just inflation dominating center stage. Because if it does, then

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Speaker 1: we need to think of balanceship, recession risks and the

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Speaker 1: fat maybe and any center bank may be a lot

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Speaker 1: more averse to tightening in that case. So it does

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Speaker 1: beg the question, whereas the neutral right for the FED,

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Speaker 1: when does it start to slow the paint of increases.

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Speaker 1: That's that's that's the tricky one. I really I'm really

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Speaker 1: watching what Fed Bullood is saying very closely because I

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Speaker 1: think the message from everyone else has consistently been two

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Speaker 1: to two and a half is about neutral rates. They're

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Speaker 1: now moving into restrictive territory and they just need to

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Speaker 1: get quite a bit into there, which is why they're

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Speaker 1: all hovering around for and a half to five perhaps

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Speaker 1: as the peak rates or where it terminates. However, has

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Speaker 1: at some point suggested that, you know, neutral rates may

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Speaker 1: be higher than the two to two and a half.

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Speaker 1: If he manages to sway the rest of the board,

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Speaker 1: then I think we may look at potential for rates

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Speaker 1: to go above five. And I think that's something we

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Speaker 1: should watch very closely, and ovisially we've been discussing the

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Speaker 1: likely path ahead for the Fed. We did get that

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Speaker 1: smaller than expected rate increase from the Reserve Bank of Australia,

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Speaker 1: as I mentioned, and that's really gave a strong boost

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Speaker 1: two equities here, so olds plunge as well Big Relly

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Speaker 1: on markets worldwide. Really, what other market expectations around rate

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Speaker 1: expectations and are they going to be disappointed by what

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Speaker 1: the Fed does next in terms of In terms of disappointment,

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Speaker 1: I'm not sure that the markets will necessarily be disappointed

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Speaker 1: because for all the chill that they have gleaned off,

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Speaker 1: whether it's the George data or the ice and manufacturing,

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Speaker 1: the wires, curves have not moved back dramatically from suggesting

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Speaker 1: uh you know, somewhere in the ballpark of our hundred

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Speaker 1: and twenty five paces points of hikes by late this

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Speaker 1: year early next year. And I think the FED is

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Speaker 1: pretty much on the program with that, Whereas I think

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Speaker 1: what markets will be watching out for very closely would

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Speaker 1: be suggestions of how much further they can go. And

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Speaker 1: I think some of that revelation might come through in December,

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Speaker 1: so the November hyke would give a sense of whether

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Speaker 1: we're scaling back from seventy five or not. That would

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Speaker 1: be quite important because it's difficult to end zarch going

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Speaker 1: from SI within the span of a month from November

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Speaker 1: to December. But from December on, but I think we'll

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Speaker 1: get a clearer view of where we're going for the

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Speaker 1: year and whether indeed they'll peek out with the fat

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Speaker 1: halting or pausing uh in in say by me latest um.

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Speaker 1: And I think that's that's really what markets are wondering.

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Speaker 1: I think many think that the FED will will pause

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Speaker 1: in in December, and as you suggest, take a look

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Speaker 1: at it. I mean I've heard people predicting this really

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Speaker 1: even back into the summer um. So it almost doesn't matter,

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Speaker 1: does it. If you get seventy fifty or seventy or

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Speaker 1: fifty any combination of those. It's just really that that's

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Speaker 1: only two months away, and people who are starting to think, well,

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Speaker 1: you know, this is a process. It will depend on

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Speaker 1: the data. I can watch the data and have a

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Speaker 1: reasonable assumption of what what we can expect. I think

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Speaker 1: the watching the data to get a sense of how

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Speaker 1: much more the hyps UH would be incoming would be

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Speaker 1: perhaps the less difficult task. The more difficult task mainly

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Speaker 1: because of the rewiring around how the fat things would be,

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Speaker 1: how long they would continue to maintain rates at elevated

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Speaker 1: levels even as inflation to celebrates. So I think that's

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Speaker 1: the tricky part. We do have an opaque plus meeting

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Speaker 1: later on today. Maybe we're looking at a two million

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Speaker 1: barrel a day cuts. What's the impact of that going

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Speaker 1: to be on global growth? I think ultimately it's going

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Speaker 1: to be pretty bad because on a it you know,

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Speaker 1: naturally it dempens the level of activity just because of

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Speaker 1: the drain that or high all prices costs. And the

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Speaker 1: other one is it gives central banks fewer reasons to

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Speaker 1: step back from the global tightening wave that we see now,

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Speaker 1: and we'll end up in a recession that crashes oil

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Speaker 1: prices even more than the OPEC plus is trying to

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Speaker 1: support it for the time being. But you know, just

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Speaker 1: just for now, sorry, go ahead, Well no, I'm just

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Speaker 1: I just we don't have much time left. I wanted

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Speaker 1: to mention New Zealand because we talked about high prices

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Speaker 1: curing high prices. New Zealand home prices just suffered their

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Speaker 1: biggest quarterly dropper, one of the biggest quarterly drops on

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Speaker 1: record in the three months through September, and that could

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Speaker 1: be happening in the US as well. Absolutely, I think

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Speaker 1: housing market risks are something that we've under accounted for.

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Speaker 1: Depending on how the percentage of mortgages that are locked

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Speaker 1: into fixed rates and when these will phase out, I

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Speaker 1: think will give us a sense of a leg to

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Speaker 1: payback from overtightening and and and the you know, the

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Speaker 1: proverabile money free legs. But for now, it looks like

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Speaker 1: many central banks are not backing down from the single

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Speaker 1: minded inflation site. So I think for a change in

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Speaker 1: the narrative, we need to wait till perhaps middle of

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Speaker 1: next year. Yeah, Nickiwie dollar very week at the moment

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Speaker 1: as well. Fifty seven thirty four not really helping with

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Speaker 1: the inflation picture there. Vishnu verra Than thanks so much

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Speaker 1: for joining us on a Bloomberg Daybreak Asia. Vishnu is

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Speaker 1: head of economics and Strategy at Missouho Bank