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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: Peta Gopenhatty, first Deputy Managing Director of the International Monetary Fund.

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Speaker 2: At a time where it feels like people are girding

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Speaker 2: for change, and you talk about some of this in

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Speaker 2: your recent outlook, you say that there is a great

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Speaker 2: deal of uncertainty because of geopolitical conflicts, protectionism and disruptions

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Speaker 2: and trade. Can you describe what exactly you're talking about

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Speaker 2: with protections?

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Speaker 1: Is this tariffs? Is it subsidies?

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Speaker 3: So firstly, I think we should recognize that the global

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Speaker 3: economy has turned out to be quite resilient after some

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Speaker 3: very hard knocks, and which is why we have growth

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Speaker 3: at around three point two percent of this year and next.

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Speaker 3: But looking ahead, there is a great deal of uncertainty.

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Speaker 3: There are questions around what kind of policies will we

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Speaker 3: have depending upon the results of important elections. Conflicts in

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Speaker 3: the Middle East that could escalate and you could see

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Speaker 3: much wider regional tension, and oil prices could go. Well,

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Speaker 3: what's going to happen to growth in China? That's another factor.

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Speaker 3: So there are many risks as much of lots of uncertainty.

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Speaker 3: Trade policy is also being discussed at these meetings quite

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Speaker 3: heavily in questions around that all of this are risks

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Speaker 3: that we see looking ahead.

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Speaker 2: How much is the US election dominating every discussion that

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Speaker 2: you have with everyone?

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Speaker 1: You know, it is very important.

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Speaker 3: What happens in the US matters for the US and

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Speaker 3: matters for the whole world, So as you can imagine,

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Speaker 3: it is an important part of the conversation.

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Speaker 1: Is it making people feel paralyzed?

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Speaker 2: And I'm talking about policymakers that I'm talking about you know, investors.

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Speaker 1: Is it making people feel like.

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Speaker 2: They can't really make any moves until there are some

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Speaker 2: outcomes for some of the big events and the elections

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Speaker 2: that are coming down the pike.

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Speaker 1: When you see the.

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Speaker 3: Data, you don't really get that impression that people are paralyzed.

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Speaker 3: If you look at the US economy and how it's doing.

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Speaker 3: You know, consumption is doing very well, libal markets are

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Speaker 3: doing well in those they've slowed some, and the financial

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Speaker 3: markets are very strong. Financial conditions are easy, So you

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Speaker 3: aren't seeing any you know, negative knocks coming from that

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Speaker 3: uncertainty right now. But yes, I think as we get

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Speaker 3: closer to it, that goes up and we will see

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Speaker 3: what comes after them.

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Speaker 2: Yeah, And I was speaking with the Buddhist Bank president

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Speaker 2: this morning, and he is talking about how it's hard

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Speaker 2: for him to really gauge some of the inflation risks

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Speaker 2: because for them, inflation would be a lot higher.

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Speaker 1: Do you feel like that's the case.

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Speaker 2: That interest rates are going to have to go up

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Speaker 2: more significantly as more tariffs go into place.

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Speaker 3: What we do know is that tariffs are inflationary. They

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Speaker 3: do put pressure on prices. That's usually what we see

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Speaker 3: in the data looking at past episodes of tariffs that

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Speaker 3: have been put in place. Right In addition, there is

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Speaker 3: a very important question of what the stance of fiscal

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Speaker 3: policy is going to be around the world and how

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Speaker 3: expansion is going to be. The US economy is very

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Speaker 3: strong right now at the same time we are seeing

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Speaker 3: inflation coming down, and our expectation is that they will

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Speaker 3: continue to do so and the Fed will continue to

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Speaker 3: cut rates. Now, if there is a much more expansion

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Speaker 3: in a physical stunts, you know, that could move the

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Speaker 3: argument in a different direction.

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Speaker 2: Are you surprised the interest rates and I don't want

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Speaker 2: to say interest rates that tenure treasure yells, that that

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Speaker 2: the benchmark treasure yields on the longer term or even

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Speaker 2: just globally, aren't reflecting more the one hundred trillion dollars

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Speaker 2: of global debt that you've reflected in your latest IMF projection.

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Speaker 3: The rate is going for the US debt is going

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Speaker 3: to also be a function of the strength of the

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Speaker 3: US economy, the strength of its institutions, and there's tremendous.

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Speaker 1: Faith in that. Again, the US economy is one of.

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Speaker 3: The strongest among the major economies if you look at

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Speaker 3: those and when you compare the US to the other

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Speaker 3: G twenty economies, it's the only economy that's GDP's higher

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Speaker 3: now than we had projected before the pandemic, the only

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Speaker 3: major economy. So it's a very strong economy, a lot

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Speaker 3: of confidence in it, and that's showing up in the

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Speaker 3: numbers too.

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Speaker 2: What I find amazing is that we talk about how

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Speaker 2: well things are going, and I got a sense for you.

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Speaker 2: You said, before you start talking about the risks, the

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Speaker 2: economy is doing really well. Understand this is there almost

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Speaker 2: this sense of why are people not feeling that? Why

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Speaker 2: is that not reflected in the sentiment on the ground

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Speaker 2: in so many surveys, Given the fact that the data

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Speaker 2: it looks pretty much like goldilocks, like soft landing, all

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Speaker 2: these things that people hoped for.

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Speaker 3: Well, the fact is that we have inflation coming down,

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Speaker 3: but the price level now is much higher than it

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Speaker 3: was a couple of years ago. And for people in

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Speaker 3: their consumption baskets, they look at what the price level

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Speaker 3: is and they say, well, prices are much higher, even

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Speaker 3: though their incomes have gone up too, which is why

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Speaker 3: you see consumption holding up very well. But there's a

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Speaker 3: lot of salience of what the price level is when

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Speaker 3: you go to the grocery store and your basket of

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Speaker 3: goods and how much they cost. I think that's having

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Speaker 3: an effect on sentiment. But I think we do have

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Speaker 3: to recognize that. You know, in the past, when there's

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Speaker 3: when central banks have tried to bring down inflation from

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Speaker 3: the kind of high levels we've seen, it's been much

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Speaker 3: more disruptive to economies. This is quite unique that we're

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Speaker 3: having inflation coming down and we are likely to see

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Speaker 3: a soft lending.

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Speaker 1: You also talk.

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Speaker 2: About trade policy, and I want to go there because

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Speaker 2: right now, at the same time that we're holding that

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Speaker 2: we're at these meetings in Washington, DC, there is a

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Speaker 2: conference going on in Russia with the bricks right the

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Speaker 2: different countries Brazil, Russia, India, as well as China, Jijimping

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Speaker 2: and Vladimir Putin are there. A lot of the delegates

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Speaker 2: from China are not here.

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Speaker 1: They are there? Is that concerning to you?

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Speaker 3: So let me give you a fact that I think

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Speaker 3: will help says a bunch of concerns. Just very recently,

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Speaker 3: are members one hundred and ninety of foreign members they

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Speaker 3: had to all agree to this on a particular reform

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Speaker 3: that would help the IMF support to low income countries.

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Speaker 3: Or one hundred and ninety member countries of the IMF

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Speaker 3: supported this. That just tells you that there's a lot

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Speaker 3: of support from our members for the IMF and they

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Speaker 3: see a great deal of value in this institution. So,

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Speaker 3: you know, we'd recognize that several of our members are

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Speaker 3: parts of other groupings, but from our perspective, we see

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Speaker 3: them very engaged with.

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Speaker 1: Our own work.

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Speaker 2: How difficult is it to come up with statements that

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Speaker 2: reflect a unified vision given that there's sort of a

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Speaker 2: fractured world.

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Speaker 1: I mean, we've talked about this. You did a lot

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Speaker 1: of research on this that I think is.

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Speaker 2: Really interesting about how there are parties that are kind

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Speaker 2: of the third parties that are helping to conduit it'd

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Speaker 2: be the conduit for trade between different countries that don't

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Speaker 2: want to do business together. I mean, how is that

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Speaker 2: making it difficult to sort of have the same reality

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Speaker 2: you've had traditionally.

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Speaker 3: I mean, there's no doubt the geopolitical tensions are higher

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Speaker 3: than we have seen in the past decades, and there

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Speaker 3: are more countries questioning the value of all the close

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Speaker 3: economic integration that we have had, questions of how to

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Speaker 3: de risk your supply chainsational steak years.

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Speaker 1: He concerns all of this.

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Speaker 3: Is taking center stage, and that obviously has implications for

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Speaker 3: any multi natural institutions. But I have to say that

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Speaker 3: what I am very pleased with is how our members,

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Speaker 3: all of them, are still working very closely at the

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Speaker 3: IMF to push through important reforms for the world.

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Speaker 2: We talk about the developing world, and I'm wondering how

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Speaker 2: much there is a convergence in your mind between activities

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Speaker 2: in the developing world and in the developed world, especially

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Speaker 2: with the deficit and some of the increase there, and

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Speaker 2: that you're seeing the opposite in a number of developing

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Speaker 2: developing countries where they're actually reducing debts.

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Speaker 1: And trying to be more disciplined. Okay, So one of the.

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Speaker 3: Points that we're making through these meetings is pointing to

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Speaker 3: everybody that we have a problem because death is very

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Speaker 3: high and our projected growth, especially into the medium term,

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Speaker 3: is not great. It's a low growth numbers three point

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Speaker 3: one percent as as opposed to what it was for

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Speaker 3: a few decades, which is around three point eight percent.

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Speaker 3: That is a problem, which means all countries, including advanced economies,

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Speaker 3: need to act on that. What is true is that

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Speaker 3: for developing countries they don't really have a choice. You know,

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Speaker 3: there's a lot of pressure coming from the markets. They

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Speaker 3: have high debt, servicing costs. We are concerned about liquidity

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Speaker 3: issues in several countries, and that you know is coming

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Speaker 3: after these countries have cumulated large amounts of death through

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Speaker 3: the pandemic and the big increase in energy in food prices.

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Speaker 3: So that's these differences, but that's always been the case.

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Speaker 3: You know, countries like the US can run much bigger

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Speaker 3: deficits than developing countries can.

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Speaker 1: Do you think that the US could face a less

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Speaker 1: trust moment.

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Speaker 3: US debt is very sustainable, it is a strong economy.

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Speaker 3: But all of that said, our advice to the US

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Speaker 3: is that it should have smaller deficits, given also that

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Speaker 3: the economy is above potential and doing really well at

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Speaker 3: this point of time, so bringing down the debt and

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Speaker 3: especially to build up for another shop the crisis which

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Speaker 3: will come. We know this is not the last time

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Speaker 3: we have a crisis.

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Speaker 2: Do you think that I just want to end here

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Speaker 2: this question about regime change, and that some people are

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Speaker 2: saying that we're entering a new paradigm where there is

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Speaker 2: a greater acceptance of protectionism, of trade tensions, of this

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Speaker 2: question about who's friends with who and who's going to

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Speaker 2: scratch who's back, but not necessarily the same sort of

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Speaker 2: free trade era. Do you think that this is the beginning,

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Speaker 2: the middle, or the end of that evolution.

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Speaker 3: What we certainly have changed in the sense that there

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Speaker 3: was a time when countries were hyper focused on efficiency,

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Speaker 3: and when they were deciding who to trade with the

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Speaker 3: only question was which was the cheapest source to buy from.

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Speaker 3: Right now they're stepping back and saying, well, we need

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Speaker 3: to make sure our supply chains are secure, that we

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Speaker 3: are not exposing ourselves to big risks, that they are

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Speaker 3: not big national security concerns. That changed is already happening

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Speaker 3: and you see that in the data, but it's still

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Speaker 3: of a small ma I get you. The question is

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Speaker 3: how much further down the post do we go?

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Speaker 1: And that I think is uncertain.

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Speaker 2: Get to Gopinath. Thank you so much for being with us.

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Speaker 2: Really appreciate your insights. That's get to goopin App the

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Speaker 2: first Deputy Managing Director at the International Monetary Fund,