WEBVTT - Bloomberg Daybreak Weekend: Fed, BOE, Modi and Biden 0:00:02.440 --> 0:00:04.960 This is Bloomberg day Break Weekend, our global look at 0:00:05.000 --> 0:00:07.120 the top stories in the coming week from our day 0:00:07.160 --> 0:00:09.920 Break anchors all around the world, and straight ahead on 0:00:09.960 --> 0:00:13.760 the program. Fetchair. J Powell Headstick Capitol Hill. I'm Tom 0:00:13.800 --> 0:00:14.800 Busby in New York. 0:00:14.840 --> 0:00:18.160 I'm Gaily Liones in Washington, where Federal Reserve nominees will 0:00:18.160 --> 0:00:20.360 be appearing in a Senate hearing next week. 0:00:20.440 --> 0:00:22.800 I'm Caroline Hetkee here in London, where we're looking at 0:00:22.800 --> 0:00:26.520 the Bank of England's unenviable position at the June rate 0:00:26.640 --> 0:00:27.400 setting meeting. 0:00:27.640 --> 0:00:31.040 I'm Doug Christner. Prime Minister Narin Bermodi comes to the US. 0:00:31.120 --> 0:00:34.720 We look at the complicated relationship between the US and India. 0:00:35.440 --> 0:00:39.440 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 0:00:39.479 --> 0:00:43.280 Eleve Them three own New York, Bloomberg ninety nine to one, Washington, DC, 0:00:43.600 --> 0:00:47.640 Bloomberg one O six one, Boston, Bloomberg nine sixty, San Francisco, 0:00:47.880 --> 0:00:52.080 DAB Digital Radio, London, Sirius XM one nineteen and around 0:00:52.159 --> 0:00:54.800 the world on Bloomberg Radio dot Com and via the 0:00:54.840 --> 0:00:56.040 Bloomberg Business App. 0:01:00.200 --> 0:01:02.480 Good day to you. I'm Tom Busby. We begin today's 0:01:02.520 --> 0:01:06.120 program with the Federal Reserve, which paused its string of 0:01:06.160 --> 0:01:09.880 interest rate hikes this past week after ten rate increases 0:01:09.880 --> 0:01:13.800 in as many beatings, but policymakers signaled two more rate 0:01:13.840 --> 0:01:16.520 hikes may be coming this year and that rate cuts 0:01:16.959 --> 0:01:19.319 are still a long way off. And this week, Vetchair 0:01:19.440 --> 0:01:21.720 Jerome Powell heads to Capitol Hill for his semi annual 0:01:21.720 --> 0:01:25.200 testimony to Congress on the Central Bank's monetary policy report. 0:01:25.720 --> 0:01:28.640 For more about what's behind the Fed's latest action and 0:01:28.680 --> 0:01:31.520 what to expect this week, we turned to Bloomberg's Global 0:01:31.560 --> 0:01:35.280 Economics and Policy editor Michael McKee. Michael, thanks for being here. 0:01:35.680 --> 0:01:36.479 Happy to be here. 0:01:37.120 --> 0:01:40.679 Well, Fed policymakers would not have left rates unchanged without 0:01:40.680 --> 0:01:45.520 good reasons, encouraging economic data about jobs or retail spending, inflation, housing, 0:01:46.040 --> 0:01:50.480 energy prices. So what will we be watching for Chairman 0:01:50.560 --> 0:01:51.520 pal to say this week? 0:01:51.840 --> 0:01:55.000 I think people will want to know how serious the 0:01:55.040 --> 0:01:58.080 Fed is about doing two more rate increases. It seems 0:01:58.160 --> 0:02:00.480 that at least one is locked in, and that's what 0:02:00.520 --> 0:02:04.080 the markets are pricing. The dot plot suggested they would 0:02:04.120 --> 0:02:08.080 do too. What would it take for the Fed to 0:02:08.160 --> 0:02:14.040 decide it needed to raise another fifty basis points? Inflation 0:02:14.400 --> 0:02:18.040 going the wrong way. Is it inflation not moving, Is 0:02:18.080 --> 0:02:21.080 it some sign that the economy is collapsing? What are 0:02:21.120 --> 0:02:21.799 they looking for? 0:02:22.560 --> 0:02:26.000 But we have seen good data. We have seen jobs 0:02:26.120 --> 0:02:29.040 a little uneven there, but the inflation some of the 0:02:29.120 --> 0:02:32.440 key inflation statistics that they look at, those metrics have 0:02:32.480 --> 0:02:36.560 been pretty good. Housing prices have gone down, energy prices 0:02:36.560 --> 0:02:40.120 have stabilized, even declined a little bit. Retail spending we 0:02:40.200 --> 0:02:42.160 got a real surprise for may Well. 0:02:42.200 --> 0:02:44.640 It looks like the economy is doing what the Fed wants. 0:02:44.720 --> 0:02:50.280 It is slowing down gradually, and that's the scenario, the 0:02:50.320 --> 0:02:53.480 soft landing scenario that they want to have. The question 0:02:53.600 --> 0:02:57.400 is does it speed up its drop? Will we start 0:02:57.440 --> 0:02:59.919 to see things fall off a cliff? So far we haven't. 0:03:00.240 --> 0:03:03.519 As you noted that jobs numbers were still strong, even 0:03:03.520 --> 0:03:08.200 though unemployment rose, it's still three point seven percent. And 0:03:09.000 --> 0:03:13.720 we saw retail sales rise, which was something of a surprise. 0:03:13.800 --> 0:03:18.080 But in each category, I think only gasoline fell, but 0:03:18.240 --> 0:03:21.639 in each category the increases were smaller than they had 0:03:21.639 --> 0:03:24.680 been in previous months. So it does suggest that people 0:03:24.760 --> 0:03:27.400 are still spending, they're just not spending as much. And 0:03:27.440 --> 0:03:30.480 that's what the whole point of the fed's tightening campaign 0:03:30.600 --> 0:03:32.320 is about now. 0:03:32.360 --> 0:03:36.200 This past week, Chairman Powell told reporters we shouldn't call 0:03:36.280 --> 0:03:39.040 this pause, that he just made a skip, and he 0:03:39.040 --> 0:03:41.560 says the FED needs more time to make sure that 0:03:41.640 --> 0:03:43.720 they made the right move. So let's listen into what 0:03:43.760 --> 0:03:44.760 he told reporters. 0:03:45.360 --> 0:03:48.080 We don't know the full extent of the consequences of 0:03:48.120 --> 0:03:51.320 the banking turmoil that we've seen. It would be early 0:03:51.360 --> 0:03:53.040 to see those, but we don't know what the extent is. 0:03:53.040 --> 0:03:55.320 We'll have some more time to see that unfolding. It's 0:03:55.360 --> 0:03:57.880 just the idea that we're trying to get this right. 0:03:58.600 --> 0:04:01.840 And this is if you think of the two things 0:04:01.880 --> 0:04:05.040 as separate variables, and I think that the skip, I 0:04:05.080 --> 0:04:08.400 shouldn't call it a skip. The decision makes sense, all. 0:04:08.440 --> 0:04:11.200 Right, So not a skip? Okay, Michael. Does that give 0:04:11.280 --> 0:04:13.080 us any sense of what the FED might do at 0:04:13.080 --> 0:04:16.640 its next meeting in July or the three remaining meetings 0:04:16.640 --> 0:04:17.039 this year? 0:04:17.520 --> 0:04:21.880 Well, the skip language that he accidentally used, and then 0:04:21.920 --> 0:04:25.560 he kept saying that the July meeting is live. We're 0:04:25.600 --> 0:04:27.880 sort of being read as signals by the markets that 0:04:27.920 --> 0:04:31.080 the FED is planning to raise rates again at the 0:04:31.160 --> 0:04:35.640 July twenty sixth meeting. That brings us back to what 0:04:35.640 --> 0:04:37.520 we were talking about earlier about what does the market 0:04:37.560 --> 0:04:42.360 want to hear in terms of the FED and what 0:04:42.400 --> 0:04:46.640 it would take to get them to stop or to 0:04:46.720 --> 0:04:49.360 move forward or do fifty basis points instead of twenty 0:04:49.360 --> 0:04:53.919 five in July. The question then becomes what happens after 0:04:53.960 --> 0:04:57.719 that when they get to September? Do they have a 0:04:57.880 --> 0:05:01.599 rate increase in train? I guess we have to wait 0:05:01.640 --> 0:05:06.039 and see what the data show us. And to go 0:05:06.160 --> 0:05:08.919 back to your very first question, I'm sure that is 0:05:08.960 --> 0:05:10.200 a line that you'll hear from j. 0:05:10.360 --> 0:05:10.720 Powell. 0:05:10.839 --> 0:05:15.039 Yeah, data dependent, data dependent, But even until July, we 0:05:15.160 --> 0:05:18.440 get some pretty important data points. So what will we 0:05:18.440 --> 0:05:19.120 get before then? 0:05:19.240 --> 0:05:24.719 Well, we get another payrolls report the week of Friday 0:05:24.720 --> 0:05:28.200 after July fourth, and then we get another CPI report 0:05:28.279 --> 0:05:32.480 and another PCE inflation report. The interesting thing is between 0:05:32.560 --> 0:05:38.719 the March and May meetings we had between them, I'm sorry, 0:05:38.839 --> 0:05:42.520 between the March and June meetings there were two or 0:05:42.560 --> 0:05:47.760 three CPI reports, two jobs reports. Now before July there's 0:05:47.839 --> 0:05:51.320 only be one of each, so they will have a 0:05:51.560 --> 0:05:55.520 less robust data set to judge how much the economy 0:05:55.560 --> 0:05:57.039 has changed. One way or the other. 0:05:57.600 --> 0:06:00.200 And during the summer, I mean, anything could hapen happen 0:06:00.320 --> 0:06:03.680 with summer jobs lifting payrolls higher, but kids coming out 0:06:03.720 --> 0:06:04.880 of school, we really can. 0:06:04.920 --> 0:06:07.800 Well, it's interesting because of course, the the Bureau of 0:06:07.839 --> 0:06:11.880 Labor Statistics seasonally adjusts UH to sort of take the 0:06:12.080 --> 0:06:15.440 lumpiness out of things like summer jobs for kids or 0:06:15.560 --> 0:06:20.000 teachers coming off the payroll because in summertime. But since 0:06:20.040 --> 0:06:23.800 the pandemic, their seasonal adjustment efforts have been troubled. It's 0:06:23.960 --> 0:06:28.080 it's been difficult to do. So it'll be interesting to 0:06:28.120 --> 0:06:31.000 see what kind of numbers we get when we start 0:06:31.040 --> 0:06:35.120 to see the June We see the June payrolls number 0:06:35.160 --> 0:06:38.400 in July, because that's a month where the swimming pools 0:06:38.440 --> 0:06:41.760 open up the June in June, and you know, the 0:06:42.279 --> 0:06:45.599 the ice cream shops take on extra workers and stuff 0:06:45.640 --> 0:06:47.720 like that. We'll see how how that all plays out. 0:06:47.880 --> 0:06:49.760 Well, you make it sound so nice, I gotta tell you. 0:06:50.720 --> 0:06:53.400 All right, Well, you know, let's let's go back to 0:06:53.520 --> 0:06:57.400 the what's coming up this week Wednesday and Thursday. Chairman 0:06:57.440 --> 0:07:03.200 Palse testimony to Congress. Now, some say that a lot 0:07:03.279 --> 0:07:05.920 of these people on the committees have less of a 0:07:06.839 --> 0:07:11.280 monetary agenda, more of a political agenda with the Chairman 0:07:11.360 --> 0:07:13.680 Powell and with the Fed. But Chairman pal has been, 0:07:13.840 --> 0:07:16.400 you know, there with a Republican president, now with the 0:07:16.480 --> 0:07:20.600 Democratic president. He has seen it all. Let's talk about 0:07:20.640 --> 0:07:24.400 what he can expect to hear from people like Massachusetts 0:07:24.400 --> 0:07:27.320 Senator Elizabeth Warren on the Senate Banking Committee. She's been 0:07:27.400 --> 0:07:30.040 very critical of the FED, very critical of the banking system, 0:07:30.440 --> 0:07:34.160 very critical of corporations, and very critical of, you know, 0:07:34.280 --> 0:07:37.120 the record setting profits that we've made. What can we 0:07:37.200 --> 0:07:39.040 expect to hear from her and others like her? 0:07:39.520 --> 0:07:41.720 Well, you know that Elizabeth Warren, and this is just 0:07:41.800 --> 0:07:45.320 based on past performance, is going to lecture Jay Powell 0:07:45.440 --> 0:07:49.480 on the evils of tightening too much because then people 0:07:49.520 --> 0:07:52.239 lose their jobs, unemployment goes up to which his answer 0:07:52.360 --> 0:07:54.880 can be, we're very sensitive to that and three point 0:07:54.960 --> 0:07:56.080 seven percent unemployment. 0:07:56.160 --> 0:07:56.360 Yeh. 0:07:56.480 --> 0:07:58.720 By the way, we're not doing that to you yet, 0:07:59.640 --> 0:08:01.640 but you could expect that from her. Others will be 0:08:01.760 --> 0:08:05.760 talking trying to talk about the debt, the US national debt, 0:08:05.880 --> 0:08:09.800 and the deficits and how much money we're spending. You 0:08:09.880 --> 0:08:12.280 can expect that from the Republicans. They usually try to 0:08:12.320 --> 0:08:16.280 get him to say that we need to have budget discipline, 0:08:16.640 --> 0:08:19.640 and he will try to stay out of those arguments. 0:08:19.760 --> 0:08:22.560 Ye, not my job, job as much as possible. Yes, 0:08:23.480 --> 0:08:25.600 well let's get back to more of those failed banks, 0:08:26.120 --> 0:08:29.560 because that's going to come up with him. It was 0:08:29.800 --> 0:08:32.319 just starting the last time he spoke. He did this 0:08:33.120 --> 0:08:37.600 monetary policy in March, but then it became a crisis. 0:08:38.559 --> 0:08:41.240 But things have settled down. So how will that play in, 0:08:41.320 --> 0:08:43.600 do you think to the testimony this week. 0:08:43.840 --> 0:08:46.319 Well, he will repeat what he said at the press 0:08:46.360 --> 0:08:50.720 conference this past week that the FED anticipates there will 0:08:50.760 --> 0:08:55.440 be some credit impacts from the bank situation. And there's 0:08:55.440 --> 0:08:57.599 certainly a lot of people out there who think that 0:08:57.760 --> 0:08:59.720 we're going to see more banks fail and we're going 0:08:59.760 --> 0:09:03.400 to see more problems. The data don't support that at 0:09:03.440 --> 0:09:07.240 the moment. This is a little wonky, but everybody's been 0:09:07.320 --> 0:09:11.440 watching this new funding lending program that the FED set 0:09:11.520 --> 0:09:16.640 up for banks, and it's still rising, and so people 0:09:16.720 --> 0:09:19.520 are thinking, well, the banks are still troubled, but there's 0:09:19.559 --> 0:09:24.880 another measure that accounts for all of the banks borrowings, 0:09:25.000 --> 0:09:28.000 not just from that, and it seems that the banks 0:09:28.120 --> 0:09:31.320 borrowed a lot from the federal home loan banks. They're 0:09:31.360 --> 0:09:34.040 paying those off and going to the Fed facility. So 0:09:34.920 --> 0:09:37.959 when you look at the overall borrowing by banks, it 0:09:38.080 --> 0:09:41.000 has come down some and it does appear that things have, 0:09:41.280 --> 0:09:43.720 as you said, settled down quite a bit. 0:09:44.200 --> 0:09:48.760 Got it so July again. The money right now on 0:09:48.840 --> 0:09:52.160 Wall Street is we're looking at perhaps a twenty five 0:09:52.200 --> 0:09:57.280 basis point increase. Yes, whispers of a fifty basis point. 0:09:57.400 --> 0:10:00.680 Well, it's just math. They said they would do two more, which, 0:10:01.200 --> 0:10:04.120 since they do twenty five at a time, is a 0:10:04.160 --> 0:10:07.120 total of fifty. So you could do fifty at once. 0:10:07.320 --> 0:10:09.640 If you figure you need to get to that level, 0:10:09.760 --> 0:10:12.000 you might as well do it right away. But then 0:10:12.120 --> 0:10:14.400 that begs the question of why they didn't do it 0:10:14.640 --> 0:10:20.160 last week. So we'll see. It's more likely, given the 0:10:21.400 --> 0:10:24.760 way Powell has framed this as an exercising caution to 0:10:24.920 --> 0:10:28.840 see the lagged impacts of the moves they've already made 0:10:28.880 --> 0:10:30.920 and what impact they're going to have on the economy 0:10:30.960 --> 0:10:34.120 going forward, that they don't want to go too high, 0:10:34.200 --> 0:10:36.839 too fast, and if they just do twenty five, that 0:10:37.520 --> 0:10:39.439 is a cautious kind of move. 0:10:39.800 --> 0:10:40.120 All right. 0:10:40.280 --> 0:10:44.160 Bloomberg's Global Economic policy editor, Michael McKee. Thanks for joining 0:10:44.280 --> 0:10:47.040 us again. Coming up on Bloomberg day Break weekend, the 0:10:47.120 --> 0:10:50.480 Bank of England and all the political economic pressure there 0:10:50.679 --> 0:11:05.199 Right now, I'm Tom Busby and this is Bloomberg. This 0:11:05.360 --> 0:11:07.680 is Bloomberg day Break Weekend, our global look ahead at 0:11:07.720 --> 0:11:10.320 the top stories for investors in the coming week. I'm 0:11:10.400 --> 0:11:13.120 Tom Busby in New York. Up later in the program, 0:11:13.360 --> 0:11:16.040 India's Prime Minister heads to the White House. But first, 0:11:16.280 --> 0:11:19.160 the Bank of England out with a rate decision in 0:11:19.200 --> 0:11:21.440 the coming week, and it hits us at a time 0:11:21.520 --> 0:11:25.559 of continued economic and political pressure in the UK. For more, 0:11:25.679 --> 0:11:28.520 let's head to London and bring in Bloomberg Daybreak Europe 0:11:28.559 --> 0:11:29.920 banker Caroline Hepger. 0:11:30.280 --> 0:11:33.400 Tom, the UK has an inflation problem. Price rises worth 0:11:33.440 --> 0:11:36.720 a four decade high last year, and although the figures 0:11:36.720 --> 0:11:40.000 have come down from eleven point one percent to eight 0:11:40.120 --> 0:11:43.480 point seven percent now, it has remained stronger than the 0:11:43.520 --> 0:11:46.560 Bank of England, and of course most economists had expected. 0:11:47.040 --> 0:11:49.920 For more on this, I'm joined by Bloomberg's UK correspondent 0:11:50.040 --> 0:11:53.560 Lizzie Burden. Lizzie, the Bank of England has a very 0:11:53.800 --> 0:11:55.440 difficult job on its hands. 0:11:55.720 --> 0:11:58.880 Yeah, we saw in that Hot jobs data. The economy 0:11:58.960 --> 0:12:01.600 is resilient, and also saw that in the GDP data, 0:12:01.720 --> 0:12:04.920 But the flip side is it's going to spur inflation. 0:12:05.080 --> 0:12:08.160 So Bloomberg Economics as a result changed its call. It 0:12:08.280 --> 0:12:10.319 did just see a rate hike in June, now it 0:12:10.440 --> 0:12:14.840 sees one in August as well. Markets have ramped up 0:12:14.880 --> 0:12:17.319 their bets for where the Bank of England's peak rate 0:12:17.400 --> 0:12:20.520 will be. Increasingly it looks like six percent and it's 0:12:20.679 --> 0:12:23.439 nearing the levels that they saw in the aftermath of 0:12:23.480 --> 0:12:28.080 the Liztrus's mini budget. So for the June meeting on Thursday, 0:12:28.360 --> 0:12:31.040 it's not really a question of whether they'll hike or not. 0:12:31.679 --> 0:12:34.040 Now it's becoming a question of will it be by 0:12:34.080 --> 0:12:37.040 a quarter point or by a half point and crucial 0:12:37.080 --> 0:12:39.400 to that will be the latest inflation data. Yeah. 0:12:39.440 --> 0:12:42.559 Absolutely, Well, you mentioned the growth and the labor data 0:12:42.640 --> 0:12:45.000 that we've had out in the last few days. So 0:12:45.120 --> 0:12:48.880 the UK's finally joined other G seven economies in regaining 0:12:48.920 --> 0:12:51.480 the GDP that it lost during the pandemic. Took a 0:12:51.520 --> 0:12:54.200 long time. Output rows by two tenths of one percent 0:12:54.280 --> 0:12:57.199 in March, so now we are back up with three 0:12:57.320 --> 0:13:00.480 tenths of one percent larger in terms of the GDP 0:13:00.640 --> 0:13:03.880 than we were pre pandemic levels. In terms of the 0:13:03.960 --> 0:13:08.520 reaction to that, his Blueberg's Senior UK economist Dan Hanson discussing, I. 0:13:08.559 --> 0:13:10.520 Mean, I think it came in broadly as expected. It 0:13:10.600 --> 0:13:12.120 was a little bit weaker than we thought it would be, 0:13:12.200 --> 0:13:14.000 but I think it's broadly in line. I mean that 0:13:14.120 --> 0:13:17.199 the big picture from the GDP data is that it's 0:13:17.320 --> 0:13:20.240 just holding up much better than anyone I'd expected, even 0:13:20.400 --> 0:13:21.959 sort of six months ago. And there are sort of 0:13:21.960 --> 0:13:23.880 lots of reasons. So that one is the labor market. 0:13:24.080 --> 0:13:27.439 There's energy, lower energy prices that's helping the global economy 0:13:27.559 --> 0:13:29.560 generally is probably doing a little bit better than people 0:13:29.600 --> 0:13:30.280 have expected. 0:13:30.559 --> 0:13:33.679 So that was Dan Hanson, bloomberg'st Senior UK Economics so 0:13:33.840 --> 0:13:37.679 reacting to the latest data, I mean, yes, it does 0:13:37.800 --> 0:13:39.959 put the UK in a difficult position. 0:13:40.679 --> 0:13:42.520 It does for the Bank of England, as I say, 0:13:42.520 --> 0:13:46.040 it's going to spur inflation probably which means more hikes. 0:13:46.400 --> 0:13:49.640 Further down the line, those hikes might mean that Britain 0:13:49.920 --> 0:13:52.839 enters a recession. I know you're speaking to Karen Ward 0:13:52.880 --> 0:13:55.760 of JP Morgan Asset Management, who's also as a side 0:13:55.840 --> 0:13:58.800 hustle an economic advisor to the Chancellor Jeremy Hunt. She 0:13:58.920 --> 0:14:02.160 thinks that a recession maybe likely, and that was even 0:14:02.240 --> 0:14:06.280 before we saw this job data. Also, I have to say, 0:14:06.840 --> 0:14:10.079 zero point two percent growth, it's pretty anemic, isn't it. 0:14:10.320 --> 0:14:10.520 Yeah. 0:14:10.520 --> 0:14:14.160 Absolutely, it's not that much to shout about, I suppose, 0:14:14.280 --> 0:14:16.240 and yet of course the government will want to show 0:14:16.280 --> 0:14:19.720 that it's positive. And when it comes to that, Richie 0:14:19.760 --> 0:14:23.360 Sunac has pledged to half inflation, one of his big 0:14:23.640 --> 0:14:27.800 five pledges, which are largely economic in focus. Of course, 0:14:28.440 --> 0:14:31.800 given the turnover that we've had in prime ministers in 0:14:32.080 --> 0:14:34.800 the UK, this was you know, this is his big 0:14:34.920 --> 0:14:39.640 kind of flagship bid for voters. And then Mervin King 0:14:39.760 --> 0:14:43.119 in recent days has come out and said very publicly 0:14:43.400 --> 0:14:45.680 in the national media that actually he thinks that that 0:14:45.920 --> 0:14:47.760 sort of pledge is a bad idea. 0:14:48.120 --> 0:14:51.320 Yeah, so this is in an interview with LBC's Andrew Marr. 0:14:51.560 --> 0:14:55.760 I have to say, policymakers and actually even Tory politicians 0:14:55.800 --> 0:14:58.000 behind the scenes when I speak to them, have said 0:14:58.040 --> 0:15:00.880 that this is a bad idea. Look, she's Sunak. The 0:15:00.960 --> 0:15:05.440 thinking is, I hear felt like lots of people blamed 0:15:05.520 --> 0:15:08.480 liss Trust for higher inflation. So when he came in, 0:15:08.720 --> 0:15:11.880 he felt like he needed to grip the issue. And 0:15:12.040 --> 0:15:14.280 even though it's really the Bank of England's job to 0:15:14.840 --> 0:15:20.160 reduce inflation, he's taking responsibility for him. But there's a 0:15:20.240 --> 0:15:24.880 difference between actively reducing inflation and not doing anything to 0:15:24.960 --> 0:15:27.360 add to it, right, So he's in a risky position 0:15:27.880 --> 0:15:31.160 when inflation is proving stickier and stickier as the months 0:15:31.240 --> 0:15:33.640 go on. And I thought it was very interesting listening 0:15:33.680 --> 0:15:37.240 to him at Prime Minister's Questions on Wednesday. He didn't 0:15:37.440 --> 0:15:40.120 really talk about halving inflation by the end of the 0:15:40.240 --> 0:15:43.360 year so much as reducing it. So is he shifting 0:15:43.400 --> 0:15:44.080 the goalposts? 0:15:44.160 --> 0:15:44.360 Yeah? 0:15:44.360 --> 0:15:48.440 Absolutely, And the former Bank of Governor Andrew Mervin king 0:15:48.600 --> 0:15:51.480 talking about how it's not bad to claim credit for 0:15:51.640 --> 0:15:56.440 it once it's actually happens, you know, but not before perhaps, 0:15:57.440 --> 0:16:01.640 And so too the relationship between government and business, which 0:16:01.720 --> 0:16:04.760 is the other big struggle I think for issues and 0:16:05.240 --> 0:16:08.240 for the Cabinet. In our reporting around whether the UK 0:16:08.400 --> 0:16:11.720 is a drift or not, we've had a number of 0:16:11.960 --> 0:16:17.440 interviews with disgruntled, even despairing business leaders about this issue, 0:16:17.960 --> 0:16:20.680 including with Archie Norman, who's the chairman of Marx and Spencer. 0:16:20.800 --> 0:16:23.720 He spoke to me at length about why the UK 0:16:24.080 --> 0:16:29.480 needs a broader industrial strategy, a real plan for the economy, 0:16:29.600 --> 0:16:33.080 a skills agenda, so that the UK, although it's under 0:16:33.080 --> 0:16:35.800 a great deal of pressure, can actually compete globally. Have 0:16:35.880 --> 0:16:37.040 a listen to what he said. 0:16:37.320 --> 0:16:40.560 An industrial strategy has to be profound, and it's not 0:16:40.880 --> 0:16:44.800 just about our atsues where we want to compete, It's 0:16:44.840 --> 0:16:48.240 about what skills do we want to have. Government plays 0:16:48.280 --> 0:16:51.840 a very big part in creating skills. We have something 0:16:51.920 --> 0:16:54.960 called the Apprenticeship Levy, which is a tax on skills 0:16:55.400 --> 0:16:57.960 and a tax on training. A large part of that 0:16:58.080 --> 0:17:00.240 tax is taken by the treasury and not recent spent. 0:17:01.000 --> 0:17:03.800 Other countries are saying, no, we need laboratory as systems, 0:17:03.880 --> 0:17:05.840 No we need more coders, No we we need more 0:17:05.920 --> 0:17:09.320 data scienttists. We seem to be agnostic. We don't know 0:17:09.400 --> 0:17:11.840 what we need, and that's not good enough. When France 0:17:11.960 --> 0:17:14.560 and Singapore and Canada and the US have a point 0:17:14.600 --> 0:17:16.560 of view, we have to have a point of view too, 0:17:16.720 --> 0:17:19.560 So you've got to start planning ahead. The footprint of 0:17:19.640 --> 0:17:22.760 government is too big in the economy to say we're 0:17:22.920 --> 0:17:26.600 just hands off, that we let the market decide because 0:17:26.640 --> 0:17:31.280 government does create and shape the future direction. A competitive 0:17:31.320 --> 0:17:34.560 economy is one where the public and private sector work together. 0:17:35.000 --> 0:17:39.199 That doesn't mean in an old fashioned sense of taxpayers 0:17:39.240 --> 0:17:41.920 money going into owning company or anything like that. It 0:17:42.040 --> 0:17:47.800 means we're working together on regulation, on trade, on investment 0:17:47.920 --> 0:17:53.760 in skills, on how government supports entrepreneurs, how we shape 0:17:53.800 --> 0:17:57.520 the tax system. At the moment that's come slightly adrift 0:17:57.680 --> 0:18:00.640 post Brexit. So there used to be a good hand 0:18:00.720 --> 0:18:04.560 in hand working relationship that was all swept away in 0:18:04.960 --> 0:18:09.119 the sort of Boris Johnson era and now we need 0:18:09.200 --> 0:18:10.119 to rebuild it again. 0:18:10.520 --> 0:18:13.520 So that was Archie Norman there saying we need an 0:18:13.600 --> 0:18:16.960 industrial strategy in the UK. So then let's wrap it 0:18:17.000 --> 0:18:19.480 all together as we think about the coming few days 0:18:19.760 --> 0:18:22.080 and you know what Andrew Bailey is going to do 0:18:22.160 --> 0:18:23.320 about UK rates. 0:18:23.680 --> 0:18:26.040 It's a really difficult position to be in for the 0:18:26.160 --> 0:18:30.040 governor looking at the data that has just come and 0:18:30.160 --> 0:18:33.119 as I say, we'll get more on inflation just before 0:18:33.400 --> 0:18:37.000 this BOE decision, but then thinking about the forecasts and 0:18:37.080 --> 0:18:39.719 what lies ahead when you've got members of the Monetary 0:18:39.720 --> 0:18:42.960 Policy Committee like Swatti Dingra warning about this lag in 0:18:43.040 --> 0:18:46.920 money Tree transmission eighteen months to two years. It seems 0:18:47.000 --> 0:18:49.880 to take four rates to pass through to the economy 0:18:49.920 --> 0:18:53.240 because of so many people having fixed rate mortgages. It's 0:18:53.240 --> 0:18:55.879 a divided committee. It looks like it's going to be 0:18:55.960 --> 0:18:59.159 between twenty five basis points and fifty basis points. But 0:18:59.240 --> 0:19:02.040 we'll be watching our clues for what happens the rest 0:19:02.119 --> 0:19:04.960 of the year. Will there be a pause in August? 0:19:05.320 --> 0:19:08.320 When will the cuts come? It looks like the Bank 0:19:08.400 --> 0:19:11.080 of England may have been first to the rate hiking party, 0:19:11.280 --> 0:19:13.080 but it's going to be the last to leave and 0:19:13.200 --> 0:19:15.400 take longer than the ECB and the FED to get 0:19:15.400 --> 0:19:15.919 to the pivot. 0:19:16.440 --> 0:19:18.800 Okay, Lizzie, thank you so much for being with me. 0:19:18.880 --> 0:19:21.120 You'll be with me throughout the coming days, of course, 0:19:21.200 --> 0:19:26.240 to cover all things UK economy. Bloomberg's UK correspondent, Lizzie Burden. 0:19:26.720 --> 0:19:29.080 I'm Caroline Hebger here in London and you can catch 0:19:29.160 --> 0:19:32.000 us every weekday morning for Bloomberg Daybreak you at beginning 0:19:32.000 --> 0:19:34.960 at six am in London. That's one am on Wall Street. 0:19:35.080 --> 0:19:35.320 Tom. 0:19:36.280 --> 0:19:40.320 Thank you, Caroline. That was Bloomberg Daybreak Europepost Caroline Hepgar 0:19:41.280 --> 0:19:44.320 and coming up on Bloomberg day Break weekend, India's Prime 0:19:44.359 --> 0:19:47.280 Minister comes to the US to meet with President Biden. 0:19:47.760 --> 0:19:49.560 I'm Tom Busby and this is. 0:19:49.600 --> 0:20:09.000 Bloomberg broadcasting live from the Bloomberg it a active Brokers 0:20:09.040 --> 0:20:12.480 studio in New York. Bloomberg elemon three oh to Washington, 0:20:12.560 --> 0:20:15.880 d C, Bloomberg ninety nine one to Boston, Bloomberg one 0:20:15.920 --> 0:20:19.119 oh sixty one to San Francisco, Bloomberg nine sixteen to 0:20:19.240 --> 0:20:22.399 the Country Syrius XM Channel one to nineteen to London 0:20:22.560 --> 0:20:26.240 DAB Digital Radio, and around the globe the Bloomberg Business 0:20:26.320 --> 0:20:30.880 app in Bloomberg Radio dot Com. This is Bloomberg Daybreak Weekend. 0:20:37.480 --> 0:20:39.560 I'm Tom Busby in New York with your global look 0:20:39.560 --> 0:20:42.040 ahead at the top stories for investors in the coming week. 0:20:42.440 --> 0:20:46.080 President Biden will host India's Prime Minister, Narendra Mody in 0:20:46.200 --> 0:20:48.440 a state dinner in the coming week. And for more, 0:20:48.800 --> 0:20:51.280 let's go to Hong Kong and Bloomberg Daybreak Asia host 0:20:51.560 --> 0:20:52.240 Doug Prisner. 0:20:52.440 --> 0:20:56.720 Tom The Biden administration recently characterized the relationship with India 0:20:56.880 --> 0:20:59.639 as the most important for the US in the world. 0:21:00.280 --> 0:21:02.720 India is viewed as a vital partner in the US 0:21:02.800 --> 0:21:06.520 effort to push back against China's expanding influence. 0:21:06.080 --> 0:21:06.520 In the world. 0:21:07.040 --> 0:21:09.320 We want to take a closer look now with Bloomberg's 0:21:09.359 --> 0:21:14.560 Rebecca Chung Wilkins. She is our Asia Government and Politics correspondent. Rebecca, 0:21:14.600 --> 0:21:16.400 it's always a pleasure. I think we have to begin 0:21:16.480 --> 0:21:19.240 with the fact that this relationship with the US is 0:21:19.320 --> 0:21:23.120 somewhat complicated, and you have to look no further than 0:21:23.400 --> 0:21:28.480 India's failure to criticize Russia's invasion of Ukraine. Can Prime 0:21:28.520 --> 0:21:31.600 Minister Mody be counted on as a reliable partner for 0:21:31.680 --> 0:21:34.680 the US or will India kind of go its own 0:21:34.760 --> 0:21:37.040 way without a strong alignment? What do you think? 0:21:37.240 --> 0:21:38.840 Well, listen, I don't want to go too far back, 0:21:38.960 --> 0:21:43.040 but India, the very basis of its foreign policy goes 0:21:43.119 --> 0:21:45.800 back to sort of the Cold War when it essentially 0:21:45.880 --> 0:21:49.760 decided to set up this non aligned country framework. So 0:21:49.840 --> 0:21:52.760 it's important to sort of understand that India from the outset, 0:21:52.920 --> 0:21:57.000 since its independent has approached foreign relations with this idea 0:21:57.080 --> 0:22:00.760 of always being somewhat a neutral figure, somewhat a middle man. 0:22:01.119 --> 0:22:03.880 And of course, you know, again during the Cold War 0:22:04.040 --> 0:22:06.920 that really was about striking a balance between the US 0:22:07.000 --> 0:22:10.840