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

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Speaker 2: So we now anticipate that the ECB will be delivering

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Speaker 2: a June cup, But what about what happens from there? Effectively,

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Speaker 2: we saw yesterday guard declaring independence from the Federal Reserve.

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Speaker 2: We are going to do our own thing. But how

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Speaker 2: long can that last? Well, I've already mentioned him, let's

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Speaker 2: talk to him. Jean Craudtrichet, former president of the European

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Speaker 2: Central Bank, joins us. Now she almost used the words

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Speaker 2: strong vigilance. Yesterday she decided Christine la Garde that a

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Speaker 2: rate cut is coming in June. Jean Claude, my question

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Speaker 2: is how much further do you think those rate cuts

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Speaker 2: will go, given the fact that it looks like the

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Speaker 2: Fed is going to be on hold for a while.

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Speaker 3: Well, thank you for your invitation.

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Speaker 4: First, they would say, clearly, she did not discourage the

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Speaker 4: market to think that a decrease of rates will take

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Speaker 4: place in June. She was not committed, but she did

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Speaker 4: not discourage and she knows and the ECB knows how

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Speaker 4: to guide the market. The proof is that in the

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Speaker 4: last meeting yesterday, there was no anticipation of decrease of

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Speaker 4: rates because the message coming from the ECB was quite clear.

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Speaker 4: So my understanding is that, yes, we do not discourage

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Speaker 4: you to foresee a decrease of race in June.

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Speaker 3: First.

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Speaker 4: Second, we do not want to be pre committed on

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Speaker 4: the successive possible decrees of rates. We have no pre commitment,

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Speaker 4: and I think it is justified in the very very

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Speaker 4: i would say, hectic, demanding and dangerous world in which

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Speaker 4: we are. So I think it's better. I think she

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Speaker 4: did quite well. We will see what the market does

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Speaker 4: for that. But the idea that the ECB might be

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Speaker 4: legitimate in decreasing rates when the US said is not

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Speaker 4: as legitimate comes out of the field. You have a

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Speaker 4: full one percent difference between the headline inflation and the

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Speaker 4: core inflation on both sides of the Atlantic.

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Speaker 3: That makes a difference when the target is the same.

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Speaker 2: In the medium run, Jeans Claude, does America have a

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Speaker 2: inflation problem and Europe a growth problem? Is that how

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Speaker 2: we should think about it?

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Speaker 4: I think that yes. Indeed, you can sum up things

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Speaker 4: like that. You could also say the policy mix in

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Speaker 4: the US remains expensive because of the fiscal side of

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Speaker 4: the policy mix, when it is not the case in Europe.

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Speaker 4: So you have also obvious difference between the two sides

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Speaker 4: of the Atlantic. And you also have to recognize that

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Speaker 4: war in Europe is a problem for the European growth

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Speaker 4: much more than the problem for.

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Speaker 3: The US growth.

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Speaker 4: So you have at least two reasons to think that

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Speaker 4: it's not abnormal that growth is more dynamic in the

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Speaker 4: US than in Europe. That being said, as I said,

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Speaker 4: in terms of inflation, the target is the same two

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Speaker 4: percent in the medium run. That might explain why the policies,

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Speaker 4: the decisions of the central banks are not I would

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Speaker 4: say absolutely the same as said Christina, that it is

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Speaker 4: true the target is the same, The present situation is

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Speaker 4: not the same. You are in two ships that are

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Speaker 4: not in the same position, even if they go to

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Speaker 4: the same harbor.

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Speaker 1: Two ships not in the same position, even if they

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Speaker 1: go into the same harbor. Two different stories, two different fundamentals,

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Speaker 1: but ultimately related at its core. We've seen that US

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Speaker 1: resilience prop up several economies, not to mention the corporate

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Speaker 1: stories in Europe. Jean Coltte talked to us about the

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Speaker 1: kind of triple effect or the ripple effect, I should say,

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Speaker 1: from the US stickiness and the inflation story into Europe,

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Speaker 1: what's the read through.

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Speaker 3: Well, again, the two major economies we are speaking of

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Speaker 3: the two extraordinly big economies in the world, at least

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Speaker 3: in our case, the a single economy that is of

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Speaker 3: the size of the US.

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Speaker 4: So we are interacting clearly, and we have to take

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Speaker 4: into account both. I would say the US has to

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Speaker 4: take into account what goes in Europe and the reverse

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Speaker 4: is pretty true for the European.

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Speaker 3: We will see exactly where we go. I take it.

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Speaker 4: That as long as the flood is credible in this idea,

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Speaker 4: that the definition of stability remains two percent in the

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Speaker 4: medium term. It seems to me that it helps considerably

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Speaker 4: because the expectations on both US of the athletic on

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Speaker 4: a medium and long term basis are very close. Obviously,

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Speaker 4: you see the market at trusting until now both central

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Speaker 4: banks as being credible in their policy. After all, the

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Speaker 4: fact that you've fed augmented rates eleven times and the

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Speaker 4: ECB ten times gives some credit to what they say

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Speaker 4: in terms of price stability.

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Speaker 1: Sean Catte, what about this bond market here. The last

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Speaker 1: time we had this kind of panic in the long

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Speaker 1: end of the US curve, it was in the third

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Speaker 1: quarter of twenty twenty three, every single central bank around

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Speaker 1: the world talked about it, from the ECB out to

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Speaker 1: the BOJ. Now that we're talking about this yield move

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Speaker 1: momentum as well, are you concerned about the pace at

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Speaker 1: which the bond market is selling off in the States?

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Speaker 4: I think that we have experienced a level of volatility

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Speaker 4: in the bond market in general and in particular in

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Speaker 4: the US.

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Speaker 3: And the bond market of the US is really.

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Speaker 4: The director, if I may bomb market at a global level,

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Speaker 4: so we.

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Speaker 3: Know that it is more I would say hectic than

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Speaker 3: we are used to.

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Speaker 4: And I'm not too surprised that to the extent that

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Speaker 4: there is a big change in the perception of the

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Speaker 4: market on what's happening exactly in terms of inflation in

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Speaker 4: the US. And even if again there is no change

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Speaker 4: of the target of the definition of price stability, I'm

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Speaker 4: not too surprised.

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Speaker 3: I would maybe underline more.

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Speaker 4: What's happening in the stock market, because the bond market

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Speaker 4: doesn't seem to me a barn when they are capturing

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Speaker 4: new information, they are making this new information times billing

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Speaker 4: them into the prices.

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Speaker 3: I am a little bit.

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Speaker 4: More worrying on the stock market on both sides of

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Speaker 4: the atnatic and everywhere, taking into account the present dangerousity

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Speaker 4: if economic and financial sphere. When I get some indicators

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Speaker 4: like the overall outstanding public indebtedness in the advanced economy,

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Speaker 4: I see seventy five percent of the GDP before Laymen,

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Speaker 4: and I see one hundred and fourteen percent today, meaning

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Speaker 4: that we have an indicator that is I would say,

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Speaker 4: more worrying than it.

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Speaker 3: Was before Lemen, before the big financial crisis.

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Speaker 4: So I don't want to be too negative, but I

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Speaker 4: am circumspect. If I may, I think we have to

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Speaker 4: care for the dangerousity of the world.

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Speaker 1: Jean Corde, is there a little too much irrational exuberance

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Speaker 1: in stocks?

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Speaker 3: That's I don't exclude that. I don't exclude that.

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Speaker 4: And we have some I would say a number of

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Speaker 4: factors that are playing in this direction, including of course

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Speaker 4: a fantastic AI jump that we are observing, and also

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Speaker 4: the fact that the central banks did the work quite.

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Speaker 3: Well until now.

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Speaker 4: We have to say, it's quite remarkable that we totally

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Speaker 4: avoided the I would say expansion, the drama of the

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Speaker 4: inflationary episode that we had after the first and the

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Speaker 4: second oil shock. So I trust that the central banks,

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Speaker 4: the FED, the ECB did quite well, quite well to

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Speaker 4: prevent us from having this kind of drama, and of

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Speaker 4: course it is judged positively by assets markets.

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Speaker 3: That being said again, it seems to me that maybe a.

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Speaker 4: Correction will appear necessary at a certain time, and I

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Speaker 4: would not be surprised if we are observing that.

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Speaker 2: Jehan quatriche thank you so much for real time. We

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Speaker 2: really appreciate it.

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Speaker 3: Former President of the European Central Bank of course,