WEBVTT - Bank of England Governor Andrew Bailey Talks trade, Brexit 0:00:02.720 --> 0:00:09.680 Bloomberg Audio Studios, podcasts, radio news. Bailey for taking a 0:00:09.680 --> 0:00:10.360 couple of questions. 0:00:10.360 --> 0:00:13.480 I mean I should say that our conversation had moved 0:00:13.480 --> 0:00:15.560 on to the much more important subject of rugby. 0:00:15.600 --> 0:00:16.520 But we'll get back to. 0:00:16.520 --> 0:00:20.079 The you know, we will talk rugby, you know what 0:00:20.120 --> 0:00:20.960 will end with rugby. 0:00:21.000 --> 0:00:21.560 But before we. 0:00:21.480 --> 0:00:24.520 Get to rugby rugby, we can talk trade, right, Okay, 0:00:25.200 --> 0:00:28.240 So you've urged the government basically to strike in your 0:00:28.280 --> 0:00:30.640 speech earlier, to strike a deeper trade deal with the 0:00:30.680 --> 0:00:34.720 European Union to improve growth and minimize negative effects of Brexit. 0:00:34.760 --> 0:00:35.560 Where would you start? 0:00:35.600 --> 0:00:38.680 Where would you go first? Well? I would say I 0:00:38.680 --> 0:00:41.200 think the government, you know, has made some important steps 0:00:41.200 --> 0:00:43.280 and I think that's helpful. I mean, as I said, 0:00:43.320 --> 0:00:45.479 I don't take a view on brexitfasly. What I do 0:00:45.840 --> 0:00:50.040 say is, you know, we should take it do everything 0:00:50.080 --> 0:00:55.080 we can to ensure that the trading relationship you know, redeveloped, 0:00:55.120 --> 0:00:57.600 if you like. I think there's important things we can 0:00:57.680 --> 0:01:00.360 do together in financial services, and I think by the wait, look, 0:01:00.360 --> 0:01:04.000 I think the recent obviously market volatility of recent weeks 0:01:04.000 --> 0:01:08.080 and months illustrates why it's important that we do work 0:01:08.120 --> 0:01:10.160 closely together and when we do by the way we do, 0:01:10.200 --> 0:01:12.720 and that's that's true also in the financial stability board. 0:01:13.840 --> 0:01:16.119 You know, we have we have many common interests. There 0:01:16.160 --> 0:01:18.520 are many things that are common to our markets that 0:01:18.520 --> 0:01:21.680 are happening, and so we can do that. Plus I say, 0:01:21.720 --> 0:01:25.119 I think that there's a natural common interest between UK 0:01:25.200 --> 0:01:27.680 and Ireland and the UK and EU on these things. 0:01:27.680 --> 0:01:29.920 So I hope we can, you know, very much hope 0:01:29.959 --> 0:01:32.080 now we can take that forward away. 0:01:31.840 --> 0:01:34.240 From financial services or there are areas that you want 0:01:34.240 --> 0:01:37.000 the other areas that you think that the government should 0:01:37.000 --> 0:01:40.200 focus on without overstepping any of the red lines that 0:01:40.240 --> 0:01:41.000 they've put in place. 0:01:41.360 --> 0:01:43.560 Well, I think that I start often, as I said 0:01:43.560 --> 0:01:45.480 in the remarks I made, I start from the point 0:01:45.480 --> 0:01:50.120 that trade is an important underpinning for growth, It's an 0:01:50.120 --> 0:01:54.200 important underpinning for activity in the economy. There are lessons 0:01:54.240 --> 0:01:57.080 to learn from from recent years which we you know, 0:01:57.080 --> 0:02:00.000 which we can put into effect. But there's no question 0:02:00.440 --> 0:02:03.960 that you know, open economies are important. And let me 0:02:03.960 --> 0:02:07.560 put this into an important perspective, and this is the 0:02:07.600 --> 0:02:10.799 story on growth. I mean, you know, the UK is 0:02:10.800 --> 0:02:12.680 not a loneliness respect by any means. So this is 0:02:12.680 --> 0:02:14.800 not a it's a UK story, but it's not a 0:02:14.840 --> 0:02:18.680 uniquely UK story. We have had a lower potential growth 0:02:18.800 --> 0:02:21.520 rate in the UK for the last well really since 0:02:21.520 --> 0:02:23.600 it's a financial crisis by the way. I'm not sure 0:02:23.600 --> 0:02:26.240 that's causal, by the way, but it happens to coincide, 0:02:27.680 --> 0:02:28.200 so that you know. 0:02:28.720 --> 0:02:30.400 The point I always make is that if you go back. 0:02:30.240 --> 0:02:32.880 Before the financial crisis, the potential growth rate in the 0:02:33.000 --> 0:02:35.000 UK was probably around two two and a half percent 0:02:35.000 --> 0:02:37.640 a Yet since then it's been one to one and 0:02:37.639 --> 0:02:41.880 a half percent, and most of the difference is to 0:02:41.880 --> 0:02:45.600 do with productivity and to do with investments. And you know, 0:02:45.639 --> 0:02:47.640 you look at the job we have with monetary policy, 0:02:47.680 --> 0:02:49.720 which is balancing supply and demand. You look at the 0:02:49.800 --> 0:02:52.920 obviously the job that you know, fiscal policy has. It 0:02:53.000 --> 0:02:56.720 is harder to run macroeconomic policy when you've got a 0:02:56.760 --> 0:02:59.040 lower growth rate. I mean, history tells us this. 0:03:00.120 --> 0:03:00.960 So raising the. 0:03:01.000 --> 0:03:04.360 Potential growth rates is critical. And say the UK is 0:03:04.360 --> 0:03:05.760 not alone in this respect. 0:03:06.200 --> 0:03:08.760 How much more necessary is it because of the trade 0:03:08.760 --> 0:03:09.880 war also that we're seeing. 0:03:09.880 --> 0:03:11.720 I mean, I think it underlines. 0:03:11.280 --> 0:03:16.560 The importance of it because the trade situation will you know, 0:03:16.880 --> 0:03:20.880 if the world economy fragments, that will also have an 0:03:20.880 --> 0:03:23.600 impact on growth, you know point I made. I mean 0:03:23.600 --> 0:03:28.480 it impacts on things like knowledge transfer packs, impacts on 0:03:28.600 --> 0:03:30.800 supply chains, so it will have an effect. 0:03:30.880 --> 0:03:34.359 Yes, Is it world fragmenting for real? Or are these 0:03:34.440 --> 0:03:35.960 just digitters that then will settle? 0:03:36.080 --> 0:03:38.560 Well, I hope, I hope we can get past the 0:03:38.600 --> 0:03:41.800 sort of disruption we're going through. It's why, as I 0:03:41.800 --> 0:03:44.600 said in my remans, I do think it's critically important 0:03:45.880 --> 0:03:49.880 that we focus on ensuring that what I call the 0:03:49.960 --> 0:03:53.400 multilateral system is you know, is. 0:03:53.320 --> 0:03:55.000 Rebuilt and is robust. 0:03:55.360 --> 0:03:58.000 And you know, I include the World Trade Organization actually 0:03:58.080 --> 0:04:02.320 the IMF, because they are are absolutely important fundamental sort 0:04:02.320 --> 0:04:04.000 of parts of the system. 0:04:04.760 --> 0:04:07.280 But does the current I guess trade turmoil make it 0:04:07.320 --> 0:04:10.120 more necessary, yes, for the UK and you to get 0:04:10.160 --> 0:04:11.040 together one hundred percent? 0:04:11.120 --> 0:04:13.200 Well, I think I think it does emphasize the need 0:04:13.240 --> 0:04:15.040 to do it. Yeah, because it puts you know, puts 0:04:15.080 --> 0:04:17.359 all of us in a situation where we've got another 0:04:17.520 --> 0:04:21.280 risk to activity in the economy. So I think, you know, 0:04:21.480 --> 0:04:25.840 doing everything we can to rebuild that relationship in this situation. 0:04:25.920 --> 0:04:27.480 But of coaurse, we also don't by the way, Look, 0:04:27.560 --> 0:04:29.560 we don't want to lose the relationship with the US. 0:04:29.600 --> 0:04:31.720 I mean, we really want to under you know, get 0:04:31.760 --> 0:04:34.200 to the issues that are underlying this and help to 0:04:34.279 --> 0:04:36.320 solve them. It's it's not something we want to sort 0:04:36.320 --> 0:04:36.960 of wish away. 0:04:38.240 --> 0:04:40.800 Is there more uncertainty because of the trade turmoil than 0:04:40.800 --> 0:04:41.919 there was after Brexit? 0:04:43.800 --> 0:04:46.200 Oh, that's a that's a hard thing. I think. 0:04:46.400 --> 0:04:49.279 Well, I think post breaksit. I mean, there was obviously 0:04:49.279 --> 0:04:52.400 there was no question what the decision was. The uncertainty 0:04:52.520 --> 0:04:53.840 was of course, it was around how it was going 0:04:53.839 --> 0:04:55.280 to be put into effect, and that went on for 0:04:55.360 --> 0:04:56.719 quite you know, you think about it, That went on 0:04:56.760 --> 0:05:00.400 for quite a long time. I think the the challenge 0:05:00.440 --> 0:05:02.120 we have at the moment is that we don't actually 0:05:02.160 --> 0:05:04.279 know what the outcome is here. I mean, this is 0:05:04.279 --> 0:05:05.760 one of the problems we have in you know, obviously 0:05:05.839 --> 0:05:08.480 in market policy is you know, I would say, when 0:05:08.480 --> 0:05:10.440 we take our decisions on interest rates, so you have 0:05:10.480 --> 0:05:12.839 to sort of stop the music, as it were, and say, okay, 0:05:13.560 --> 0:05:17.320 we'll take this read of what's going on, what's going 0:05:17.320 --> 0:05:20.200 on in the economy and in the world economy, and 0:05:20.240 --> 0:05:23.039 then apply it into our monetary policy decision. But obviously, 0:05:23.240 --> 0:05:26.800 when I say that, however, you're making decisions on a 0:05:26.800 --> 0:05:29.800 forward basis, because marketary policy has its effect looking forward. 0:05:29.839 --> 0:05:31.800 So then you've got the challenge as we had, you know, 0:05:31.880 --> 0:05:36.480 three weeks ago, what exactly is going to. 0:05:36.400 --> 0:05:37.680 Be the end point of all of this. 0:05:37.920 --> 0:05:39.880 I mean, you know, if we've been having this conversation 0:05:40.200 --> 0:05:42.160 twenty four hours ago, we might have had a different 0:05:42.360 --> 0:05:44.599 you know, we'd have a different facts around this for 0:05:44.680 --> 0:05:48.120 the moment. So that you know, that introduces you know, 0:05:48.320 --> 0:05:51.160 we we're sort of classic as central backs and talking 0:05:51.200 --> 0:05:54.600 about uncertainty constantly. We've also introduced the word unpredictability because 0:05:54.640 --> 0:05:56.200 I think that's a slightly different thing. 0:05:56.880 --> 0:05:59.559 I mean, I know investment managers, you know in Europe, 0:05:59.600 --> 0:06:01.960 are really around the world, are again trying to figure 0:06:01.960 --> 0:06:04.120 out the turmoil. I think someone's come up with the 0:06:04.240 --> 0:06:07.520 term the taco trade, which is Trump always chickens out 0:06:08.080 --> 0:06:11.359 when it comes to imposing ruthy tariff, getting like a 0:06:11.400 --> 0:06:16.960 slightly nervous laugh. But how you know, if you're thinking, 0:06:17.000 --> 0:06:19.000 because I know you think about trade wars, like how 0:06:19.000 --> 0:06:21.239 should investment managers think about the trade wars? 0:06:21.240 --> 0:06:21.880 Like what do we know? 0:06:21.920 --> 0:06:23.679 What do we not know? At every decision? 0:06:23.720 --> 0:06:24.440 How do you look at it? 0:06:24.480 --> 0:06:25.680 How do you look at probability. 0:06:27.360 --> 0:06:29.440 Well, I think there's a number of things that we 0:06:29.520 --> 0:06:33.240 have to think about. Well, let me take one in 0:06:33.240 --> 0:06:35.560 the real economy and then we'll come on to markets maybe. 0:06:36.200 --> 0:06:37.919 I think the one in the real economy that we 0:06:37.960 --> 0:06:42.200 have to think about is if there is a negative 0:06:42.200 --> 0:06:45.880 effect on activity, is it going to be a demand 0:06:45.920 --> 0:06:47.640 effect or is it going to be a demand and 0:06:47.720 --> 0:06:50.680 supply side effect. And this is important because obviously we 0:06:50.720 --> 0:06:54.400 saw with we COVID and Ukraine this problem of having 0:06:55.400 --> 0:06:56.880 repeated supply side. 0:06:56.600 --> 0:06:57.479 Shocks going on. 0:06:58.560 --> 0:07:00.520 I mean, I think it's quite interesting and I observe 0:07:00.600 --> 0:07:02.800 quite all of the commentators that and this tends to 0:07:02.839 --> 0:07:05.320 happen that they immediately assume that it's a demand shock, 0:07:06.080 --> 0:07:08.359 and obviously that from uncy policy. If you if you 0:07:08.400 --> 0:07:10.320 stop there as it were, then you think, well, that's 0:07:10.360 --> 0:07:13.760 actually negative for inflation. But of course, if it's actually 0:07:13.800 --> 0:07:17.960 turns out and this does happen that there is a 0:07:17.960 --> 0:07:20.680 supply shock element to it, and if that's say on 0:07:20.720 --> 0:07:23.160 supply chains, and if that turned out to be persistent, 0:07:23.200 --> 0:07:25.160 then that would not the effect on inflation would be 0:07:25.240 --> 0:07:28.440 quite different. Now, reading that is very hard at the moment, 0:07:28.480 --> 0:07:30.720 So we have to keep coming back to that. It's 0:07:30.760 --> 0:07:32.520 why we keep using as you know, we could, we 0:07:32.840 --> 0:07:36.240 keep using these terms gradual and careful in the approach 0:07:37.560 --> 0:07:40.720 on markets. I think, you know, the issue is that 0:07:40.760 --> 0:07:45.760 I think is this. We've seen very big changes in 0:07:45.840 --> 0:07:48.080 what I call the sort of structure of core financial 0:07:48.120 --> 0:07:50.760 markets in recent in the last five years ten years, 0:07:52.800 --> 0:07:55.960 big shift from the sort of traditional sort of bank 0:07:56.040 --> 0:07:59.720 dealer model to a non bank model. And before any 0:07:59.720 --> 0:08:02.280 of this happened, we were already, you know, spending a 0:08:02.280 --> 0:08:04.680 lot of time saying, well, what is the sort of 0:08:04.760 --> 0:08:07.119 pattern that you know, what shocks can that can happen 0:08:07.120 --> 0:08:09.920 and how would they sort of push and go through 0:08:09.960 --> 0:08:10.600 that system. 0:08:11.240 --> 0:08:13.120 And of course it's even more acute. 0:08:12.760 --> 0:08:15.440 Now in terms of understanding you know, where the fragilities 0:08:15.480 --> 0:08:19.200 are in a world of volatile markets with that structure 0:08:19.240 --> 0:08:21.720 of bond markets for instance. So it's a thing we 0:08:21.760 --> 0:08:22.720 spend a lot of time on. 0:08:23.080 --> 0:08:25.720 But how close have markets come to this financial doom 0:08:25.720 --> 0:08:29.360 loop spiral similar to what happened in the LDI crisis. 0:08:30.000 --> 0:08:32.439 Well, the good news is is that I don't think, yeah, 0:08:32.480 --> 0:08:36.240 we didn't get near to that point. And by the way, 0:08:36.280 --> 0:08:38.160 I think that's you know, that's important for a number 0:08:38.200 --> 0:08:41.080 of reasons. One is that it does suggest and this 0:08:41.160 --> 0:08:42.960 is where I do somewhat push back on the sort 0:08:43.000 --> 0:08:46.280 of the you know, the deregulation agenda, which is not 0:08:46.360 --> 0:08:48.960 because I think our rules and regulations are all perfect. 0:08:49.000 --> 0:08:49.600 They're not. 0:08:50.800 --> 0:08:54.240 But there isn't a trade off between financial stability and growth, 0:08:54.240 --> 0:08:56.959 and there isn't a trade off between financeidability and sort 0:08:56.960 --> 0:08:58.679 of macroeconomic stability. 0:08:58.720 --> 0:08:59.600 And that's important. 0:09:01.880 --> 0:09:02.080 Now. 0:09:02.240 --> 0:09:04.320 I think what we should you know, what we have 0:09:04.400 --> 0:09:07.280 seen so far is that the system has stood up 0:09:07.480 --> 0:09:10.080 in that sense. Now so far, of course, you know, 0:09:10.400 --> 0:09:12.360 you know, we've got to keep a very careful eye 0:09:12.360 --> 0:09:14.200 on this, and we've then got to know we'll have 0:09:14.240 --> 0:09:16.400 to come back and you know, as we always do, 0:09:16.520 --> 0:09:18.880 sort of go over the entrails of what's happened and 0:09:18.920 --> 0:09:21.720 sort of you know, look look look under the bonnet 0:09:21.760 --> 0:09:23.920 and say, well what, you know, what can we learn 0:09:24.000 --> 0:09:25.840 from this? And we will, know, doubt learn a lot 0:09:26.040 --> 0:09:29.440 we always do. So far, I would say the system 0:09:29.480 --> 0:09:31.360 has stood up, but you know, but there has been 0:09:31.360 --> 0:09:31.960 straining in there. 0:09:32.000 --> 0:09:33.679 I mean it's clearly been straining in markets. 0:09:33.800 --> 0:09:36.439 I mean, so far, this doesn't feel anyone with confidence, 0:09:36.720 --> 0:09:37.920 how big of a risk is. 0:09:37.920 --> 0:09:42.120 It Now you think, well, well, you know that there's 0:09:42.120 --> 0:09:44.280 a lot of unpredictability and uncertainty out there, so we 0:09:44.320 --> 0:09:47.000 have to watch it very carefully. What I would say 0:09:47.040 --> 0:09:48.600 is that I think we've you know, all of us 0:09:49.000 --> 0:09:52.560 have now developed tools you know, to handle that. 0:09:52.679 --> 0:09:53.440 We've got more. 0:09:53.360 --> 0:09:54.800 Tools to handle it. So that was one of the 0:09:54.880 --> 0:09:57.319 things that you know, we we built out of the 0:09:57.400 --> 0:10:01.960 ld I issue, for instance. It's not just about having 0:10:02.760 --> 0:10:05.800 resilience in the sense of more protection, it's also you know, 0:10:06.480 --> 0:10:08.480 my view is, look, these are what I call sort 0:10:08.480 --> 0:10:11.800 of tailor the distribution risk events. There comes a point 0:10:11.880 --> 0:10:17.080 where holding sort of permanent resilience for very very extreme 0:10:17.120 --> 0:10:19.160 events is not the right answers. You know, there is 0:10:19.200 --> 0:10:21.120 a there is a world where it's actually more cost 0:10:21.120 --> 0:10:23.000 effective for the central bank to come in and. 0:10:23.520 --> 0:10:24.120 Deal with it. 0:10:24.920 --> 0:10:27.559 That's why we've you know, we're moving towards having these 0:10:27.640 --> 0:10:31.280 you know, non bank emergency lending facilities which we can 0:10:31.840 --> 0:10:34.720 we can trigger more easily. They're not standing facilities, because 0:10:34.720 --> 0:10:37.920 that's the world of banks and money, but because we've 0:10:37.920 --> 0:10:40.200 had this shift to the non bank world so much 0:10:40.240 --> 0:10:42.280 in our markets, we've got to have these tools at 0:10:42.280 --> 0:10:42.920 our disposal. 0:10:43.240 --> 0:10:43.920 But I know you were. 0:10:44.080 --> 0:10:46.400 I mean, you're paid to worry really about inflation, about grows, 0:10:46.400 --> 0:10:49.400 about everything. But do you worry more about a market 0:10:49.440 --> 0:10:51.120 event than anything else. 0:10:52.280 --> 0:10:55.120 Well, look, we're paid to do both. I mean, we 0:10:55.160 --> 0:10:57.880 worry about monetary policy because that's crucial to you know, 0:10:57.920 --> 0:10:59.800 to the well being of the economy. It's crucial to 0:10:59.840 --> 0:11:03.040 the value of money, to real value of money. And 0:11:03.160 --> 0:11:05.560 you know, I sometimes hear people saying central banks are 0:11:05.559 --> 0:11:06.320 taking their eye off it. 0:11:06.400 --> 0:11:09.000 No, we haven't at all. But you know we have to. 0:11:09.160 --> 0:11:10.080 We have to do both. 0:11:10.200 --> 0:11:12.880 You know, these things don't they can't exist in a 0:11:12.920 --> 0:11:15.079 separate universe. That's the mistake that was made before the 0:11:15.120 --> 0:11:18.800 financial crisis, certainly in the UK. So we have to 0:11:18.800 --> 0:11:20.600 spend a lot of time on financial stability, and we 0:11:20.600 --> 0:11:23.760 do because that is equally about the resilience of markets. 0:11:23.760 --> 0:11:27.800 It's about the nominal value of money. And you know, 0:11:27.840 --> 0:11:31.000 I say to people, Look, the last few months would 0:11:31.040 --> 0:11:33.520 have been wholly worse if we've been dealing with a 0:11:33.559 --> 0:11:36.320 fragile financial system at the same time that we're having 0:11:36.320 --> 0:11:39.000 these shots gone. You know, we've had that experience, We've 0:11:39.040 --> 0:11:40.559 dealt with it. That's wholly worse. 0:11:41.559 --> 0:11:44.280 Governor, you have said that trade wars are bad and 0:11:44.280 --> 0:11:47.080 that imbalances in the global economy need to be managed 0:11:47.120 --> 0:11:51.760 by multinational institutions or multilateral issudes like the IMF, But 0:11:51.800 --> 0:11:55.199 actually their scope is very limited. So it is you know, 0:11:55.320 --> 0:11:57.840 is President Trump not right to try something different? 0:11:58.440 --> 0:12:01.480 Well, I think, I mean, you're right about the scope. 0:12:01.480 --> 0:12:03.200 But the scope is the scope. 0:12:02.840 --> 0:12:05.960 And the effectiveness of these institutions is what we, as 0:12:06.120 --> 0:12:09.440 the sort of the member countries, enable them to be. 0:12:10.720 --> 0:12:12.400 You know, I don't think we can expect you know, 0:12:12.760 --> 0:12:14.280 I work for a moment and I spend a lot 0:12:14.280 --> 0:12:16.080 of time with the IMF. I don't think we can 0:12:16.120 --> 0:12:18.240 expect the IMF to go around waiving a magic wand 0:12:18.840 --> 0:12:20.680 solving every problem that comes our way. 0:12:21.679 --> 0:12:22.520 What they can do. 0:12:22.720 --> 0:12:24.560 And I think this is crucial and it's been you know, 0:12:24.960 --> 0:12:27.840 it's deeply embedded in the Breton Woods system. Is you know, 0:12:27.880 --> 0:12:30.200 if you look at the articles of the of the IMF, 0:12:30.360 --> 0:12:36.000 trade is right up there from a macro perspective, and 0:12:36.360 --> 0:12:39.199 we have to then as the as the participant countries, 0:12:39.240 --> 0:12:41.040 as as we are as you know, as a as 0:12:41.080 --> 0:12:42.839 a permanent member of the board, as one of the 0:12:42.840 --> 0:12:46.000 big shareholders. You know, we have to enable them to 0:12:46.200 --> 0:12:48.240 you know, to help us in that sense and to 0:12:48.280 --> 0:12:51.320 provide the you know, the evidence and the analysis and 0:12:51.400 --> 0:12:54.360 the you know, the sort of the framework for them saying, look, 0:12:54.360 --> 0:12:58.080 we've got to rebuild policy. I'm not so closely involved 0:12:58.160 --> 0:12:59.719 or not closely involved in the w t A, but 0:12:59.760 --> 0:13:02.120 I do see, you know, as we see them a 0:13:02.120 --> 0:13:04.000 lot in the context of the IMF I talked to 0:13:04.040 --> 0:13:04.960 and goes see a lot. 0:13:05.160 --> 0:13:06.040 And again, I think. 0:13:05.920 --> 0:13:11.320 We've got to say, look, if it isn't working, we 0:13:11.360 --> 0:13:14.360 can't just abandon it, you know, We've got to get 0:13:14.360 --> 0:13:17.600 together and say what does it take to bring it 0:13:17.640 --> 0:13:19.600 back to where where it can play the role that 0:13:19.600 --> 0:13:21.800 we need it to play. We can't say sorry, that's 0:13:22.280 --> 0:13:24.240 you know, that's no more. What do you think is 0:13:24.280 --> 0:13:26.880 needed to bring well? I think I think I said 0:13:26.880 --> 0:13:28.560 in my remarks, I mean, I think we've got to 0:13:28.600 --> 0:13:31.000 sort of look at the question of to what extent well. 0:13:31.000 --> 0:13:32.719 First of all, I think, just because this is where 0:13:32.720 --> 0:13:34.679 the macrolamac comes in, I think we've got to come 0:13:34.720 --> 0:13:38.479 to an agreed view on what is a persistent imbalance, 0:13:39.440 --> 0:13:43.520 because it isn't any imbalance clearly, what is a persistent imbalance. 0:13:43.559 --> 0:13:47.600 What's the meaning of a persistent imbalance? And then what 0:13:47.640 --> 0:13:49.880 do we do about it? And then I think allied 0:13:49.920 --> 0:13:51.360 to that is this question of what you might have 0:13:51.480 --> 0:13:54.360 loosely called industrial policy, which is, to what extent is 0:13:54.400 --> 0:13:59.400 that being in the sense contributed to by industrial And 0:13:59.400 --> 0:14:01.840 then's got to be a more robust framework in which 0:14:01.880 --> 0:14:04.319 those things can be sort of in a sense hammered out. 0:14:05.760 --> 0:14:08.000 Do you think the rest of the world is decoupling 0:14:08.040 --> 0:14:11.880 from America but pulling tighter somewhere else, or is it 0:14:11.960 --> 0:14:13.400 just decoupling full stop? 0:14:14.600 --> 0:14:16.120 I don't think. 0:14:16.160 --> 0:14:18.840 I don't don't think frankly, the whole process is that advanced. Really, 0:14:19.120 --> 0:14:22.080 First of all, I don't really believe that. I think 0:14:22.120 --> 0:14:26.320 it doesn't. It's not useful or really right to talk 0:14:26.360 --> 0:14:29.400 about this sort of you know, is the dollar going 0:14:29.400 --> 0:14:31.080 to be a reserve currency? The dollar is still the 0:14:31.120 --> 0:14:32.800 most used currency and is going to go on being 0:14:32.800 --> 0:14:35.320 the most because there's so much infrastructure built around it 0:14:35.440 --> 0:14:39.240 that you know, that's a long way off. We may 0:14:39.280 --> 0:14:43.800 see some rebalancing of sort of activity, but I don't 0:14:43.800 --> 0:14:45.320 think we're anywhere near that, and I don't think we 0:14:45.360 --> 0:14:50.040 should want to be anywhere, know that. Frankly, I don't 0:14:50.080 --> 0:14:53.240 think really there's a you know, there's a great sort 0:14:53.240 --> 0:14:55.600 of move to sort of let's get together and sort 0:14:55.640 --> 0:14:57.880 of fight the US together. I don't think that's the case. 0:14:57.880 --> 0:15:00.640 I think there's still a lot of you know, what, 0:15:00.640 --> 0:15:01.920 what are we going to how are we going to 0:15:01.960 --> 0:15:05.280 deal with this? And I think we want to come together, 0:15:05.320 --> 0:15:08.200 and we want to come together with the US and say, look, 0:15:08.640 --> 0:15:11.480 you know, we we've got these multilateral forums. We've got 0:15:11.520 --> 0:15:15.400 to make these things work together to deliver you know, 0:15:15.560 --> 0:15:16.480 sensible outcomes. 0:15:16.800 --> 0:15:17.200 I guess the. 0:15:17.280 --> 0:15:20.280 Question could be, you know, is there can it come 0:15:20.320 --> 0:15:23.040 back to what it was? Or is the world splintering, 0:15:23.680 --> 0:15:25.200 you know, irrevocably. 0:15:26.440 --> 0:15:29.440 Well, look, I think we have to we have to 0:15:29.480 --> 0:15:31.720 put all our effort into doing that. I mean, I'm, 0:15:31.760 --> 0:15:33.720 you know, as you know you said earlier, I'm you know, 0:15:33.720 --> 0:15:36.840 I'm taking over the chair of the FSB of Fantanctability Board. 0:15:36.840 --> 0:15:39.360 I mean, I you know, fortunately we haven't seen those 0:15:39.360 --> 0:15:41.240 tensions in the FSB, but we have to be very 0:15:41.880 --> 0:15:42.960 acutely aware of it. 0:15:43.040 --> 0:15:44.440 And I certainly am. 0:15:45.440 --> 0:15:47.880 So it isn't it isn't fracturing. I think, look, I 0:15:47.880 --> 0:15:51.000 think the world economy has come under strain. I mean, 0:15:51.080 --> 0:15:54.600 let's be honest, you know, the Russia Ukraine situation has 0:15:54.640 --> 0:15:57.600 created a lot of strain in what a my called 0:15:57.600 --> 0:16:00.640 sort of world economic policy and world em for it. 0:16:00.720 --> 0:16:02.640 So if you go to the G twenty for instance, 0:16:02.680 --> 0:16:05.680 you know it's you know, it is having an effect 0:16:06.320 --> 0:16:09.280 on those institutions. They're not able to do the job 0:16:09.360 --> 0:16:10.280 that we need them to do. 0:16:11.080 --> 0:16:13.040 But how much do you worry about bond markets in 0:16:13.080 --> 0:16:16.320 general when you look at financial stability, right? I mean, 0:16:16.320 --> 0:16:19.840 I think the IMF was saying that guild market has vulnerabilities, 0:16:19.840 --> 0:16:22.560 that management office targeting sales at the short end of 0:16:22.600 --> 0:16:25.760 the curve where the demand is pension funds have pulled back. 0:16:25.800 --> 0:16:27.080 I mean, there's just a lot going on. 0:16:27.200 --> 0:16:28.240 Something could go wrong. 0:16:28.840 --> 0:16:31.520 Yes, I mean, obviously we're not responsible for that management policy. 0:16:31.560 --> 0:16:35.920 It's the debt management office. I mean, I think that 0:16:36.280 --> 0:16:38.840 they've said they're looking at this because the UK course 0:16:38.880 --> 0:16:41.240 has had a history of actually. 0:16:41.560 --> 0:16:43.480 Issuing more at the long end. 0:16:44.080 --> 0:16:46.520 And look, there's a lot of sense to that, a 0:16:46.520 --> 0:16:50.480 lot of sense to that, but the curve has deepened 0:16:50.480 --> 0:16:52.440 a lot, and I think you know they're rightly now 0:16:52.480 --> 0:16:55.080 looking at well, what does that tell us about going 0:16:55.080 --> 0:16:58.640 forwards about the market government. 0:16:58.680 --> 0:17:00.520 We have five minutes left and by poor Man, I 0:17:00.520 --> 0:17:02.760 think we'll talk a little bit about UK monetary policy 0:17:02.800 --> 0:17:06.679 and wage and inflation growth since the Mayor decision and 0:17:06.760 --> 0:17:10.399 some recent CPI and wage data markets slashing their bets 0:17:10.400 --> 0:17:13.280 on radcuts to just one this year. Does that sound 0:17:13.320 --> 0:17:13.800 about right? 0:17:14.320 --> 0:17:21.479 Well, you're welcome, yes, yes, yes, or no? Hands up. 0:17:26.640 --> 0:17:29.800 There's a there's a there's a lot of uncertainty around 0:17:29.840 --> 0:17:32.760 at the moment. You know, it's three weeks since obviously 0:17:32.800 --> 0:17:34.680 since I think we were last sitting talking to another 0:17:34.760 --> 0:17:38.960 discussing this the day we took the decision to be 0:17:39.000 --> 0:17:41.280 honest with you on the UK front. I think the 0:17:41.320 --> 0:17:44.239 evidence that we've seen since really it's been pretty much 0:17:44.280 --> 0:17:47.119 in line with what we were expecting to see and 0:17:47.160 --> 0:17:51.000 it really underlines the big decisions and the big questions. 0:17:50.560 --> 0:17:51.679 That we have to keep coming back to. 0:17:51.840 --> 0:17:55.479 So we we we've been predicting this, this hump up 0:17:55.480 --> 0:17:58.800 and inflation for some time. It was basically sort of 0:17:58.840 --> 0:18:01.400 give or take under NAT point one what we expected 0:18:01.400 --> 0:18:04.040 it to be. It's not in what I call the 0:18:04.119 --> 0:18:05.880 sort of the pieces of the parts of the economy. 0:18:05.880 --> 0:18:08.119 We tell you much about supply and demand. Unfortunately it's 0:18:08.600 --> 0:18:11.560 it's in the sort of so called administered prices. But 0:18:11.600 --> 0:18:13.320 the big issue for us is it going to call 0:18:13.400 --> 0:18:15.960 second round effects in the labor market. 0:18:16.000 --> 0:18:16.600