WEBVTT - Bloomberg Daybreak Weekend: Banks, Congress, Tesla, UK 0:00:03.560 --> 0:00:06.240 This is Bloomberg Daybreak Weekend, our global look at the 0:00:06.240 --> 0:00:09.360 top stories in the coming week from our Daybreak anchors 0:00:09.360 --> 0:00:11.440 all around the world, and straight ahead on the program. 0:00:11.440 --> 0:00:15.160 Another big week coming for bank earnings. I'm Tom Busby 0:00:15.280 --> 0:00:17.920 in New York. I'm Stephen Carlin London with a Prime Minister, 0:00:17.960 --> 0:00:19.759 and the Bank of England will be hoping there won't 0:00:19.760 --> 0:00:23.599 be another unpleasant inflation surprise in store. I'm Brian Curtis 0:00:23.600 --> 0:00:26.040 in Hong Kong. We look ahead at Tesla's earnings by 0:00:26.160 --> 0:00:29.520 the company's progress in China. I'm Kaylee Lines in Washington, 0:00:29.600 --> 0:00:32.000 where we're getting ready for Congress to come back to 0:00:32.040 --> 0:00:35.760 the Capitol after two week recess. Watch for fireworks when 0:00:35.800 --> 0:00:40.159 they return. That's all straight ahead on Bloomberg Daybreak Weekend 0:00:40.360 --> 0:00:44.960 on Bloomberg eleven three on New York, Bloomberg ninety nine one, Washington, DC, 0:00:45.280 --> 0:00:49.360 Bloomberg one O six one, Boston, Bloomberg nine sixty, San Francisco, 0:00:49.600 --> 0:00:53.840 DAB Digital Radio, London, Sirius XM one nineteen and around 0:00:53.840 --> 0:00:56.480 the world on Bloomberg Radio dot Com and via the 0:00:56.520 --> 0:01:02.760 Bloomberg Business App. Good day to you. I'm Tom Busby, 0:01:02.800 --> 0:01:05.440 and we begin today's program with all the first quarterbank 0:01:05.520 --> 0:01:08.280 earnings that began this past Friday and continue in the 0:01:08.319 --> 0:01:11.959 coming week. Bloomberg Wall Street reporter Shanali Bassett joining me 0:01:12.040 --> 0:01:16.320 now for some insight. He s, all right, well, let's 0:01:16.319 --> 0:01:17.880 start with some of the good news that we heard 0:01:17.959 --> 0:01:22.399 on Friday, particularly upside earning surprises from the biggest JP 0:01:22.480 --> 0:01:25.520 Morgan Chase and Citygroup. Yeah, there are a few things. 0:01:25.640 --> 0:01:28.600 For JP Morgan in particular, not only did they beat 0:01:28.680 --> 0:01:32.880 on revenue, they also had some really interesting items within 0:01:33.120 --> 0:01:35.680 different lines of the banks. So, for example, they said 0:01:35.680 --> 0:01:38.640 they're going to make billions of dollars more in net 0:01:38.680 --> 0:01:43.399 interest income than was initially expected. Another thing that happened though, 0:01:43.640 --> 0:01:46.520 was that they beat on fixed income trading, and so 0:01:46.560 --> 0:01:49.640 you also saw an institutional business do very well here 0:01:49.720 --> 0:01:54.040 relative to what was expected. That was similar for Citygroup 0:01:54.080 --> 0:01:56.520 as well. Remember, the markets are still very volatile, so 0:01:56.560 --> 0:02:00.160 the fact that they're still making money from institutional clients 0:02:00.160 --> 0:02:02.520 are a big deal as we watch some of the 0:02:02.560 --> 0:02:04.560 cracks in the market and how they affect both the 0:02:04.560 --> 0:02:08.519 consumer and institutional clients. Now, speaking of those cracks, JP 0:02:08.600 --> 0:02:11.800 Morgan Chase CEO Jamie Diamond told investors, you can count 0:02:11.800 --> 0:02:15.919 the number of troubled banks on your hands. What does 0:02:15.960 --> 0:02:18.120 that tell us? You know, nobody wants to be in 0:02:18.160 --> 0:02:21.320 a banking crisis. Or you can use what Muhammadalarian would say, 0:02:21.320 --> 0:02:24.079 and he says it's a banking tremor, not a banking crisis. 0:02:24.560 --> 0:02:27.679 And even with the struggles we're seeing with the likes 0:02:27.680 --> 0:02:30.160 of Silicon Valley Bank, a lot of questions still around 0:02:30.200 --> 0:02:33.040 First Republic. What JP Morgan and City Group are telling 0:02:33.080 --> 0:02:37.440 you that this is fairly contained now? JP Morgan banks 0:02:37.560 --> 0:02:41.080 hundreds of banks in America as well. There are more 0:02:41.080 --> 0:02:44.640 than four thousand of them, and there's a consensus here 0:02:44.680 --> 0:02:47.280 among even the largest banks which have benefited a lot 0:02:47.320 --> 0:02:50.359 from this kind of banking tremor crisis, whatever you want 0:02:50.360 --> 0:02:53.840 to call it. The thing here is those regional banks 0:02:53.840 --> 0:02:56.040 are really what touches a lot of America. They have 0:02:56.080 --> 0:02:58.639 a lot of exposure to commercial real estate, for example, 0:02:58.919 --> 0:03:02.800 small businesses which employ a lot of the American economy. 0:03:03.080 --> 0:03:05.240 So if those regional banks face a lot of pressure, 0:03:05.280 --> 0:03:06.720 which is really what we're going to see the bulk 0:03:06.760 --> 0:03:08.680 of in terms of the earning cycle the next couple 0:03:08.680 --> 0:03:12.440 of weeks, there could be ripple effects to any pains 0:03:12.520 --> 0:03:15.880 those banks, the smaller banks would feel and in the 0:03:15.919 --> 0:03:19.640 earnings that we just had on Friday, do we see 0:03:19.840 --> 0:03:21.760 the movement of a lot of money, a lot of 0:03:21.800 --> 0:03:24.440 deposits coming out of those regional banks and into the 0:03:24.440 --> 0:03:27.399 big East. It was most notable at JP Morgan, where 0:03:26.680 --> 0:03:31.000 they posted a surprise increase in deposits. They had been 0:03:31.440 --> 0:03:34.600 drawing down for the last couple of quarters here because 0:03:34.680 --> 0:03:37.680 interest rates are still very high, people moving into money 0:03:37.680 --> 0:03:40.720 market funds instead. JP Morgan is telling you that don't 0:03:40.720 --> 0:03:44.000 expect this kind of increase in deposits to continue, even 0:03:44.000 --> 0:03:46.000 what they took in in the wake of kind of 0:03:46.000 --> 0:03:49.360 the Silicon Valley bank issue. They say that these are 0:03:49.360 --> 0:03:51.960 not necessarily sticky deposits. They can go out the door 0:03:52.080 --> 0:03:54.200 just as easily as they've come in. Of course, we 0:03:54.200 --> 0:03:57.040 don't worry about deposits at JP Morgan. You know, I 0:03:57.080 --> 0:03:59.800 want to say that their deposit base is probably bigger 0:03:59.840 --> 0:04:02.920 here than the GDP of France. It's two point three 0:04:03.040 --> 0:04:06.200 seven trillion dollars we're talking about in deposits at JP Morgan. 0:04:06.480 --> 0:04:10.400 But again, you know, does that deposit movement cause fragilities 0:04:10.440 --> 0:04:13.040 in the smaller banks. That's where it becomes more of 0:04:13.040 --> 0:04:16.000 a question. Now, I want to touch on something you 0:04:16.080 --> 0:04:18.920 spoke about, and that is higher interest rates and how 0:04:18.960 --> 0:04:22.440 these banks benefited from the What's it been nine in 0:04:22.480 --> 0:04:25.960 a row of increases from the Federal Reserve and maybe 0:04:25.960 --> 0:04:28.479 one or two more to come. The interesting thing about 0:04:28.560 --> 0:04:31.080 this is that if you look at City Group and 0:04:31.120 --> 0:04:33.160 if you look at JP Morgan, a lot of this 0:04:33.240 --> 0:04:37.320 is coming from their credit card portfolios. So they're really 0:04:37.520 --> 0:04:40.680 getting more because people are borrowing more from on their 0:04:40.680 --> 0:04:43.200 credit card debt. That's not the same by the way, 0:04:43.240 --> 0:04:45.240 as we know for a lot of the regionals and 0:04:45.279 --> 0:04:48.800 for Wells Fargo, which is more heavily tilted towards, for example, 0:04:48.839 --> 0:04:51.520 the mortgage market, which has been facing a lot of 0:04:51.560 --> 0:04:54.120 pressures in this higher interest rate environment. Oh yeah, and 0:04:55.040 --> 0:04:58.760 we just saw, speaking of credit cards, retail sales dipping 0:04:59.400 --> 0:05:03.640 last last month. But still it's it's a big pot 0:05:03.760 --> 0:05:06.039 that you know, we're spending a lot of money Americans, 0:05:06.040 --> 0:05:08.040 and it makes total sense. You see them the bank numbers. 0:05:08.080 --> 0:05:11.799 Also you see card spending up at these banks. How 0:05:11.839 --> 0:05:14.120 long that continues for remember a couple of times this 0:05:14.240 --> 0:05:16.960 year Jamie Diamond has said that the consumer will start 0:05:17.000 --> 0:05:18.400 to hit a cliff at the end of this year. 0:05:18.800 --> 0:05:21.720 So you have city groups saying that you can expect 0:05:21.880 --> 0:05:24.880 kind of a soft or shallow recession, if you will, 0:05:25.080 --> 0:05:27.280 maybe in the second half of this year. But then 0:05:27.320 --> 0:05:29.400 you also have to take into account what Jamie Diamond 0:05:29.440 --> 0:05:32.520 and JP Morgan has said about the uncertainties that bake 0:05:32.600 --> 0:05:35.240 into twenty twenty four into next year. So we're talking 0:05:35.240 --> 0:05:38.480 about a long horizon of uncertainty here. So that so 0:05:38.600 --> 0:05:42.480 despite you know, the upbeat earnings, they are very cautious. 0:05:42.480 --> 0:05:45.599 They are being cautious. They're telling investors it's not over yet, 0:05:46.240 --> 0:05:49.320 certainly not. And even in their numbers alone, you see 0:05:49.360 --> 0:05:53.159 them really preparing with higher provisions for credit losses, even 0:05:53.240 --> 0:05:56.479 higher charge offs. The ninety data linguency rate on for example, 0:05:56.720 --> 0:05:58.960 JP Morgan's credit card book has ticked a little higher. 0:05:59.200 --> 0:06:03.400 They're well bull you know levels we've seen that would 0:06:03.640 --> 0:06:07.000 be considered alarming. They're well below that. JP Morgan calls 0:06:07.000 --> 0:06:10.040 it a normalization. We're getting it back to more normal levels. 0:06:10.320 --> 0:06:13.040 You're going to get more losses as you're lending more. 0:06:13.440 --> 0:06:17.560 But all in all, I mean, JP Morgan is very profitable. 0:06:17.680 --> 0:06:19.479 In fact, in terms of revenue. They just had a 0:06:19.480 --> 0:06:24.840 record corridor. So that is a pretty incredible considering all 0:06:24.839 --> 0:06:28.279 the worries that we had gone into the quarter with. Right, 0:06:29.000 --> 0:06:33.360 and now the cavalcade of earnings continues this coming week 0:06:33.560 --> 0:06:36.760 and we hear from some the rest of the biggies, 0:06:37.160 --> 0:06:39.280 a lot of the regional banks, even the small ones. 0:06:39.360 --> 0:06:42.360 So what are we expecting to hear from Bank of America, 0:06:42.440 --> 0:06:45.520 from Golden Sex, from Morgan Stanley on the Bank of 0:06:45.600 --> 0:06:47.479 of America front. I think it'll be interesting to see 0:06:47.480 --> 0:06:49.680 what they say on that interest income, given that they're 0:06:49.720 --> 0:06:52.080 such a big lender to the American economy. Do they 0:06:52.160 --> 0:06:54.719 say the same things as JP Morgan that they expect more? 0:06:55.000 --> 0:06:57.880 Remember City Group didn't really change their outlook for the year, 0:06:58.320 --> 0:07:01.320 and also JP Morgan City Group in particular, their head 0:07:01.440 --> 0:07:04.640 count has risen over the past year. How about Bank 0:07:04.680 --> 0:07:08.440 of America Wages have risen also, so we know that 0:07:08.480 --> 0:07:11.960 expenses tied to pay are rising, but how much can 0:07:12.040 --> 0:07:14.920 banks really take on with that much uncertainty ahead? There's 0:07:14.960 --> 0:07:18.400 also Schwab on Monday. Remember Schwab will be very interesting 0:07:18.440 --> 0:07:22.400 because they've had a large sell off. They are very concerned, 0:07:22.440 --> 0:07:25.680 or their investors rather are concerned about people moving from 0:07:25.680 --> 0:07:28.800 deposits to money market funds. It's not a question of 0:07:29.000 --> 0:07:32.160 viability of the firm necessarily, it's a question of profitability 0:07:32.200 --> 0:07:35.720 and what will cause more pressures at a place like Schwab. 0:07:36.240 --> 0:07:38.920 You also have Goldman, Saxe and Morgan Stanley in the 0:07:38.960 --> 0:07:43.000 coming days after that. Like I said, the institutions investment 0:07:43.040 --> 0:07:47.400 banking fees are way down, but Goldman in particular, if 0:07:47.440 --> 0:07:51.640 they find the same fixed income trading figures or beats 0:07:51.720 --> 0:07:54.800 that JP Morgan and City Group had, you know, and 0:07:55.040 --> 0:07:59.000 their bankers are just fine. Let's put it that way. Now. 0:07:59.240 --> 0:08:03.160 Some of the others that have truest is one that 0:08:03.200 --> 0:08:06.040 we just heard news from them last week, Fifth third 0:08:06.120 --> 0:08:08.560 Key Corps, some of the second level or third level 0:08:08.600 --> 0:08:11.600 of banks, and are we seeing a similar thing. That's 0:08:11.600 --> 0:08:13.680 what you talked about. The ones that are the regional 0:08:13.680 --> 0:08:16.440 banks that are really vital to smaller communities. This is 0:08:16.480 --> 0:08:18.800 where it gets so stressful. The big banks this quarter, 0:08:18.880 --> 0:08:22.920 they're very easy stories more or less, but the regional banks, 0:08:24.120 --> 0:08:26.680 line by line, number my number. If I take a 0:08:26.720 --> 0:08:29.480 look at P and C all through Friday had been 0:08:29.600 --> 0:08:32.320 kind of up and down in the stock market. They 0:08:32.400 --> 0:08:35.360 were up, they were down, and remember they were stable 0:08:35.440 --> 0:08:39.520 in their actual numbers. When you looked at the deposit flows, 0:08:39.520 --> 0:08:42.040 they actually did better than what Wall Street had expected. 0:08:42.600 --> 0:08:45.080 So do we see the same from M ANDT and 0:08:45.120 --> 0:08:47.280 Fifth Third and all of these other regionals or did 0:08:47.320 --> 0:08:52.760 they for whatever reason face stiffer outputs and deposits from 0:08:52.800 --> 0:08:56.000 their clients? You know, PNC is based in Pittsburgh, some 0:08:56.080 --> 0:08:58.599 of them. Some people say that these are regional differences. 0:08:59.000 --> 0:09:00.920 It tended to be a lot of the California banks. 0:09:00.920 --> 0:09:04.199 People were concerned about the concentration and some of those 0:09:04.480 --> 0:09:07.240 you know, First Republic and Silicon Valley Bank kind of 0:09:07.440 --> 0:09:10.640 stories and their balance sheets. But do you see those 0:09:10.679 --> 0:09:13.800 same pressures really start to come across from the client 0:09:13.840 --> 0:09:17.160 base at least from a lot of these regionals. And 0:09:17.200 --> 0:09:19.240 then you have to add the other question of what 0:09:19.280 --> 0:09:22.240 did their loan books look like? Which is another question 0:09:22.400 --> 0:09:26.120 that will continue to be a worry throughout the year. 0:09:26.280 --> 0:09:29.960 Is if you're worried about credit quality deteriorating, and some 0:09:30.040 --> 0:09:33.360 of those regional banks obviously maybe on Jamie Diamond's list. 0:09:33.840 --> 0:09:37.600 You know, we saw wild fluctuations at PacWest, a big 0:09:37.679 --> 0:09:40.800 lender in the Los Angeles area, you know, which it 0:09:40.800 --> 0:09:43.840 could be spillover from Silicon Valley Bank. But do we 0:09:43.880 --> 0:09:46.360 have any idea what some of these where some of 0:09:46.360 --> 0:09:49.040 these banks are or which banks he may be referring 0:09:49.080 --> 0:09:51.920 to which ones? No, And you don't want to say 0:09:51.920 --> 0:09:53.920 them either, because you don't want to cause any alarm. 0:09:54.040 --> 0:09:57.320 But you know it's interesting you name PacWest. Something interesting 0:09:57.320 --> 0:10:00.280 about PacWest was one thing they did to kind of 0:10:00.280 --> 0:10:04.520 cooled down the market was they said that they instead 0:10:04.520 --> 0:10:06.360 of going out to the market and raising money, they 0:10:06.400 --> 0:10:11.679 got essentially, you know, credit facility from a private firm 0:10:12.040 --> 0:10:14.240 named Atlas sp This is a firm those started by 0:10:14.240 --> 0:10:17.079 Apollo in the wake of Credit Suite, and they basically 0:10:17.160 --> 0:10:20.080 lent the money against a series of assets to weather 0:10:20.200 --> 0:10:22.600 the storm. And so you know, we could see more 0:10:22.640 --> 0:10:24.640 deals like that. It was a very interesting deal that 0:10:24.720 --> 0:10:27.600 I know that a lot of investors wanted to model. 0:10:28.120 --> 0:10:31.480 And it also showed you another thing that if these 0:10:31.480 --> 0:10:34.040 banks want to tap the capital markets, if they want 0:10:34.120 --> 0:10:37.319 to raise money. You know, when Silicon Valley Bank happened, 0:10:37.840 --> 0:10:41.120 that wasn't possible. The market was closed to these banks. 0:10:41.640 --> 0:10:45.640 But now they're finding other folks. Comes at a cost, 0:10:45.960 --> 0:10:48.000 but they could raise money to make it through this 0:10:48.040 --> 0:10:50.960 difficult environment if they need to an alternative means of 0:10:51.080 --> 0:10:53.800 raising money from the past. Thank you, Shinali. That was 0:10:53.840 --> 0:10:57.080 Bloomberg Wall Street reporter Shanali bask And coming up on 0:10:57.120 --> 0:11:00.959 Bloomberg Daybreak weekend in the UK, some key data coming 0:11:00.960 --> 0:11:03.760 our way ahead of the Bank of England's next interest 0:11:03.840 --> 0:11:14.400 rate decision. I'm Tom Busby. This is Bloomberg. This is 0:11:14.440 --> 0:11:17.240 Bloomberg Daybreak weekend, our global look ahead at the top 0:11:17.280 --> 0:11:20.160 stories for investors in the coming week. I'm Tom Busby 0:11:20.240 --> 0:11:23.000 in New York. Up later in our program, watch for 0:11:23.040 --> 0:11:25.560 a lot of drama as members of Congress get ready 0:11:25.600 --> 0:11:28.360 to return to Capitol Hill. But first in the UK, 0:11:28.520 --> 0:11:30.840 we'll get some key data in the coming days which 0:11:30.840 --> 0:11:34.319 will factor into the Bank of England's next interest rate decision. 0:11:34.679 --> 0:11:36.840 Like the FED, the UK Central Bank is thought to 0:11:36.880 --> 0:11:39.760 be close to ending its hiking cycle, although the economic 0:11:39.840 --> 0:11:43.679 situation in Britain does look quite different. Downple Moore or 0:11:43.760 --> 0:11:46.440 let's head to London and bringing Bloomberg Daybreak Europe Banker 0:11:46.480 --> 0:11:49.319 Stephen Carroll, Stephen Tom the Prime Minister is she seen 0:11:49.320 --> 0:11:51.400 not named Halfing the race of inflation is one of 0:11:51.400 --> 0:11:53.960 his five key priorities for this year. He'll be hoping 0:11:53.960 --> 0:11:56.520 about the CPI print from March. It starts to show 0:11:56.520 --> 0:11:59.040 that trans after we had a surprise uptake to ten 0:11:59.120 --> 0:12:02.040 point four scent in February. To discuss this and some 0:12:02.160 --> 0:12:04.120 more of the data points will be unpacking from the 0:12:04.240 --> 0:12:06.560 UK in the coming days. I'm joined by Bloomberg's senior 0:12:06.640 --> 0:12:09.560 UK economist, Dan Hanson, and our UK correspondent Lizzie Burden 0:12:09.640 --> 0:12:12.200 is in the studio with us as well. Dan, this 0:12:12.360 --> 0:12:17.760 February ECPI number was a shucker. Remind us what drove that. Yeah, 0:12:17.800 --> 0:12:20.360 so we had we had a pick up in a 0:12:20.400 --> 0:12:22.720 little well quite a big pick up actually. The surprises 0:12:22.760 --> 0:12:25.400 and core goods inflation, so clothing and footwear and also 0:12:25.440 --> 0:12:29.000 in food inflation as well. They were the sources of surprises, 0:12:30.840 --> 0:12:33.720 and we were expecting a reading of nine point nine percent. 0:12:34.040 --> 0:12:36.000 It came in ten point four percent. The Bank of 0:12:36.040 --> 0:12:37.920 England was expecting a reading of nine point nine percent. 0:12:37.960 --> 0:12:42.000 So you're ride it was a big surprise. Looking ahead, 0:12:43.120 --> 0:12:46.120 I think it will probably be seen as a blip. 0:12:47.760 --> 0:12:50.520 And there are sort of two parts of this. One 0:12:50.600 --> 0:12:53.920 part is you're just going to get these what economists 0:12:53.960 --> 0:12:57.040 called base effects, So these these effect these big price 0:12:57.160 --> 0:12:59.480 rises last year, falling out of the annual comparison, and 0:12:59.520 --> 0:13:01.760 that's going to be part of the story in March. 0:13:01.800 --> 0:13:05.240 It's going to become a more significant story in April 0:13:05.280 --> 0:13:07.080 and later in the year when we get the falls 0:13:07.360 --> 0:13:11.120 the rises in gas prices falling out of the annual comparison. 0:13:11.240 --> 0:13:13.320 But I think, looking looking to the March number, we're 0:13:13.360 --> 0:13:15.040 going to we think we're going to see a drop 0:13:15.080 --> 0:13:17.079 back from ten point four percent. We actually think we're 0:13:17.080 --> 0:13:19.600 going to fall a little bit beneath ten percent. So 0:13:20.679 --> 0:13:22.280 it looks like it's going to be a temporary blit 0:13:22.559 --> 0:13:25.640 February figure. Okay, and you mentioned energy prices there, of 0:13:25.640 --> 0:13:27.720 course one of the big drivers that pushed inflation up 0:13:27.720 --> 0:13:30.720 to these levels in the end towards the end of 0:13:30.840 --> 0:13:35.200 last year. Where is inflation looking stickier now or where 0:13:35.240 --> 0:13:37.600 within the detail the number should we be thinking about? Yeah, 0:13:37.679 --> 0:13:39.600 I mean this is this is I mean it goes 0:13:39.600 --> 0:13:41.800 to the Bank of England's thinking as well. So you've 0:13:41.840 --> 0:13:43.960 got you've got this. You're right, you've got this energy 0:13:43.960 --> 0:13:46.440 components and over the course of this year, if wholesale 0:13:46.520 --> 0:13:49.680 energy prices stay where they are at the moment, over 0:13:49.720 --> 0:13:51.640 the course of this year, you're going to get about 0:13:51.679 --> 0:13:54.640 four and a half percentage points off the headline rate 0:13:54.640 --> 0:13:56.720 of inflation, so you're at ten point four at the moment. 0:13:56.760 --> 0:13:59.840 That's going to get you to six, partly mechanically through 0:14:00.000 --> 0:14:02.400 base effects, partly because we've had this fall in gas 0:14:02.480 --> 0:14:04.720 price wholesale gas prices since the start of the year. 0:14:06.120 --> 0:14:09.160 Where the stickiness then comes. I think there are actually 0:14:09.200 --> 0:14:12.040 two bits of it. One is services inflation, and that's 0:14:12.040 --> 0:14:14.400 what the Bank has said it's very focused on. But 0:14:14.520 --> 0:14:17.800 actually what has probably been a bit stickier than most 0:14:17.960 --> 0:14:22.240 including us, that have expected is the good side of 0:14:22.280 --> 0:14:27.120 the basket and where the supply chain disruption really was 0:14:27.160 --> 0:14:29.800 the source of that inflation. But actually it hasn't come 0:14:29.840 --> 0:14:33.120 down as quickly as we'd been expecting all the Bank 0:14:33.120 --> 0:14:35.400 of England has been expecting. So there is some stickiness 0:14:35.440 --> 0:14:38.000 there which is cause for concern. But I think the 0:14:38.080 --> 0:14:40.520 really key area to watch in terms of persistence, and 0:14:40.560 --> 0:14:43.080 going to your question, is services and services inflation, which 0:14:43.120 --> 0:14:47.000 again jump back up in February. We think it's going 0:14:47.000 --> 0:14:50.000 to ease slightly in March. I mentioned as you see 0:14:50.080 --> 0:14:52.000 acts promise of having inflation by the end of the year. 0:14:52.040 --> 0:14:54.040 Your colleague Jamie Rush has the thinkly put it that 0:14:54.040 --> 0:14:55.640 you could put a cutling pig in charge of the 0:14:55.640 --> 0:14:58.000 economy and inflation was still fall by half by the 0:14:58.080 --> 0:15:00.640 end of the year. How does the pick look a 0:15:00.680 --> 0:15:04.160 little bit further out in terms of inflation will Jamie's 0:15:04.160 --> 0:15:06.560 got a much better way of words. I think he 0:15:06.600 --> 0:15:09.000 was a bit embarrassed after he said, of actually he 0:15:09.040 --> 0:15:13.000 should be it's not very becoming. But look, I think 0:15:13.360 --> 0:15:15.240 I think he's going to get He's going to meet 0:15:15.280 --> 0:15:18.280 his target. So I think Jamie's right, You're going to 0:15:18.360 --> 0:15:21.600 get there predominantly through these base effects as we've as 0:15:21.640 --> 0:15:25.200 we've mentioned, but I think there's going to be there 0:15:25.320 --> 0:15:28.760 is going to be somewhat of a slowdown in other components. 0:15:28.760 --> 0:15:31.560 So I think core goods will continue to ease in 0:15:31.640 --> 0:15:34.800 terms of inflation. There. Food inflation I think will come 0:15:34.840 --> 0:15:36.920 off a little bit. It's it's extremely high at the 0:15:36.960 --> 0:15:39.120 moment and it's probably going to pick up again in 0:15:39.240 --> 0:15:41.560 the March report. But I think it's going to come 0:15:41.560 --> 0:15:45.240 off and on our forecast you get to three percent 0:15:45.640 --> 0:15:48.320 by the end of the year headline inflation. But I 0:15:48.320 --> 0:15:52.280 think what that masks is core inflation, which we think 0:15:52.440 --> 0:15:53.760 is going to end the year about four and a 0:15:53.800 --> 0:15:57.520 half percent, so significantly higher, and that again reflects this 0:15:57.800 --> 0:16:00.320 mainly reflects services inflation, but also what I've mentioned on 0:16:00.360 --> 0:16:02.720 the good side as well. Another piece of the economic 0:16:02.760 --> 0:16:04.640 puzzle that we're going to learn more about next week 0:16:04.720 --> 0:16:07.120 is the labor markets. We've got jobs data out the 0:16:07.200 --> 0:16:10.560 UK's had a particular problem with participation post the pandemic 0:16:10.560 --> 0:16:12.720 as well. Are we likely to see any improvement on 0:16:12.800 --> 0:16:15.080 that front? So I think what you're going to see 0:16:15.080 --> 0:16:18.720 from the jobs the job's data is a steady unemployment rate. 0:16:18.840 --> 0:16:21.160 So this has been a bit of a theme this 0:16:21.240 --> 0:16:23.440 year of the economy doing a little bit better, the 0:16:23.560 --> 0:16:26.480 labor markets staying a little bit tighter than people thoward 0:16:26.480 --> 0:16:31.040 and not calling as quickly. But the sort of the 0:16:31.600 --> 0:16:34.160 interesting side of this is how quickly wage growth seems 0:16:34.160 --> 0:16:36.320 to be cooling. So if you look on if you 0:16:36.320 --> 0:16:38.440 look at the headline measures of wage growth, we think 0:16:39.280 --> 0:16:41.880 private sector regular pay is going to fall from seven 0:16:41.920 --> 0:16:44.120 percent to six and a half percent, which is a big, 0:16:44.400 --> 0:16:46.400 big drop down. But actually if you look on an 0:16:46.440 --> 0:16:49.400 underlying basis, so that the headline measures a year on 0:16:49.560 --> 0:16:51.560 year three months moving average, it takes a long time 0:16:51.600 --> 0:16:53.880 for the numbers to sort of cool and fall off. 0:16:54.360 --> 0:16:59.840 But if you look at sort of more timely, more 0:17:00.040 --> 0:17:03.320 timely picture of the underlying wage picture, it's actually it's 0:17:03.360 --> 0:17:06.199 actually calling very quickly. Now. That's obviously not consistent with 0:17:06.480 --> 0:17:08.480 a title what you would expect and a tight labor 0:17:08.560 --> 0:17:13.199 market and with expectations inflation expectations, pay expectations up at 0:17:13.240 --> 0:17:16.720 sort of five percent mark at least in the near term. 0:17:16.840 --> 0:17:20.080 But there is a story there that is really important, 0:17:20.119 --> 0:17:22.520 particularly for the for the Bank of England, and that's 0:17:22.560 --> 0:17:24.600 something that we're going to be really focused on in 0:17:24.680 --> 0:17:27.919 the in the next job's release. Yeah, Lizzie Breddon, you've 0:17:27.920 --> 0:17:31.720 been waiting patiently to listening into this conversation as well. 0:17:31.760 --> 0:17:33.480 But I know the story that you've been following is 0:17:33.520 --> 0:17:35.679 the change in the makeup of the Bank Aving's Monetary 0:17:35.680 --> 0:17:38.879 Policy Committee won't affect the next meeting, But tell us 0:17:38.920 --> 0:17:41.560 about Megan Green who's joining the MPC. Yeah, not the 0:17:41.600 --> 0:17:45.520 meeting after that. It's the replacement for Sylvana turn Railroad. 0:17:45.720 --> 0:17:49.320 She is currently global chief Economist at the Crawl Institute. 0:17:49.560 --> 0:17:53.360 She's got a background in financial services, also in academia, 0:17:53.760 --> 0:17:56.919 and you know it's a difficult, delicate moment to be 0:17:57.000 --> 0:17:59.960 joining the MPC because we're nearing the end of the 0:18:00.080 --> 0:18:03.400 tightening cycle. You've had eleven straight hikes so far, and 0:18:03.560 --> 0:18:08.240 this debate currently is between Sylvana ten Rairoa who Green's replacing, 0:18:08.240 --> 0:18:10.520 and Swatty Dingra at the dovish end and then at 0:18:10.560 --> 0:18:13.480 the hawkish end of the spectrum Katherine Mann about whether 0:18:13.720 --> 0:18:17.960 it's time to pause. As Dan says, I noted putting 0:18:17.960 --> 0:18:20.639 a foot in both camps, whether it's going to be 0:18:20.680 --> 0:18:25.760 a hold or a hike. But fortunately Megan Green is 0:18:25.760 --> 0:18:28.399 a regular on Bloomberg TV and radio, so we've had 0:18:28.440 --> 0:18:32.000 a bit of an insight into her thoughts already. Recently 0:18:32.080 --> 0:18:34.960 she's said that she's concerned about the impact of tightening 0:18:34.960 --> 0:18:38.119 monetary policy on the banking system, and she said it 0:18:38.200 --> 0:18:40.560 more in the context of the US, but it's very 0:18:40.560 --> 0:18:43.280 applicable in the UK as well, because of course we've 0:18:43.280 --> 0:18:45.920 had the fallout of Credit Sweets and Silicon Valley Bank. 0:18:46.560 --> 0:18:48.960 This was a question that was raised around the last 0:18:49.040 --> 0:18:52.000 night meeting at the Bank of England. Have financial conditions 0:18:52.040 --> 0:18:53.760 tightened so much that the work of the Bank of 0:18:53.800 --> 0:18:57.200 England has been done for it, and so it's interesting 0:18:57.240 --> 0:19:00.600 that she has already had this view out there, and 0:19:00.760 --> 0:19:03.480 given her financial services background, we know that she's very 0:19:03.480 --> 0:19:06.800 aware of it. How will her appointment affect the balance 0:19:06.840 --> 0:19:09.720 then on the committee? I mean it's hard. I think 0:19:09.760 --> 0:19:14.760 as Dan's colleague Anna noted to be more dovish than 0:19:14.880 --> 0:19:18.400 Sylvana ten Rairo, She's voted to hold at the past 0:19:18.440 --> 0:19:22.600 three meetings. She's even been talking about cutting rates before 0:19:22.640 --> 0:19:26.080 she leaves the committee. So it seems that this appointment 0:19:26.160 --> 0:19:28.840 can be nothing but a tilt to the hawkish side, 0:19:28.960 --> 0:19:32.399 no matter how dovish Meghan Green may be. But the 0:19:32.480 --> 0:19:34.680 reality is she isn't going to take her seat until 0:19:34.720 --> 0:19:37.560 two meetings time. As I say, the hiking cycle could 0:19:37.560 --> 0:19:41.960 be over by then. More interesting perhaps for our UK 0:19:42.400 --> 0:19:47.240 listeners then, is her open criticism of Brexit on Twitter. 0:19:48.400 --> 0:19:51.720 She might have to rein that in her if she 0:19:51.800 --> 0:19:55.280 joins the now that she's joining the MPC. Okay, Lizzie Burden, 0:19:55.320 --> 0:19:57.160 thank you very much, a UK correspondent on our senior 0:19:57.280 --> 0:20:00.679 UK economist at Dan Hansen as well. I'm Stephen in London. 0:20:00.720 --> 0:20:02.879 You can catch us every weekday morning here for Bloomberg 0:20:03.000 --> 0:20:05.800 Daybreak Europe, beginning at six am in London and one 0:20:05.840 --> 0:20:08.760 am on Wall Streets. Tom, thank you, Stephen, And coming 0:20:08.840 --> 0:20:12.080 up on Bloomberg Daybreak weekend. Could be a contentious week 0:20:12.280 --> 0:20:14.800 on Capitol Hill, and we'll tell you why. I'm Tom 0:20:14.880 --> 0:20:28.280 Busby and this is Bloomberg Broadcasting live from the Bloomberg 0:20:28.320 --> 0:20:33.080 Interactive Broker Studio in New York. Bloomberg elvon Freo to Washington, DC, 0:20:33.280 --> 0:20:36.680 Bloomberg ninety nine one to Boston, Bloomberg one O six 0:20:36.760 --> 0:20:40.040 one to San Francisco, Bloomberg nine sixty to the country, 0:20:40.119 --> 0:20:44.399 Sirius XM Channel one nineteen to London, DAB Digital Radio, 0:20:44.520 --> 0:20:47.600 and around the globe the Bloomberg Business app and Bloomberg 0:20:47.720 --> 0:20:57.800 Radio dot Com. This is Bloomberg Daybreak Weekend. I'm Tom 0:20:57.840 --> 0:20:59.879 Busby in New York with your global look ahead at 0:20:59.880 --> 0:21:02.720 the top stories for investors in the coming week. A 0:21:02.800 --> 0:21:05.879 lot of travel this weekend for many Senators and representatives 0:21:05.880 --> 0:21:08.640 as they make their way back to Capitol Hill after 0:21:08.680 --> 0:21:11.600 more than two weeks of spring and Easter break. The 0:21:11.640 --> 0:21:13.879