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Speaker 1: And we're joined that by Rajiv de Mello. He is

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Speaker 1: Global macro portfolio manager at g m A Asset Management

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Speaker 1: and Roger. We were listening to president former President Trump,

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Speaker 1: they're launching his re election campaign for twenty four. One

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Speaker 1: of the things he mentioned was inflation and how that

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Speaker 1: surged since he left office. But let's have some context here.

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Speaker 1: It's urged everywhere as countries exited COVID. But how's the

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Speaker 1: inflation picture look in the US by four? I mean,

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Speaker 1: you could argue were turning the corner right now. Inflation, indeed,

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Speaker 1: is has been a huge issue in the midterm campaign

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Speaker 1: as well, and people are worried about the higher infatient rates.

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Speaker 1: But as you mentioned, I mean, we are seeing some

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Speaker 1: signs of infasient topping out. We've got the CPI number

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Speaker 1: last week, the PPI which is the Producer price Index yesterday,

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Speaker 1: and both of them are showing that we're seeing some

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Speaker 1: moderation and inflation. So indeed, going forward, we could see

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Speaker 1: infliction come off um by um it's already in moderating,

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Speaker 1: and other advanced signs of inflation are also showing signs

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Speaker 1: of moderation, which is positive. A lot of the areas

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Speaker 1: which were abnormally which had abnormal inflation due to the

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Speaker 1: exit of COVID lockdowns and a normalization of economy, the

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Speaker 1: boost and demand for goods, that's all normalizing somewhat and

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Speaker 1: coming down. So that's uh, that's a positive for for

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Speaker 1: a more moderating way of inflation. Now, the speed of

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Speaker 1: it is what's worrying the FED. So maybe it's not

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Speaker 1: just the speed, but the fact that the FED has

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Speaker 1: to be convinced that it's put the genie back in

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Speaker 1: the bottle, so to speak, a regime. Is there the

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Speaker 1: risk then that even though we begin to see significant moderation,

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Speaker 1: that the FED holds a very hard line and keeps

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Speaker 1: policy tied for for quite some time. The FED is

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Speaker 1: trying to convince us that that's what they're going to do. Um,

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Speaker 1: even though they are they are most likely too, you know,

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Speaker 1: step back to fifty basis point hike in December. Uh,

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Speaker 1: and then uh, you know, never go back to the

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Speaker 1: seventy five basis points in next year. But by the

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Speaker 1: fifty or twenty five, the FETs still wants to tell

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Speaker 1: us that it is on cost to high rates. It

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Speaker 1: wants to keep that success. It's achieved in keeping inflation

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Speaker 1: expectations very well managed, and it's done that remarkably well

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Speaker 1: through its very pokish tone and actions as well. Considering

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Speaker 1: four times seventy five basis points is is really very

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Speaker 1: very high. UM, So the FET wants to keep that,

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Speaker 1: and also in the latest communication wants to tell us

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Speaker 1: always telling us that it will not cut rates quickly,

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Speaker 1: it will keep a high plateau in interest rates. We

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Speaker 1: have seen a lot of volatility and markets trying to

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Speaker 1: guess what the fate is doing next and when it's

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Speaker 1: going to happen. Do you have a sense that maybe

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Speaker 1: I could say, getting a little bit too far out

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Speaker 1: in front of this eventual pivot. I I think that

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Speaker 1: the markets are breathing a sigh of relief. After all,

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Speaker 1: in the distribution of probabilities, at some stage about a

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Speaker 1: month ago, it was there was the likelihood that the

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Speaker 1: FED terminal rate could be much higher than what's being

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Speaker 1: priced five and a half six, even in some risk cases.

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Speaker 1: And I think those tail risks are coming down now.

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Speaker 1: So on the upside, expectations are very high, terminal rates

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Speaker 1: are coming down, and on the downside, I think that

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Speaker 1: um there is more of a belief that we could

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Speaker 1: get a soft landing, and so you know that that

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Speaker 1: means that you know, we would see a huge sell

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Speaker 1: off in financial assets, we would force the FED to

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Speaker 1: do emergency cuts. So I think that distribution is coming down.

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Speaker 1: And if you look imply it's implied volatilities from the

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Speaker 1: option markets, that seems to confirm that because they're all

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Speaker 1: coming off quite well, which is healthy for the on

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Speaker 1: the anfl markets. So inflation maybe trending down. We've established that.

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Speaker 1: We also know that at least in terms of the

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Speaker 1: rhetoric the FED is using policymakers are intented in making

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Speaker 1: sure that they've really accomplished their goal in getting it

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Speaker 1: under control. But it's not just the FED. I would

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Speaker 1: be remiss if we didn't talk about the Bank of

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Speaker 1: Korea Rajiv. I guess we're about a week and a

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Speaker 1: half from a policy meeting in Seoul. We know the

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Speaker 1: situation in South Korea is such that that they are

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Speaker 1: also or it is also dealing with significant inflationary pressures. Absolutely.

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Speaker 1: I mean, inflation is a global problem and Korea is

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Speaker 1: is facing higher inflation as well. The Bank of Korea

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Speaker 1: is somewhat more dubbish though than central banks in UH,

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Speaker 1: in Latin America or the US for many domestic reasons

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Speaker 1: as well. But inflation has not only gone up for

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Speaker 1: domestic reasons, but the ones been weak until most recently,

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Speaker 1: and that's also not been very good for for Korea.

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Speaker 1: So the Bank of Korea will high creates. We expected

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Speaker 1: twenty five basis points hike, which is kind of moderate still,

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Speaker 1: but they also worried about the financial situation taking too much.

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Speaker 1: They have a lot of mortgages which are very sensitive

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Speaker 1: to higher rates, and political turmoil is UH is building

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Speaker 1: in Korea and that's that's negative for the economy. Yeah,

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Speaker 1: we've seen a few central banks around the world now

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Speaker 1: either slowing or considering slowing the pace of rate increases.

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Speaker 1: And I'm just wondering connected to this, I want to

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Speaker 1: get to the Bloomberg question of the day. What are

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Speaker 1: the implications for the U s. Dollar? How far do

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Speaker 1: you see the green bag falling by the end of

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Speaker 1: the year. Since the beginning of the month, we've seen

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Speaker 1: the dollar actually declined quite a bit, and that's that

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Speaker 1: was after of course a significant round part. But broad

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Speaker 1: broad dollar measures such as the dollar indecks are down,

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Speaker 1: and probably we have seen the peak in the dollar,

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Speaker 1: and the dollar can gradually decline as the Fed doesn't

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Speaker 1: go for these very sharp increases in rates sort of

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Speaker 1: moderates them. Other countries recover, groth doesn't collapse as much

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Speaker 1: as expected, so in sort of boltylock scenario, you don't

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Speaker 1: have a global growth collapt collapse, so other currencies can recover.

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Speaker 1: And we've seen we've seen initially a recovery in Latin

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Speaker 1: American We've seen that propagate to Asia as well, with

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Speaker 1: Asian currencies have done much better over the last couple

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Speaker 1: of weeks. Before we let you go, I'm sorry there.

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Speaker 1: Before we let you go, i'd like to get your

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Speaker 1: take on China, And we had the ECO data yesterday

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Speaker 1: for the month of October. Industrial output was up a

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Speaker 1: bit a low market forecast, but that retail sales figure

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Speaker 1: with a decline in of about a half of one percent,

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Speaker 1: the first drop we've seen since May. Does this necessarily

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Speaker 1: mean now that the government has no choice but to

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Speaker 1: add to some of them measures that it's already undertaken,

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Speaker 1: to try to prop up things like the property market,

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Speaker 1: let's say, or or to make some more modifications to

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Speaker 1: its COVID policy. Because it's really got to kind of

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Speaker 1: support the economy. I think it has signaled that direction. Um.

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Speaker 1: Every couple of days we get new announcements about different measures. Ei,

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Speaker 1: don't there's your COVID front, some kind of relaxation the

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Speaker 1: property measures as well. I would expect more economic measures

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Speaker 1: as well, um, because of this data being weak and

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Speaker 1: they see that what's happening in China is a weakening

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Speaker 1: and they're really determined how to address that, something that

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Speaker 1: we hadn't seen for the last many months of quarters.

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Speaker 1: Now they're doing something. Go ahead, Paul, I'm sorry to interrupt,

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Speaker 1: not at all. I was just wondering which sectors that

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Speaker 1: you see benefiting most from what's going on in China.

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Speaker 1: And again, has the market getting too out in front

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Speaker 1: of this as well? We've seen some big rises and

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Speaker 1: property and take over the last couple of days. Yes

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Speaker 1: we have. I mean Hong Kong has has really saw it.

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Speaker 1: But then it really went down to very very low levels,

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Speaker 1: and a bunch of information on the came in which

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Speaker 1: was more positive. Even this the Biden she meeting in

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Speaker 1: Bali was was a positive. All those measures were positive

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Speaker 1: as well, But I would prefer the domestic site which

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Speaker 1: moved up a bit less but had also fallen less.

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Speaker 1: I think the domestic economy is where the focus of

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Speaker 1: policy will be UM and I expect, you know, Chinese

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Speaker 1: domestic equities to recover from here. Raschief always a pleasure

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Speaker 1: to have the chance to speak with you about what

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Speaker 1: you're observing in markets and to benefit from your insights.

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Speaker 1: Rajieve Demelo, Global macro portfolio manager at Gamma Asset Managements,

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Speaker 1: joining from Singapore here on daybreak Asia