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Speaker 1: Good morning.

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Speaker 2: It's Thursday, the fourth of January here in London. This

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Speaker 2: is the BlueBag Day Bacurate podcast. I'm Caroline Hepka.

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Speaker 3: And I'm Stephen Carroll. Coming up today. The latest Federal

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Speaker 3: Reserve minutes say interest rates have probably peaked as markets

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Speaker 3: price and cuts from March.

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Speaker 2: Two explosions in yvon Mark, a new peak in regional

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Speaker 2: tensions in the Middle.

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Speaker 3: East, plus what local councils in the UK going bankrupt

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Speaker 3: means for public services.

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Speaker 2: Let's start with a roundup of our top stories.

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Speaker 3: Officials at the Federal Reserve expect interest rates to remain

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Speaker 3: in restrictive territory for some time, but acknowledge they have

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Speaker 3: probably peaked and will go down this year. Minutes from

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Speaker 3: the December meeting showed increased optimism from policymakers, though Richmond

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Speaker 3: FED President Thomas Barkin says a soft landing wasn't inevitable.

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Speaker 4: Most of us forecasted rate normalization to begin sometime this year,

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Speaker 4: but the range of estimates was pretty wide, from two

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Speaker 4: folks who forecasted no cuts to one person who forecasted

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Speaker 4: as many as six. So I'd caution you to focus

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Speaker 4: less on the rate path and more on the flight path.

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Speaker 4: Is inflation continuing its descent, and is the broader economy

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Speaker 4: continuing to fly smoothly. Conviction on both questions will determine

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Speaker 4: the pace and timing of any change in rates.

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Speaker 3: Barkin didn't really out in March interest rate cut when asked.

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Speaker 3: Futures markets have been anticipating the federal cut rates six

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Speaker 3: times this year, beginning with a likely quarter point reduction

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Speaker 3: in March. That's versus the quarterly projection implying three cuts

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Speaker 3: in twenty twenty four.

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Speaker 2: Authorities in Iran say that two explosions which killed nearly

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Speaker 2: one hundred people, are retaliation for its stance against Israel.

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Speaker 2: The blasts happened at a memorial service for custom Sulimani,

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Speaker 2: an Iranian commander killed in a US drone strike four

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Speaker 2: years ago. Professor Farwar's Gurgis from the London School of

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Speaker 2: Economics says that there's speculation about who's done it.

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Speaker 5: If Israel really is behind this at that this would

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Speaker 5: really bring about what we fear iregion wide conflict. We

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Speaker 5: have to wait and see because Uron has many enemies,

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Speaker 5: as you know, TAHUS organizations, non state actors, so the

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Speaker 5: jury is still.

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Speaker 2: Out for Gurji's, Iran and Hezbula have to respond to

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Speaker 2: any provocation else their domestic credibility suffers. The United States

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Speaker 2: has said there was quote no reason to believe that

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Speaker 2: Israel was involved.

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Speaker 3: Activity in China's services sector has rebounded to the highest

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Speaker 3: level in five months. Kaitan's private survey rose to a

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Speaker 3: reading of five point fifty two point nine from fifty

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Speaker 3: one point five in November, beating estimates that it would

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Speaker 3: barely move. But in separate data, wages offered to Chinese

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Speaker 3: workers in major cities declined by the most on record.

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Speaker 3: It underscores persistent deflationary pressures and sluggish consumer confidence in

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Speaker 3: the world's second largest economy.

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Speaker 2: Previously confidential documents related to Jeffrey Epstein have been made

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Speaker 2: public in federal court in New York after a year's

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Speaker 2: long battle over their release. Many of the names featured

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Speaker 2: are widely reported former associates of the late disgraced financier,

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Speaker 2: including the former US President Bill Clinton and the UK's

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Speaker 2: Prince Andrew, both have denied knowing about or participating in

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Speaker 2: inappropriate conduct with Epstein. Paul Pollentia is a former US

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Speaker 2: federal prosecutor. He says that judgments regarding the case are

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Speaker 2: partially due to the work of victims.

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Speaker 6: Part of the reason why Jeffrey Epstein was prosecuted in

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Speaker 6: New York, or at least was indicted in New York,

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Speaker 6: was because Virginia Giffrey would not stop.

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Speaker 2: The released documents were part of a twenty to fifteen

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Speaker 2: lawsuit against Gilain Maxwell, who is serving a twenty year

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Speaker 2: sentence for sex trafficking.

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Speaker 3: Donald Trump has asked the US Supreme Court to overturn

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Speaker 3: a ruling barring him from the presidential ballot in Colorado.

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Speaker 3: Ploenberg's Eric Larson says the appeal has a number of

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Speaker 3: possible outcomes.

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Speaker 7: The court could rule, for example, that the Colorado Supreme

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Speaker 7: Court didn't give Trump to process that he deserved under

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Speaker 7: this case that happened in Colorado. That's another argument that

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Speaker 7: Trump is making. He's also arguing that the Fourteenth Amendment,

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Speaker 7: the section three of the Fourteenth Amend that which you

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Speaker 7: borrowed insurrectionists from holding office federal office doesn't apply to

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Speaker 7: the office of the Presidency, only to other types of

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Speaker 7: federal officers, and the Supreme Court could overturn that color

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Speaker 7: Rader decision based only on those findings. That they wished

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Speaker 7: without specifically weighing in on whether Trump was an interactionist.

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Speaker 7: But of course that is another option for the court.

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Speaker 3: That's Bloomberg Zeger reporter Eric Larson. Despite the former president's

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Speaker 3: many ongoing legal cases, he is the current front runner

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Speaker 3: for the Republican presidential nomination.

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Speaker 2: Here in the UK, investment boosting tax breaks are failing

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Speaker 2: to attract businesses. New data shows that sluggish corporate activity

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Speaker 2: could still prove problematic for the economy. Bloomberg's Tia Adebayo

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Speaker 2: Ho's the details.

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Speaker 8: British companies are limiting their spending because of high debt,

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Speaker 8: servicing costs and a stagnant economy. According to a survey

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Speaker 8: by the British Chamber of Commerce, stalling investment will continue

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Speaker 8: to hold back growth despite government tax breaks. During the

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Speaker 8: last quarter of twenty twenty three, most companies kept their

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Speaker 8: investment unchanged, whilst almost twenty percent decreased it. That's despite

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Speaker 8: the number of firms expecting an increase in turnover growing

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Speaker 8: over the same period. The news comes after Chancellor Jeremy

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Speaker 8: Hunt made incentives designed to unlock corporate spending permanent in

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Speaker 8: November last year. In London, TIWA Adebayo Bloomberg Radio.

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Speaker 2: Now in a moment Our UK Economy reported Tom Reese

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Speaker 2: joins us to discuss the growing number of local councils

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Speaker 2: in England, effectively declaring bankruptcy from Woking to Birmingham Nottingham City.

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Speaker 2: So we'll unpack that story for you. But first, the

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Speaker 2: macro Man column raises a nice little question that I

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Speaker 2: thought we'd discuss. At what point do you start taking

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Speaker 2: year to date performance in any given year seriously as

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Speaker 2: an indication of returns going forward?

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Speaker 3: Well, yeah, I mean it's a key questions as we

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Speaker 3: look at it. I mean, your state indicator is not

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Speaker 3: telling us very much on the fourth of January, has

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Speaker 3: to be said, but it is something that is It's

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Speaker 3: an interesting argument to impact by Cameron Crees in this piece.

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Speaker 2: Yeah, absolutely, I mean, look, the first the reason that

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Speaker 2: it comes up is that the first training time of

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Speaker 2: this year was just so rotten and it was such

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Speaker 2: an abrupt sort of reversal of the November to December

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Speaker 2: Connor rally. So Cameron Crees goes into quite a lot

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Speaker 2: of detail and actually he looks at the kind of

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Speaker 2: dispersion of days and what it means for investing and

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Speaker 2: he does point to actually the fourth day in so

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Speaker 2: only the fourth day into a new year, that actually

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Speaker 2: perhaps there is some correlation between that and the rest

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Speaker 2: of the year.

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Speaker 1: But he has a.

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Speaker 2: Really nice piece looking at where the tipping point is,

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Speaker 2: you know, as you go through the calendar year.

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Speaker 3: Okay, so that's from Cameron Creees a Macroman calm worth

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Speaker 3: your time this morning. Let's get more now though, on

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Speaker 3: what we learned from the Federal Reserves meeting minutes and

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Speaker 3: the outlook for the US Central Bank. Policymakers agreed that

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Speaker 3: rates were probably at or near their peak and see

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Speaker 3: more optimistic about the downward path for inflation going forwards.

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Speaker 3: Bloomber queening Columnst. Daniel Mass joins us now for more, Daniel,

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Speaker 3: great to have you with us on the program. So

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Speaker 3: these were the minutes of the December meeting where Jerome

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Speaker 3: Powell made those dubvish comments were sparked a market rally.

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Speaker 3: Did the minutes match the chair's tone?

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Speaker 1: What's important to remember the minutes aren't transcripts. Transcripts come

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Speaker 1: out five years later, so presentationally they can differ from

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Speaker 1: what the chairs said at his press conference, which is

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Speaker 1: much more contemporaneous. One thing that perhaps has not attracted

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Speaker 1: the attention that it's deserved was a remark from J.

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Speaker 1: Powell at his verbal briefing where he said, we are

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Speaker 1: quote well into restrictive territory. So what does that imply?

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Speaker 1: That implies you can still be restrictive as the minutes

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Speaker 1: indicate and cut rates. There's no inconsistency there. If you're

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Speaker 1: well into restrictive territory, you can still cut rates and

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Speaker 1: hold at restrictive territory. So I don't see an enormous

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Speaker 1: contradiction there.

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Speaker 2: Okay, But there were some hawkish notes. How much caution

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Speaker 2: did the minutes of show and throw up Thomas Barkin's

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Speaker 2: comments Also in terms of imminent rate cuts.

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Speaker 1: Well, at no point did J. Powell saying he's briefing

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Speaker 1: the rate cuts were imminent. Now people have tried to

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Speaker 1: sort of fence around verbally with FED officials to try

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Speaker 1: to tease out the March thing. I don't know that

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Speaker 1: it matters significantly whether it's March, April or May. It's

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Speaker 1: fairly unambiguous that unless something changes dramatically, rates are coming.

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Speaker 1: Rate cuts are coming, and there'll be several of them,

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Speaker 1: you know, in terms of Bark, and we've had this

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Speaker 1: conversation before. There's one thing I learned over the course

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Speaker 1: of a decade in Washington listening to Federal Reserve officials

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Speaker 1: and going to Federal Reserve lockups at Hinge points, focus

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Speaker 1: on the policymakers who are the most important. That means

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Speaker 1: the triumphant, the chair, the vice chair, and the head

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Speaker 1: of the New York Fed. It's been a while since

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Speaker 1: the Richmond Fed, all respector Thomas Barkin counted for a lot.

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Speaker 3: We also had some data out yesterday, job openings, the

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Speaker 3: ism manufacturing reading as well, both showing some weakness. How

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Speaker 3: does the data and the jobs report due out tomorrow

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Speaker 3: play into the rape cuts narrative and what happens next?

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Speaker 1: I think they're entirely consistent with the idea of rate cuts.

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Speaker 1: You know, there was a lot of backslapping toward the

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Speaker 1: end of tw twenty twenty three that a US recession

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Speaker 1: had been avoided or that it hadn't been detected. It's

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Speaker 1: important to remember the US gauge as a recession differently

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Speaker 1: from most other advanced economies, which base it on two

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Speaker 1: consecutive quarters of contraction in GDP. With the US, the

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Speaker 1: committee that determines the life and death of business cycles

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Speaker 1: is pretty disdainful.

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Speaker 3: Of that rule.

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Speaker 1: We will only know if a recession began at the

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Speaker 1: end of twenty twenty three, perhaps not till the middle

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Speaker 1: of twenty twenty four. Often the recession has passed before

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Speaker 1: this August panel will call its beginning.

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Speaker 2: One to watch out for then and think about Daniel.

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Speaker 2: Thank you so much for joining us as ever, Bloomberg

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Speaker 2: Opinion colonist Daniel moss Well.

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Speaker 3: That's turned to a story from the UK and Act

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Speaker 3: and the pilot state of local government finances in several

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Speaker 3: English towns and cities. Birmingham and Nottingham are among those

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Speaker 3: who declared fact of bankruptcy with spots now and as

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Speaker 3: a section one hundred and fourteen notice their residents may

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Speaker 3: soon be facing a similar situation to the London commuter

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Speaker 3: tent of Woking Are. UK Economy reporter Tom Reese joins

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Speaker 3: us Now for more on this story. Tom. How widespread

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Speaker 3: are the problems then around local government finances in the UK?

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Speaker 9: I mean, that's the bleam pound question at the moment.

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Speaker 9: A recent survey you found that around one in five

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Speaker 9: local councils say they are very all fairly likely to

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Speaker 9: issue what we call these Section one one four notices

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Speaker 9: in the next few years. I mean that this would

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Speaker 9: be them effectively declaring bankruptcy. And under these the councilors

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Speaker 9: are emitting that they can't balance the books as they

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Speaker 9: are legally obligated to do, and they need to take

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Speaker 9: draft action, you know, such as you know, massive cut

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Speaker 9: suspending bigger council tax rises. Well we, as you said,

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Speaker 9: we had three of these last year Woking, Birmingham and Nottingham.

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Speaker 9: But there's there's a center in the sector that that's

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Speaker 9: just you know, the tip of the iceberg, and there's

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Speaker 9: many more to come that that could arise in an

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Speaker 9: election year, which is obviously not very helpful for Rishi

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Speaker 9: sunts government because I mean a big part of the

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Speaker 9: reason why these councils were in such distrates is because

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Speaker 9: they've had massive real terms cuts to their grants from

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Speaker 9: central governments, you know, since the austerity.

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Speaker 3: Period, and it just adds to.

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Speaker 9: That sense of the public sector kind of deteriorating.

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Speaker 2: Yeah, absolutely not very helpful for voters either. I mean,

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Speaker 2: working nestles just outside of London in the green leafy belt,

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Speaker 2: they issued the Section one one four notice last June

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Speaker 2: how bad were the financial problems in working and actually

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Speaker 2: tell us a bit about what's happened since then to

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Speaker 2: this town.

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Speaker 9: Yeah, so it's a pretty bad case in Woking in

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Speaker 9: particularly while the cuts to central government grants haven't helped

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Speaker 9: in working, this is a bad case of financial mismanagement.

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Speaker 9: So in order to help to boost their income, they've

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Speaker 9: gone this massive commercial property the investments free that is

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Speaker 9: massively backfired. It's included spending huge amounts on developments that

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Speaker 9: included skyscrapers and a new Hilton hotel which is expected

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Speaker 9: to ramp up their debt to around two point four billion,

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Speaker 9: which for the size of the council it is is

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Speaker 9: just absolutely monstrous. I mean it makes Woke in the

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Speaker 9: most indebted council and the country relative to its size.

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Speaker 9: Since issuing that one one four noticed last June, it's

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Speaker 9: had to look at drastic cuts, suspending you know, the

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Speaker 9: town's main swim pool may close. Community Sentence, which provides

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Speaker 9: services to the elderly such you know, bathing and meals.

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Speaker 9: They're having their funding were drawn. The town's main art

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Speaker 9: gallery is having all its funding from the council removed.

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Speaker 9: Sports pitches, public toilets. It's literally affected almost every corner

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Speaker 9: of this town.

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Speaker 3: So what does it mean then for the likes of

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Speaker 3: Birmingham which is a much bigger city.

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Speaker 9: And we're just starting to see the prosals from Immingham

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Speaker 9: on what cuts they're looking at, and it's a pretty

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Speaker 9: similar story, but just on a bigger scale. We're still

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Speaker 9: waiting for the full details from Birmingham, which remember is

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Speaker 9: Europe's largest local authority. It's set out proposals for around

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Speaker 9: one hundred and fifty million of cuts, so that a

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Speaker 9: much bigger scale than Woking. But they includet like fifty

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Speaker 9: seven million from the Children and Families Department, twenty nine

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Speaker 9: million from the highways and bins, so it's something that

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Speaker 9: residents there will really notice.

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Speaker 2: But then what are the options open to councils? Are

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Speaker 2: they going to effectively need to be bailed out by

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Speaker 2: government central government?

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Speaker 9: It's tricky. There's not a whole lot they can do

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Speaker 9: given the cuts from in grants from central government, given inflation,

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Speaker 9: given you know the amount that demand is rising for

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Speaker 9: things their services like social care. I mean they can

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Speaker 9: cut spending drastically when they issue these one one forward

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Speaker 9: they can increase council tax or they could sell assets

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Speaker 9: to help their finances. But I mean it doesn't really

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Speaker 9: get to the real crux of the issue. I mean,

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Speaker 9: the government is trying to distance itself from the problem.

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Speaker 9: Really it's kind of blaming these one one fours on

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Speaker 9: the mismanagement of local councils, and that is truted to

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Speaker 9: a certain extent, but it doesn't really help address the

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Speaker 9: real issue that underpins these one one forwards. I mean,

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Speaker 9: Michael Gove, the Secretary of State in charge of this,

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Speaker 9: has provided they provided last month for another four billion

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Speaker 9: of extra funding for the next financial year to help councils,

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Speaker 9: but the sector just says this is just not enough

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Speaker 9: to kind of stave off those headwinds you know, from

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Speaker 9: inflation and rise and demands, et cetera. It does create

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Speaker 9: quite a big political issue in potentially in an election

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Speaker 9: year if if a lot more of these councilors go bust.

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