WEBVTT - Green Investment Concerns & BoE Decision Day

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<v Speaker 1>Good morning. It's Thursday, the third of August in London.

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<v Speaker 1>This is the Bloomberg Daybreak You Up podcast. I'm Caroline

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<v Speaker 1>Hepka and.

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<v Speaker 2>I'm Stephen Carroll. Coming up today, the CEO of the

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<v Speaker 2>energy giant SSE tells us the government needs to reassure

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<v Speaker 2>markets on green investments.

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<v Speaker 1>The Bank of England is getting ready to raise interest rates,

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<v Speaker 1>but will they opt for twenty five or fifty basis points?

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<v Speaker 2>And former US Treasury secretaries call for action on the

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<v Speaker 2>country's ballooning debt.

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<v Speaker 1>Let's start with a roundup of our top stories. The

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<v Speaker 1>UK government will boost the funding available to renewable energy projects,

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<v Speaker 1>with the struggling offshore wind industry benefiting the most. The

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<v Speaker 1>total pot available for the current subsidy auction will increase

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<v Speaker 1>by twenty two million pounds to two hundred and twenty

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<v Speaker 1>seven million pounds, so up by eleven percent. It comes

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<v Speaker 1>as the CEO of the UK's largest renewable electricity company, SSE,

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<v Speaker 1>has told the Bloomberg UK Politics podcast the government needs

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<v Speaker 1>to reassure markets on its green credentials. Alistair Phillips Davies

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<v Speaker 1>says that green investment depends on the government's words.

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<v Speaker 3>It's for them to reassure markets and make sure that

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<v Speaker 3>there is a clear commitment to creating the industries that

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<v Speaker 3>we've started creating so successfully. In the UK.

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<v Speaker 1>Phillips Davies is overseeing dog A bank going online today.

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<v Speaker 1>This is the UK's largest offshore wind farm, which will

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<v Speaker 1>power some seven percent of the national grid when fully operational.

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<v Speaker 1>We're going to dive into that story in more detail

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<v Speaker 1>in just a few minutes.

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<v Speaker 2>The Bank of England is expected to raise rates again later,

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<v Speaker 2>with a recent inflation slow down giving policymakers scope to

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<v Speaker 2>scale back the size of hikes. Economists and investors are

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<v Speaker 2>anticipating the benchmark lending rate we'll go up by at

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<v Speaker 2>least a quarter point to five and a quarter percent.

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<v Speaker 2>The view comes as the latest inflation unemployment data showed

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<v Speaker 2>easing pressure on prices. Speaking to us little earlier, and Elitch,

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<v Speaker 2>deputy for Economist at the CBI, told us UK GDP

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<v Speaker 2>has held up surprizingly well in the face of higher rates.

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<v Speaker 4>The economy has proved more resilient so far than many

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<v Speaker 4>of us were expected, and indeed the last growth data

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<v Speaker 4>out from the URNS reinforced that point. But of course,

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<v Speaker 4>with so many fixed rate mortgages due still to refix

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<v Speaker 4>at higher rates. There's huge vulnerability in the border economy.

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<v Speaker 2>Anna Leitch also told us the UK recession is now

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<v Speaker 2>a distinct possibility. We will bring you the decision from

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<v Speaker 2>the Bank of England live here in Bloomberg at twelve

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<v Speaker 2>pm London time, with a press conference led by Governor

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<v Speaker 2>Andrew Bailey half an hour later.

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<v Speaker 1>Now, two former US Treasury secretaries have called for action

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<v Speaker 1>to tackle the country's ballooning debt burden. Speaking just hours

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<v Speaker 1>after Fitch stripped America of its Triple A credit rating,

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<v Speaker 1>Hank Paulson and Timothy Geidner shared their thoughts with David

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<v Speaker 1>Weston on Blueberg's Wall Street Week, and Hank Pauson didn't

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<v Speaker 1>mince his words.

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<v Speaker 5>Our first culture jectory is concerning, but we're a rich

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<v Speaker 5>country and we've got time to deal with it. But

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<v Speaker 5>we need to do some things in the next few

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<v Speaker 5>years to change that trajectory, and I think that's going

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<v Speaker 5>to be very important. To do that. It's going to

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<v Speaker 5>take doing things on both the spending side and the

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<v Speaker 5>revenue side.

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<v Speaker 1>Paulson's successor as Treasury chief, Timothy Geidner, was asked by

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<v Speaker 1>David weston whether it would take a crisis before Washington

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<v Speaker 1>did address its borrowing needs. He answered, quote, I hope not.

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<v Speaker 1>You get that full conversation on the Wall Street Week podcast,

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<v Speaker 1>available on Apple, Spotify, or wherever you listen.

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<v Speaker 2>JP Morgan CEO Jamie Diamond says he's unhappy with plans

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<v Speaker 2>for more stringent capital rules in the United States. The

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<v Speaker 2>comments come just days after regulators released the long awaited proposals.

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<v Speaker 2>Speaking to CNBC, Diamond said the measures will take will

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<v Speaker 2>make mortgage and small business lending harder for banks.

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<v Speaker 6>It's phurely disappointing. I think these rules are I mean,

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<v Speaker 6>I've always thought g Sify was a joke. Now we

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<v Speaker 6>have operation overs capital, which I think is equally bad

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<v Speaker 6>based on my rules, which kind of make no sense

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<v Speaker 6>to me. And if I was the Feder'd be very

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<v Speaker 6>careful about saying their models are perfect.

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<v Speaker 2>Diamond went on to say that hedge funds and private

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<v Speaker 2>equity firms are dancing in the streets over tightening regulations

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<v Speaker 2>for banks. The proposal from regulators would require big uslanders

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<v Speaker 2>to set aside more capital, with the eight largest financial

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<v Speaker 2>firms facing an increase of about nineteen percent.

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<v Speaker 1>Donald Trump is expected to appear in a Washington federal

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<v Speaker 1>court today to face new charges that he conspired to

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<v Speaker 1>obstruct the twenty twenty presidential election. This is the third

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<v Speaker 1>criminal case against the former president as he seeks a

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<v Speaker 1>new term in the White House. Speak to NBC, Trump's

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<v Speaker 1>lead lawyer, John Lauro, says that he believes the former

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<v Speaker 1>president will win.

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<v Speaker 7>They have to demonstrate beyond a reasonable doubt that number one,

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<v Speaker 7>President Trump did not believe that all these irregularities were true,

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<v Speaker 7>and number two that he did something to corruptly obstruct justice.

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<v Speaker 7>And they can't prove that because everything he did was

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<v Speaker 7>to get at the truth.

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<v Speaker 1>John Laura joined the former president's legal team in July

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<v Speaker 1>and says that the charges are entirely politically motivated.

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<v Speaker 2>And treasuries are proving to be an increasingly ineffective hedge

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<v Speaker 2>for stocks as the two move in tandem. Bond prices

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<v Speaker 2>usually move in the opposite direction to the stock market,

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<v Speaker 2>but the two started to move in sync as the

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<v Speaker 2>Fed raised rates aggressively last month. The correlation between the

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<v Speaker 2>asset classes was the highest since nineteen ninety six. This

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<v Speaker 2>means the classic sixty to forty portfolio of stocks and

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<v Speaker 2>bonds offered investors little protection from volatilities. Those are some

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<v Speaker 2>of our top stories on the program this morning, on

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<v Speaker 2>a day of course, we're looking ahead to the Bank

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<v Speaker 2>of England decision as well. I'm interested in the latest

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<v Speaker 2>results that we've had from Next So shares in the

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<v Speaker 2>high street retailer in the UK up about a tenth

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<v Speaker 2>of one percent, which, considering the overall fort Sea is

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<v Speaker 2>down by one point four percent, is not bad actually,

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<v Speaker 2>But essentially this is a big high street bell Weather,

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<v Speaker 2>one that's often considered to be a good guide to

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<v Speaker 2>the health of the British retailers in general, saying that there,

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<v Speaker 2>you know, things are looking quite good for pry sales

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<v Speaker 2>rising at seven percent compared to last year. Their profit

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<v Speaker 2>forecasts are up. They had said that warmer weather lull

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<v Speaker 2>was potentially going to help people buy more clothing just

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<v Speaker 2>in June. I think that was an early summer protection

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<v Speaker 2>that has yet.

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<v Speaker 1>To realize as I carry my umbrella around the whole time. Yeah, look,

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<v Speaker 1>that's that's a very good business story. But I also

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<v Speaker 1>want to talk about this one that's going to be

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<v Speaker 1>I think quite entertaining. Perhaps maybe we've got another American

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<v Speaker 1>star coming to the UK. This is Tom Brady who

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<v Speaker 1>is apparently buying a steak in Birmingham, Birmingham City. Let

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<v Speaker 1>me just add minority steak. But it seems like so

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<v Speaker 1>many stars. I mean, he's actually a sporting legend in

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<v Speaker 1>the US obviously MVP of Well I think five times

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<v Speaker 1>in a row. But yeah, buying this stake. So it

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<v Speaker 1>does seem to be that Premier League football is open

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<v Speaker 1>to lots of foreign interest the minute.

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<v Speaker 5>Yeah.

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<v Speaker 2>Absolutely, I'll bring a bit of American star power, I think,

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<v Speaker 2>to to Birmingham City while they're at it. Maybe well,

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<v Speaker 2>let's turn to us another story that we're following here

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<v Speaker 2>very closely in the UK, and this is the latest

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<v Speaker 2>around renewable energy. A big development today with a new

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<v Speaker 2>after a wind farm opening, but also moves by the

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<v Speaker 2>government to update their subsidy scheme, something that has been

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<v Speaker 2>the subject of conversation you've been having, Carola.

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<v Speaker 1>Yeah, absolutely, So the Dogger Bank off your wind farm,

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<v Speaker 1>which is the largest UK wind farm to date, is

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<v Speaker 1>being switched on today. So we had a conversation with

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<v Speaker 1>the CEO of the SSE which is the Footy one

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<v Speaker 1>hundred company, Alisa Phillips Davis, about this Lizzy Burden and

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<v Speaker 1>I about the impact that dogger Bank is going to

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<v Speaker 1>have coming online. Remember that the UK is a world

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<v Speaker 1>leader really and in wind power. I know we sometimes

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<v Speaker 1>hear that phrase used often, but I think it's true.

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<v Speaker 1>The UK also wants to triple offs your wind capacity

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<v Speaker 1>by twenty thirty. The UK's got this legally binding target

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<v Speaker 1>of becoming carbon neutral by twenty fifty. But then it

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<v Speaker 1>is also so in this week that the Prime Minister

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<v Speaker 1>announced hundreds of new licenses for oil and gas production

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<v Speaker 1>in the North Sea. So we had this big conversation

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<v Speaker 1>with Phillips Davis, the first part of which is just

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<v Speaker 1>on the success of dogger Bank and what it will

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<v Speaker 1>mean to UK energy production.

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<v Speaker 8>Have a listen.

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<v Speaker 3>It's a huge milestone. You're talking about a power band

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<v Speaker 3>that will generate something like twenty terri or hours of energy,

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<v Speaker 3>which is six or seven percent of the total UK

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<v Speaker 3>requirement for energy, and the fact that it's doing that

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<v Speaker 3>price is far far cheaper than we're seeing in the

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<v Speaker 3>wholesale market at the moment, about fifty pounds. You know,

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<v Speaker 3>that's a real boost for UK consumers getting much cheaper energy,

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<v Speaker 3>and it's also homegrown energy, so we're getting much more

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<v Speaker 3>energy security out of it as well. And then all

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<v Speaker 3>on the back of that you're also getting create clean

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<v Speaker 3>green energy too, which is carbon free.

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<v Speaker 2>Okay, so that is in a relation to this dugger

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<v Speaker 2>bank after a wind farm. Can that be repeated though, Caroline.

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<v Speaker 1>Well, I think there are a few issues here. First,

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<v Speaker 1>there's a question mark about the commitment. I think of

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<v Speaker 1>Rishie Sunak, who is not Boris Johnson, and maybe there

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<v Speaker 1>have been some concerns about how committed he is, you know,

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<v Speaker 1>whether he is as committees perhaps as the previous Prime

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<v Speaker 1>minister has been. Then there's the big competition from the

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<v Speaker 1>US and Joe Biden. The enormous amount of money that's

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<v Speaker 1>going into renewables. Does that suck investment out of other

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<v Speaker 1>countries or away from other countries? And then there's also

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<v Speaker 1>just the nuts and bolts of the whole business, And

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<v Speaker 1>this is where the government announcement today this morning is

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<v Speaker 1>so interesting. So it's about the cost of building wind farms,

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<v Speaker 1>and then it's also about the subsidy scheme that the

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<v Speaker 1>government backs. These contracts for difference is what they're called,

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<v Speaker 1>and it gives the energy produces a certain price a

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<v Speaker 1>cap of how much you know, they can make from

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<v Speaker 1>the renewable energy that they then supply. Now, the government

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<v Speaker 1>has just announced this morning that it's going to increase

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<v Speaker 1>contract for difference in the amount of money the total

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<v Speaker 1>pot for that by twenty two million pounds. That's an

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<v Speaker 1>eleven percent increase, and so the offshore wind will benefit

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<v Speaker 1>the most. The boss of SSE, though, has some doubts

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<v Speaker 1>about whether that's going to be enough to overcome things,

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<v Speaker 1>so we asked him about also, you know, all of

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<v Speaker 1>these threats I suppose to renewable energy sources in the

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<v Speaker 1>UK have listened to his response.

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<v Speaker 3>It's for them to reassure markets and make sure that

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<v Speaker 3>there is a clear commitment to creating the industries that

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<v Speaker 3>we've started creating so successfully in the UK, things like

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<v Speaker 3>dog a bankll There'll be two thousand jobs created around that.

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<v Speaker 3>In moving forward, we've obviously got the opportunity to build

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<v Speaker 3>thousands of mega wat's more plans to create more jobs

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<v Speaker 3>in the UK, to bring supply chain here as well.

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<v Speaker 3>Certainly something that we're working on with people to make

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<v Speaker 3>sure that some of the big technology providers, whether they

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<v Speaker 3>be turbines, towers or cables come to the UK and

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<v Speaker 3>invest and build facilities in These are all things that

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<v Speaker 3>I think all political parties can agree on, and I'm

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<v Speaker 3>sure there'll be an important part of what all the

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<v Speaker 3>political parties put out in their manifestos and what they

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<v Speaker 3>look to brief on as we go into the autumn

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<v Speaker 3>and winter.

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<v Speaker 2>Curring this conversation happening at a very timely moment, the

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<v Speaker 2>Energy Secretary has just met with all of those big

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<v Speaker 2>energy companies as well to discuss this issue.

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<v Speaker 1>Yeah, so it's meant to be Energy week, So yes,

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<v Speaker 1>a lot is going on in this space. Grant Shapps

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<v Speaker 1>met with well SSE for one, but also DF Shell

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<v Speaker 1>BP and they've all got these big billion pound plans

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<v Speaker 1>to invest in low and zero carbon projects. So it

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<v Speaker 1>is very important. So the SSC CEO they're talking about, well,

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<v Speaker 1>it's up to the Conservative government to really demonstrate their

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<v Speaker 1>commitment here, which I think is quite a big statement

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<v Speaker 1>in and of itself. But then also we asked him,

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<v Speaker 1>well what about Labor, the opposition party, what do you

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<v Speaker 1>think of their overtures, their policies. Here's what he said.

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<v Speaker 3>We've certainly seen some strong rhetoric Rachel Reeves talking about

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<v Speaker 3>wanting to be the next Green Chancellor and more generally

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<v Speaker 3>from labor you know, significant ambitions, even more so potentially

0:12:07.240 --> 0:12:09.960
<v Speaker 3>than the current government. They've signaled that they want to

0:12:09.960 --> 0:12:12.079
<v Speaker 3>go quicker in terms of getting to twenty thirty and

0:12:12.120 --> 0:12:15.640
<v Speaker 3>twenty thirty five. Having clean, homegrown energy is going to

0:12:15.640 --> 0:12:18.160
<v Speaker 3>be really really important and I think all all the

0:12:18.200 --> 0:12:19.160
<v Speaker 3>parties will see that.

0:12:20.720 --> 0:12:24.680
<v Speaker 1>So that was Alistair Phillips Davies, the CEO of SSE,

0:12:25.679 --> 0:12:28.720
<v Speaker 1>the fifty one hundred constituent on the day that they

0:12:28.760 --> 0:12:32.880
<v Speaker 1>bring online dog a Bank, biggest UK offshore wind farm

0:12:33.080 --> 0:12:36.000
<v Speaker 1>so far, so really important moment for the UK's green

0:12:36.160 --> 0:12:40.720
<v Speaker 1>energy transition. Can Britain remain a world leading offshore wind power?

0:12:40.760 --> 0:12:43.760
<v Speaker 1>The government hoping with this extra pot of money for

0:12:43.840 --> 0:12:46.800
<v Speaker 1>renewables that they've just announced this morning that that will

0:12:46.800 --> 0:12:49.600
<v Speaker 1>be the case. But yeah, it's a really interesting moving story.

0:12:49.800 --> 0:12:51.520
<v Speaker 2>Certainly, is that fall into you to come on today's

0:12:51.600 --> 0:12:55.120
<v Speaker 2>UK Politics podcast here on Bloomberg. Let's turn next to

0:12:55.200 --> 0:12:57.960
<v Speaker 2>today's Bank of England decision. Though another rate I expected,

0:12:57.960 --> 0:13:00.600
<v Speaker 2>but some questions over the size of that increase. I've

0:13:00.600 --> 0:13:02.599
<v Speaker 2>seen you at UK economist Dan Hansen joins US and

0:13:02.640 --> 0:13:06.240
<v Speaker 2>Studio with my mining to you, Dan Markets pricing in

0:13:06.280 --> 0:13:08.800
<v Speaker 2>a roughly one in three chance of a fifty basis

0:13:08.920 --> 0:13:10.880
<v Speaker 2>point hike. Could we be in for a surprise?

0:13:11.360 --> 0:13:12.920
<v Speaker 8>I think so. Yeah, I think there's there's a real

0:13:13.040 --> 0:13:16.200
<v Speaker 8>risk of a surprise. Clearly, it wouldn't be quite as

0:13:16.200 --> 0:13:18.160
<v Speaker 8>big a surprise as it was in June, where I

0:13:18.200 --> 0:13:21.040
<v Speaker 8>think people were far sort of more focused on the

0:13:21.040 --> 0:13:24.040
<v Speaker 8>twenty five basis point move. But I think if you

0:13:24.040 --> 0:13:27.360
<v Speaker 8>look at the data, it has been really mixed. You've had,

0:13:28.080 --> 0:13:30.360
<v Speaker 8>it's been very well documented. But the good news on

0:13:30.840 --> 0:13:35.520
<v Speaker 8>headline CPI inflation, but setting against that, wage growth is

0:13:35.559 --> 0:13:38.439
<v Speaker 8>still accecul our eting, particularly in the private sector, services

0:13:38.480 --> 0:13:41.720
<v Speaker 8>inflation is still very high. So there's this balance between

0:13:42.280 --> 0:13:45.000
<v Speaker 8>headline inflation dropping and coming down, which is obviously the

0:13:45.280 --> 0:13:48.440
<v Speaker 8>target measure and that's what the bank is ultimately charged

0:13:48.440 --> 0:13:50.800
<v Speaker 8>with bringing back to two percent. But there are signs

0:13:50.800 --> 0:13:53.480
<v Speaker 8>of persistence in the inflation process and that's something that

0:13:53.520 --> 0:13:57.000
<v Speaker 8>they may may be more concerned about and opt for

0:13:57.040 --> 0:13:58.199
<v Speaker 8>a fifty basis point hike.

0:13:58.600 --> 0:14:00.520
<v Speaker 1>Okay, what are you going to be watched out for

0:14:00.559 --> 0:14:03.880
<v Speaker 1>then today in terms of guidance in terms of future

0:14:03.920 --> 0:14:05.040
<v Speaker 1>hikes in the rate path.

0:14:05.760 --> 0:14:07.840
<v Speaker 8>Yeah, there's a lot to watch today because we get

0:14:07.880 --> 0:14:11.160
<v Speaker 8>the forecast as well. But I think for us there

0:14:11.240 --> 0:14:13.480
<v Speaker 8>are three things. Really. The first thing is the guidance,

0:14:13.520 --> 0:14:16.840
<v Speaker 8>as you say, and whether that's essentially the data dependence remains,

0:14:16.840 --> 0:14:19.440
<v Speaker 8>I think it will. I mean all the other major

0:14:19.480 --> 0:14:21.440
<v Speaker 8>central banks are stepping into that realm. The Bank of

0:14:21.440 --> 0:14:24.440
<v Speaker 8>England sort of moved there in February, has been dragged

0:14:24.520 --> 0:14:27.200
<v Speaker 8>higher by the data. All these data surprises we've been had,

0:14:27.680 --> 0:14:30.640
<v Speaker 8>we've had, but I think they'll stick with the guidance

0:14:30.680 --> 0:14:32.160
<v Speaker 8>they've got. I think the other thing to look at

0:14:32.280 --> 0:14:36.800
<v Speaker 8>is the medium term inflation forecasts and the meat what

0:14:36.840 --> 0:14:39.320
<v Speaker 8>they call the mean inflation forecast, so that is the

0:14:39.440 --> 0:14:43.120
<v Speaker 8>risk adjusted forecast, the forecast that is adjusted for the

0:14:43.160 --> 0:14:47.080
<v Speaker 8>policymaker's perception of risks around inflation. And if they think

0:14:47.080 --> 0:14:49.680
<v Speaker 8>that's going to be around two percent in the medium term,

0:14:49.880 --> 0:14:52.360
<v Speaker 8>that's a pretty good indication that they think market pricing

0:14:52.440 --> 0:14:55.960
<v Speaker 8>is broadly in the right place. So market pricing currently

0:14:56.200 --> 0:14:59.080
<v Speaker 8>looking for a peak of five seventy five percent. The

0:14:59.120 --> 0:15:03.120
<v Speaker 8>other final thing I'll be watching is the near term

0:15:03.160 --> 0:15:06.680
<v Speaker 8>headline inflation forecast, because that gives us an idea of

0:15:06.760 --> 0:15:08.920
<v Speaker 8>what the bank is expecting in the near term, and

0:15:08.960 --> 0:15:11.120
<v Speaker 8>we get a measure of what a data surprise looks

0:15:11.160 --> 0:15:13.080
<v Speaker 8>like relative to the bank's expectations.

0:15:13.600 --> 0:15:16.680
<v Speaker 2>Okay, what about quantitas of tightening? Is that something that

0:15:16.720 --> 0:15:18.640
<v Speaker 2>we should be expecting news on today?

0:15:18.840 --> 0:15:20.680
<v Speaker 8>Yeah, that's an interesting one. There's seen. There's been a

0:15:20.720 --> 0:15:23.640
<v Speaker 8>lot of chatter about that, and I think I think

0:15:23.720 --> 0:15:26.280
<v Speaker 8>it will they'll wait till September to make the announcement,

0:15:26.320 --> 0:15:28.880
<v Speaker 8>but it's been I think a broader point here is

0:15:28.920 --> 0:15:31.040
<v Speaker 8>that it's been so well trailed what they're going to

0:15:31.600 --> 0:15:33.680
<v Speaker 8>it's very likely they're going to do somewhere between eighty

0:15:33.680 --> 0:15:36.640
<v Speaker 8>and one hundred billion for next year. We think it's

0:15:36.680 --> 0:15:39.760
<v Speaker 8>going to be about ninety billion, and that purely reflects

0:15:39.800 --> 0:15:41.960
<v Speaker 8>the fact that next year relatives this year, where they've

0:15:41.960 --> 0:15:44.320
<v Speaker 8>done about eighty billion, there's going to be more of

0:15:44.360 --> 0:15:48.880
<v Speaker 8>the stock of guilt's rolling off naturally, so redemptions occurring,

0:15:49.720 --> 0:15:52.400
<v Speaker 8>but they'll keep the active sales. The amount of active

0:15:52.440 --> 0:15:55.320
<v Speaker 8>sales roughly similar at ten billion pounds a quarter, So

0:15:55.400 --> 0:15:57.280
<v Speaker 8>that leads you to the sort of ninety billion number

0:15:57.320 --> 0:15:59.960
<v Speaker 8>that we think. Well, they'll ultimately announce, but I think

0:16:00.360 --> 0:16:03.240
<v Speaker 8>they'll probably wait till September. But as you say, Stephen.

0:16:03.240 --> 0:16:04.960
<v Speaker 8>I think there is a risk of it today, but

0:16:04.960 --> 0:16:06.400
<v Speaker 8>I don't think it's going to be a big surprise.

0:16:06.960 --> 0:16:09.880
<v Speaker 1>Yeah, And I think I would point listeners to our

0:16:09.920 --> 0:16:12.840
<v Speaker 1>Bloomberg opinion columnist Marcus Ashworth on this point. I mean

0:16:14.080 --> 0:16:16.640
<v Speaker 1>his perspective. I think it's quite interesting talking about the

0:16:16.760 --> 0:16:19.640
<v Speaker 1>very big losses of being taken on the sales, you know,

0:16:19.680 --> 0:16:23.880
<v Speaker 1>as the Bank of England does this, but the bank

0:16:24.000 --> 0:16:25.800
<v Speaker 1>is determined to sort of stay the course anyway. He

0:16:26.440 --> 0:16:28.120
<v Speaker 1>had some quiet Yeah, obviously a.

0:16:28.120 --> 0:16:29.320
<v Speaker 4>Very opinion view.

0:16:29.400 --> 0:16:32.200
<v Speaker 1>Yes, I mean quite far, but I think it's really interesting.

0:16:32.240 --> 0:16:34.520
<v Speaker 2>On the day Marcus has never met offense that he

0:16:34.560 --> 0:16:37.640
<v Speaker 2>hasn't summer assaulted over to try and move to one

0:16:38.600 --> 0:16:41.880
<v Speaker 2>point of view, Dan, I am interested in this idea

0:16:41.920 --> 0:16:45.240
<v Speaker 2>of the bank over tightening and how much it's conscious

0:16:45.280 --> 0:16:48.280
<v Speaker 2>of the risk that you know, this this is going

0:16:48.320 --> 0:16:51.080
<v Speaker 2>to push the economy into perhaps a worse recession that

0:16:51.160 --> 0:16:53.480
<v Speaker 2>it may already may or may not already be heading for.

0:16:54.160 --> 0:16:55.800
<v Speaker 8>Yeah, I mean they are going to be conscious of that.

0:16:55.840 --> 0:16:57.920
<v Speaker 8>And I think one thing that's really interesting around this

0:16:58.000 --> 0:17:00.480
<v Speaker 8>is the mood music from the government. So if you

0:17:00.520 --> 0:17:03.040
<v Speaker 8>go back to the end of May, you had the

0:17:03.120 --> 0:17:06.679
<v Speaker 8>Chancellor saying he'd be quite comfortable with recession if it

0:17:06.720 --> 0:17:10.200
<v Speaker 8>meant bringing inflation down. We've now had essentially a one

0:17:10.240 --> 0:17:14.119
<v Speaker 8>eighty with the advisors. We've had the scoop by our

0:17:14.160 --> 0:17:17.440
<v Speaker 8>Bloomberg News colleagues saying the advisers are worry about worried

0:17:17.440 --> 0:17:20.120
<v Speaker 8>about the bank overtightening now and I think I think

0:17:20.160 --> 0:17:24.160
<v Speaker 8>both those the Chancellor's initial comments would have played into

0:17:24.200 --> 0:17:27.919
<v Speaker 8>the NPC's thinking at the June meeting, giving it essentially

0:17:27.920 --> 0:17:30.399
<v Speaker 8>it's like a green light to go to go harder,

0:17:30.440 --> 0:17:32.399
<v Speaker 8>to do more. And I think, you know, in the

0:17:32.400 --> 0:17:34.760
<v Speaker 8>back of their minds, and they are an independent body,

0:17:34.800 --> 0:17:36.600
<v Speaker 8>so I'm not saying there's political influence, but I think

0:17:36.640 --> 0:17:39.040
<v Speaker 8>in the back of their minds they'll be. There'll be

0:17:39.080 --> 0:17:42.760
<v Speaker 8>some there'll be conscious that things have changed. The narrative

0:17:42.800 --> 0:17:45.680
<v Speaker 8>has changed, the narrative has changed globally as well. That's

0:17:45.680 --> 0:17:47.840
<v Speaker 8>the other thing with the FED and the ECB. But

0:17:47.880 --> 0:17:50.879
<v Speaker 8>I think domestically, I know it's only one inflation print,

0:17:51.080 --> 0:17:53.439
<v Speaker 8>but that everything looks a little bit rosier now on

0:17:53.480 --> 0:17:55.680
<v Speaker 8>the inflation front, we have recali Soon Act saying yesterday

0:17:55.800 --> 0:17:57.159
<v Speaker 8>it was like at the end of the tunnel on

0:17:57.200 --> 0:18:00.200
<v Speaker 8>the inflate in the inflation fight, so you can see

0:18:00.200 --> 0:18:02.520
<v Speaker 8>that the mood music from the government has shifted slightly,

0:18:03.640 --> 0:18:04.760
<v Speaker 8>But there is the way.

0:18:04.840 --> 0:18:06.080
<v Speaker 2>Is he right on that as they're lied at the

0:18:06.119 --> 0:18:12.240
<v Speaker 2>end of the tunnel allow inflation? How does that compare

0:18:12.280 --> 0:18:13.000
<v Speaker 2>to your forecast?

0:18:13.160 --> 0:18:15.280
<v Speaker 8>Well, I think they will get to five at the

0:18:15.400 --> 0:18:17.919
<v Speaker 8>end of this year, so they'll meet their goal of

0:18:17.960 --> 0:18:21.600
<v Speaker 8>halving inflation. The thing that I am sort of been

0:18:21.600 --> 0:18:24.119
<v Speaker 8>worried about for some time now is that it's not

0:18:24.160 --> 0:18:27.000
<v Speaker 8>getting to five or maybe even four, but it's getting

0:18:27.320 --> 0:18:31.440
<v Speaker 8>from three or four down to two. That's the challenge.

0:18:31.480 --> 0:18:33.200
<v Speaker 8>So you're going to get the easy wins, and we're

0:18:33.200 --> 0:18:36.440
<v Speaker 8>going to keep getting easy wins five to four, maybe

0:18:36.480 --> 0:18:40.399
<v Speaker 8>even three, but getting from three to two is the challenge.

0:18:40.440 --> 0:18:43.520
<v Speaker 8>And that's where you're talking about over tightening. The question

0:18:43.680 --> 0:18:46.280
<v Speaker 8>is does the bank just do what it needs to

0:18:46.320 --> 0:18:49.080
<v Speaker 8>do to get to two, because from their perspective, that

0:18:49.119 --> 0:18:52.359
<v Speaker 8>is an overtightening, that's doing their job. But perhaps from

0:18:53.160 --> 0:18:56.760
<v Speaker 8>a sort of someone in the UK's perspective, a recession,

0:18:56.840 --> 0:18:59.160
<v Speaker 8>the recession that's needed to get from three to two

0:18:59.359 --> 0:19:02.080
<v Speaker 8>would be deemed overtiming and doing too much. Will we

0:19:02.160 --> 0:19:04.960
<v Speaker 8>just be happy with three percent inflation rather than two

0:19:04.960 --> 0:19:08.240
<v Speaker 8>percent inflation if it meant not underset or creating all

0:19:08.280 --> 0:19:09.040
<v Speaker 8>these job losses.

0:19:11.119 --> 0:19:13.840
<v Speaker 2>This is Bloomberg Daybreak Europe, your morning brief on the

0:19:13.920 --> 0:19:16.960
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