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Speaker 1: This is Bloomberg Daybreak here for this Thursday, the twenty

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Speaker 1: second of June in London. Coming up today.

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Speaker 2: I'm lucky for some The Bank of England gets set

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Speaker 2: for a thirteenth consecutive rate rise.

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Speaker 1: Howel's pair the Fed Chief indicates that two more hikes

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Speaker 1: are likely this year.

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Speaker 2: Put inside for insider trading. An ex Goldman banker is

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Speaker 2: convicted of passing tips to a friend.

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Speaker 3: The age old old age question and the only way

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Speaker 3: is ethics. Those are the stories we're looking at in

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Speaker 3: today's papers. I'm James Walcock.

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Speaker 1: Plus, the search for the Titanic sub continues with less

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Speaker 1: than ten hours of air remaining. Rescuers are chasing sounds

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Speaker 1: detected underwater.

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Speaker 4: That's all straight ahead on Bloomberg Daybreak Europe. The business

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Speaker 4: news you need to start your day in just one

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Speaker 4: fifteen minute podcast on Apple, Spotify, the Bloomberg Business App

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Speaker 4: and everywhere you get your podcasts.

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Speaker 2: Good morning.

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Speaker 1: I'm Stephen Carroll and I'm Caroline Hecker. Here are the

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Speaker 1: stories that we're following today.

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Speaker 2: The Bank of England is expected to raise interest rates

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Speaker 2: by twenty five basis points today and what will be

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Speaker 2: its thirteenth increase in a row. With inflation remaining stubbornly

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Speaker 2: high at eight point seven percent, traders are betting the

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Speaker 2: Bank of England will have to accelerate the pace of

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Speaker 2: hikes again. A twenty five basis point hike would bring

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Speaker 2: the bring the bank's based rate to four point seven

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Speaker 2: five percent. Associated General's global chief economist Klaus Batter says

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Speaker 2: markets are wrong to expect a six percent terminal rate.

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Speaker 5: I'm very hesitant to use the terms take plation. I

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Speaker 5: mean we don't. We're not quite in the camp of

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Speaker 5: the six percent we I mean currently word at four

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Speaker 5: fifty We've got another two rate hikes by the Bank

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Speaker 5: of England getting us to five percent.

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Speaker 2: Klaus Batter's comments com as Bloomberg Economics is forecast that

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Speaker 2: six percent rates would knock about two percent off UK GDP.

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Speaker 2: Bwe's decision will be announced at twelve pm London time.

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Speaker 2: Will have live coverage across Bloomberg Radio, television and of

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Speaker 2: course on the terminal well.

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Speaker 1: The jump in rate Betts has fueled a renewed rise

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Speaker 1: in mortgage rates to above six percent in the UK.

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Speaker 1: The rising costs of borring will ramp up the pressure

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Speaker 1: on the one point three million households due to refinance

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Speaker 1: fixed rate loans this year. The Prime Minister is she

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Speaker 1: Soon Act says the government is doing what it can

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Speaker 1: to help.

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Speaker 6: We've also established a new FCA consumer duty that will

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Speaker 6: protect borrowers, for example, by allowing them to extend their

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Speaker 6: mortgage terns or switch to interest only mortgages. And we

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Speaker 6: have spent tens of billions of pounds supporting households with

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Speaker 6: a living cost.

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Speaker 1: But Sunac's comments come as several of his own MPs

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Speaker 1: told Bloomberg that furlough payments and energy bills support have

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Speaker 1: led voters to expect government intervention on mortgages.

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Speaker 2: Federal Reserve Chief Jerome Powerless signal that the Central Bank

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Speaker 2: will raise rates twice more this year. Here's what he

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Speaker 2: told the US House Financial Services Committee.

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Speaker 7: Almost every single of the sixteen of the eighteen participants

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Speaker 7: on the FMC wrote down that they do believe it'll

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Speaker 7: be appropriate to raise rates, and a big majority believes

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Speaker 7: razor rates twice this year. And you know, I think

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Speaker 7: that's a pretty good guess of what will happen if

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Speaker 7: the economy performs about is expected.

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Speaker 2: Pal also told lawmakers the FED is running down its

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Speaker 2: balance sheet at a pace of around one trillion dollars

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Speaker 2: a year. His comments come after the Federal Reserve paused

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Speaker 2: its series of interest rate hikes last week for the

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Speaker 2: first time in fifteen months.

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Speaker 1: The European Central Bank is pushing lenders to test how

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Speaker 1: long they'd last in a bank run, as these sector

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Speaker 1: plans for future crises Bloomberg. Samuel Etien reports.

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Speaker 8: Credit Sweezies collapse was a wake up call modern day

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Speaker 8: bank runs can happen in days rather than months, sources

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Speaker 8: tell Bloomberg. The ECB is responding it's placing more weight

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Speaker 8: on how long banks can survive with no access to funding,

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Speaker 8: instead of just their liquidity ratios. The disaster planning hasn't

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Speaker 8: stopped at the Central Bank. A survey of EU banks

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Speaker 8: says eighty seven percent have started modeling how climate change

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Speaker 8: could be a financial shock. Some are war gaming what

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Speaker 8: would happen if the fossil fuels sect to rapidly shed

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Speaker 8: value in London? Samuel Ettian, Bloomberg, Daybreak Europe.

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Speaker 2: A former Goldman Sax banker has been found guilty of

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Speaker 2: passing inside information to a once close friend. Briget Goel

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Speaker 2: was convicted in Manhattan on Wednesday of tipping our former

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Speaker 2: Barclays trader ak Shae Nuranjan about deals at Goldman. Naranjan

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Speaker 2: made two hundred and eighty thousand dollars in illegal profits

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Speaker 2: trading on the information, but later flipped on his friend.

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Speaker 2: The charges carry a maximum sentence of twenty years in prison,

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Speaker 2: though he's likely to be sentenced to much less.

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Speaker 1: International team searching for the submersible missing near the wreck

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Speaker 1: of the Titanic are zeroing in on unidentified noises detected underwater.

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Speaker 1: The chairman and co founder of Horizon Maritime Services, Sean Leet,

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Speaker 1: says that they're doing everything they can to facilitate a rescue.

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Speaker 9: The equipment that's been mobilized for this is the finest

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Speaker 9: in the world, the most capable in the world. We

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Speaker 9: have to hold old hope. I think, as you're aware,

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Speaker 9: there's still life support available on the suberstible, and we'll

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Speaker 9: continue to hold old hope until the very end.

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Speaker 1: Horizon Maritime Services are part of an international rescue effort

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Speaker 1: that includes advanced equipment and underwater robots from the United States, Canada,

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Speaker 1: and France. The five man crew of the missing mini

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Speaker 1: sub are currently thought to have less than ten hours

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Speaker 1: of air remaining. Those are our top stories this morning.

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Speaker 1: So the robots are coming apparently Stephens, well robots, maybe

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Speaker 1: that's a bit a bit ostentatious, I mean computer algorithms.

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Speaker 1: At least a couple of really interesting pieces on the

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Speaker 1: Ternel about this. So computer algorithms, Goldman Sachs is replacing

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Speaker 1: external money managers, including names like Brigade Capital Management, Marathon

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Speaker 1: Asset Management Artists and partners with computer driven algorithms. Why

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Speaker 1: they're trying to slash fees of course, and they're also

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Speaker 1: trying to rebuild dwindling assets a Goldmin Sachs that talk

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Speaker 1: about the repositioning, and this.

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Speaker 2: Is at a time that we know the JP Morgan

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Speaker 2: has been really moving very quickly to hire as many

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Speaker 2: people as possible for their push into AI as well.

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Speaker 2: Jamie Diamond has called artificial intelligence critical for the bank

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Speaker 2: as well, and they've now named Teresa Heights and Reather

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Speaker 2: as the head of its new data and analytics unit

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Speaker 2: as well. So it's an interesting shift that we're seeing

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Speaker 2: across the industry, driven as you say, by this idea

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Speaker 2: of you know, if there's more AI involved, it means

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Speaker 2: fewer people, which means cheper fees. For those who are

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Speaker 2: using the services as well. But there's also now a

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Speaker 2: huge competition among banks to try and get the people

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Speaker 2: that they need to develop the algorithms to be able

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Speaker 2: to set this whole process in motion.

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Speaker 1: Yeah. Absolutely, I mean Heights and Weather is a veteran

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Speaker 1: of JP Morgan, of course, but no, I think it's

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Speaker 1: very interesting that they are creating an entirely new department

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Speaker 1: and then all the kind of AI people within JP

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Speaker 1: Morgan will answer to her, as you say, Jamie Darmond

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Speaker 1: having talked about the importance of all of this, Yeah,

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Speaker 1: I think it's pretty fascinating. Though.

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Speaker 2: Yeah, it certainly is a little bit worrying, but we'll

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Speaker 2: try to focus too much on that. We're looking for

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Speaker 2: something to distract you from the impending robots taking your jobs.

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Speaker 2: Is a great piece from our colleagues about the summer

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Speaker 2: essentials that you can buy for your summer holidays. So

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Speaker 2: this is an article by our colleague Kristen Shirley looking

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Speaker 2: at the trends in terms of travel technology, things like

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Speaker 2: the Lomo instant camera.

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Speaker 1: This is the summer of revenge spending. Revenge travel holidays

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Speaker 1: apparently that we've long been.

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Speaker 2: Because airfares are so high people are thinking, well, I

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Speaker 2: just won't. Maybe I'll just spend money on some accessories instead. Yes,

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Speaker 2: maybe your eye out of this list.

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Speaker 1: Yeah, I mean it's got some pretty fancy gear, actually

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Speaker 1: doesn't it watches, handbags, summer time pieces.

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Speaker 2: Something for everyone. Yeah, there's actually similarly looking time pieces

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Speaker 2: as well in this too. So anyway, look, that's a

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Speaker 2: bit of holiday inspiration if you're looking outside of the

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Speaker 2: nice weather today and wondering what it's going to be

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Speaker 2: like when you get to take a break this summer.

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Speaker 3: At least.

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Speaker 2: Of course, the focus today will be on what exactly

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Speaker 2: the Bank of England says, given that we had that

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Speaker 2: hotter than expected inflation number yesterday. Our UK correspondent Lizzie

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Speaker 2: Burden is with us for more on this. Lizzie, we

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Speaker 2: were all there were sharp intakes of breath all around

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Speaker 2: in the studio yesterday when we got that number from

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Speaker 2: a eight point seven percent. How much will that hot

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Speaker 2: inflation point have changed the game for the Bank of England.

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Speaker 10: Well, it means that half point hike today is potentially

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Speaker 10: on the table markets. The your forty percent chance of

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Speaker 10: that happening. But economists do still expect just a quarter

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Speaker 10: point hike, it'd still be the thirteenth in a row.

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Speaker 10: It takes rates to four point seventy five percent. But

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Speaker 10: remember five percent is the level that the bank itself

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Speaker 10: last summer identified as the level that could trigger debt distress.

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Speaker 10: But when you've had four straight upside inflation surprises, some

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Speaker 10: say you need to get a grip of it with

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Speaker 10: a jumbo hike, and that's why economists aren't ruling it

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Speaker 10: out that the fact is, though they say it's more

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Speaker 10: likely in August. We were talking to Dan Hanson, our

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Speaker 10: senior UK economist, about this yesterday. Really he says it's

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Speaker 10: going to be easier to get back to the language

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Speaker 10: of acting forcefully with a press conference with forecasts, and

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Speaker 10: we'll have to wait till August for that. We haven't

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Speaker 10: had a half point hike since February. Plus by August,

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Speaker 10: Silvana Tenreirow, one of the big doves on the committee,

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Speaker 10: is going to have left to be replaced by Megan Green.

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Speaker 10: She's been making hawkish noises lately. As for this meeting,

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Speaker 10: though you could see a three way split. You could

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Speaker 10: have doves like Silvanum Tenrairow and swatted Ingra voting for

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Speaker 10: a hold, Catherine Mann at the other end going for

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Speaker 10: a half point hike, and the rest in the middle

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Speaker 10: going for twenty five basis points.

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Speaker 1: But those real concern isn't there out of that data

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Speaker 1: that we had yesterday that core inflation is going up,

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Speaker 1: that its services, that it's the domestic economy that is

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Speaker 1: seeing that inflation. So sort of blaming it, you know,

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Speaker 1: on energy prices from the war in Ukraine or even

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Speaker 1: breaks it seems a little bit outdated. But as you say,

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Speaker 1: there's no press conference today, so what are we going

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Speaker 1: to be looking at in the Bank of England statements.

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Speaker 10: Well, it's all about the future path for rates. So

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Speaker 10: markets now fully pricing that rates will peak at six

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Speaker 10: percent by December, some traders even seeing six point two

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Speaker 10: five percent. Bloomberg Economics reckons if you have rates at

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Speaker 10: six percent, that would trigger a recession, a two percent

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Speaker 10: drop in GDP, which is why there's this skepticism that

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Speaker 10: the bank would actually go that far. The question today

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Speaker 10: is really whether the governor is going to push back

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Speaker 10: against market expectations. It's not something that officials usually do,

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Speaker 10: they don't see it as their job, but they do

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Speaker 10: make exceptions sometimes, like we saw in November. Will they

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Speaker 10: do it again today? What if the market ignores them?

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Speaker 10: It then becomes a question of credibility.

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Speaker 2: Okay, twelve pm UK time one will have that decision.

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Speaker 2: Lizzie Burden, thank you so much for taking us through

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Speaker 2: all of that.

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Speaker 1: Up next, the age Old Old Age Question and the

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Speaker 1: only way is ethics.

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Speaker 4: Now the Paper Review on blue Bird Daybreak Europe. The

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Speaker 4: news you need to know from today's papers.

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Speaker 8: Boom.

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Speaker 2: James Wilcock is with us now for details in the

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Speaker 2: stories and to explain those terrible puns. James, James Wilcock,

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Speaker 2: good morning to you. Let's start in the Financial Times.

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Speaker 2: They're rising about the Resolution Foundation's work on pension super funds.

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Speaker 3: I mean, this is the age old old age question

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Speaker 3: that I forced Caroline to read out just a moment ago.

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Speaker 3: Now we've been talking about this for quite some time,

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Speaker 3: which is why it's the age old question. I mean

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Speaker 3: Caroline has had the mayor to in London on who's

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Speaker 3: talking about pension from consolidation. Many think tanks, including both

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Speaker 3: political parties, are putting out ideas. The Resolution Foundation have

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Speaker 3: a report out this morning and what's fascinating is just

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Speaker 3: to see a bit more flesh on the bones of

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Speaker 3: what they're calling for. They want consolidation of ninety percent

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Speaker 3: of Britain's pension funds. That's the little level we're talking here,

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Speaker 3: because they see it as it's not necessarily a lack

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Speaker 3: of capital. That's the other big headline figure though for them,

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Speaker 3: it is actually what they see as a issue where

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Speaker 3: the UK, uniquely compared to other companies and issues in Europe,

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Speaker 3: has very little large corporate governance, in that you have

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Speaker 3: lots of small hedge funds and lots of small pension

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Speaker 3: funds and not many large voices on the table who

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Speaker 3: are saying you need to deliver returns, you need to

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Speaker 3: grow as a business, you need to be sort of

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Speaker 3: pushing for more riskier activities. And so they're saying that

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Speaker 3: actually there is a big issue where a lot of

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Speaker 3: pension fund managers don't do much in the way of

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Speaker 3: corporate governance.

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Speaker 4: Yeah.

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Speaker 1: I mean, is this the unintended consequence of the twenty

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Speaker 1: fifteen pension freedom So the major reform in terms of

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Speaker 1: allowing people you know, much more say over their defined

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Speaker 1: contribution pension schemes. Yeah, And it ties into also, of

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Speaker 1: course how much risk the UK is prepared to take

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Speaker 1: and you know how you create growth and invest in Britain.

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Speaker 3: Exactly, And I mean they also sort of say that

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Speaker 3: you could try and mandate this in terms of say

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Speaker 3: labor of talking about creating a business band. The Conservatives say,

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Speaker 3: looking at say the PPF, which is the Safety Net

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Speaker 3: Fund as ways of driving investment is that's one way.

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Speaker 3: But this is also partly about attitude. And they keep

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Speaker 3: coming back to that. Now, whether that it was that

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Speaker 3: reforming twenty fifteen that you point out, Caroline or not.

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Speaker 3: They go back to the two thousands and they say

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Speaker 3: the UK has uninvested less than yes sin say US

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Speaker 3: or Germany or France over a two decade period and

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Speaker 3: that adds up to four percent and lost GDP.

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Speaker 1: They say, yeah, absolutely enormous. They also say that, yeah,

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Speaker 1: perhaps in Europe you have more workers on boards as well,

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Speaker 1: encouraging the risk taking investing.

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Speaker 2: Okay, James. Meanwhile, academic journals and the filancial times are

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Speaker 2: getting into academic dishonesty. Thus the creation of your masterpiece.

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Speaker 2: The only way is ethics. Well, not my massive fees.

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Speaker 3: I don't make credit for that show, but I like

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Speaker 3: when I was a philosophy student one of my favorite

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Speaker 3: philosophy papers looked at the problem with ethics professors, the

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Speaker 3: idea being is are they any better than the rest

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Speaker 3: of us? Found that inner libraries, they went through all

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Speaker 3: the US and British libraries, academic libraries, compared to any

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Speaker 3: other books, ethic speciors on average had more overdue books

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Speaker 3: and more missing books than other professions. So are they

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Speaker 3: actually better? And so this story that has taken a

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Speaker 3: hold in science, and it is also in the ft

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Speaker 3: in that Francesca Gino is one of Harvard Business Schools

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Speaker 3: best known behavioral scientists, and she works on rebel Talent

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Speaker 3: to twenty eighteen book with why it Pays to break

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Speaker 3: the rules at work and at life. And it seems

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Speaker 3: it's being alleged that a lot of her data may

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Speaker 3: have been made up. And this comes as part of

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Speaker 3: a wider crisis we're seeing in sort of replicability in

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Speaker 3: behavioral sciences. This includes economics and a lot of other

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Speaker 3: psychology testing of like quite how far a lot of

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Speaker 3: this stuff is true and is believable? And it is

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Speaker 3: this sort of the catchy hook of it is the

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Speaker 3: professor who's been studying whether the stuff is believable and

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Speaker 3: how people lie that also might have made up their

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Speaker 3: own data.

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Speaker 1: Wow, that's quite some accusation. Okay, very interesting.

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Speaker 2: Just a word on Guardian and university students.

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Speaker 3: Yes, I mean, we're having such a big focus on

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Speaker 3: labor market here. It's interesting to see how that's affecting

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Speaker 3: the next generation. Two years ago, thirty five per cent

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Speaker 3: of students, so they were taking on paid work to

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Speaker 3: make meet with the studies. This year, according to the

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Speaker 3: survey of the Higher Education Policy Institute, that's ow fifty

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Speaker 3: five percent. So we're looking at how this is impacting

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Speaker 3: the rest of labor market, and we are a bit troubled.

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Speaker 3: I mean, Lizzy was just traversing Dan Hansen's confusion over

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Speaker 3: this stuff. The student market is one area where it

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Speaker 3: is working as intended. Higher inflation is making people go

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Speaker 3: to the labor market. But the flip side is that

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Speaker 3: is impacting their studies. It is saying that now it

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Speaker 3: is at the point where twenty percent of students feel

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Speaker 3: that they need to work to study, and if you

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Speaker 3: work more than seventeen hours, that is where the dropout

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Speaker 3: rates start to go up.

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Speaker 2: This is Bloomberg Daybreak Europe. You're a morning brief on

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Speaker 2: the stories making news from London to Wall Streets and beyond.

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Speaker 1: I'm Caroline Hepka and.

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Speaker 2: I'm Stephen Carroll. Join us again tomorrow morning for all

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