WEBVTT - Bloomberg Daybreak Weekend: Fed, BoJ, UK Banks 0:00:02.520 --> 0:00:04.920 This is Bloomberg day Break Weekend, our global look at 0:00:04.960 --> 0:00:07.240 the top stories in the coming week from our Daybreak 0:00:07.240 --> 0:00:09.600 anchors all around the world, and straight ahead on the 0:00:09.600 --> 0:00:13.400 program gearing up for a highly anticipated Bedrooll Reserve decision. 0:00:13.520 --> 0:00:14.840 I'm Tom Busby in New York. 0:00:14.960 --> 0:00:17.440 I'm Brian Curtis in Hong Kong. We check in with 0:00:17.480 --> 0:00:22.000 Bloomberg's Kathleen Hayes on the boj Will they or won't They? 0:00:22.400 --> 0:00:25.040 I'm Caroline Hepga in London, where we've been speaking to 0:00:25.160 --> 0:00:27.960 Nigel Fouers about the decision by coops to close his 0:00:28.080 --> 0:00:28.840 bank accounts. 0:00:28.960 --> 0:00:31.560 I'm Kaylee Lyons in Washington, where the Biden family is 0:00:31.600 --> 0:00:34.360 brison for Hunter Biden to appear in a Delaware court. 0:00:35.440 --> 0:00:39.720 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg Eleve, 0:00:39.760 --> 0:00:43.280 the three own New York, Bloomberg ninety nine to one, Washington, DC, 0:00:43.600 --> 0:00:47.680 Bloomberg one O six one, Boston, Bloomberg nine sixty, San Francisco, 0:00:47.880 --> 0:00:52.080 DAB Digital Radio, London, Sirius XM one nineteen and around 0:00:52.159 --> 0:00:54.800 the world on Bloomberg Radio dot com and via the 0:00:54.840 --> 0:00:56.000 Bloomberg Business app. 0:01:00.080 --> 0:01:01.880 Good day to you. I'm Tom Busby, and we begin 0:01:01.920 --> 0:01:05.000 today's program with the FEDS big policy meeting coming up 0:01:05.000 --> 0:01:08.160 this week, which Bloomberg Radio will be covering live. Now 0:01:08.240 --> 0:01:10.039 joining me now to talk about what could be a 0:01:10.160 --> 0:01:14.399 pivotal decision from the Central Bank. Bloomberg's Global Economics and 0:01:14.440 --> 0:01:17.440 Policy editor Michael mckeep well. The Federal Open Market Committee 0:01:17.440 --> 0:01:19.880 will wrap up a big two day meeting this Wednesday 0:01:20.080 --> 0:01:22.640 with a decision on interest rates and a press conference 0:01:22.720 --> 0:01:23.440 from Chairman J. 0:01:23.600 --> 0:01:24.000 Powell. 0:01:24.480 --> 0:01:27.360 What do you see happening? Do they pause again? Do 0:01:27.400 --> 0:01:30.840 they hike by how much? What is Chairman Powell expected 0:01:30.880 --> 0:01:32.320 to signal for the rest of the year. 0:01:32.560 --> 0:01:34.880 You know, they better move or there could be a 0:01:34.920 --> 0:01:37.520 lot of disappointed people on Wall Street. Futures markets are 0:01:37.520 --> 0:01:41.280 pricing in at this point a ninety five percent chance 0:01:41.640 --> 0:01:43.640 that they will raise rates, which is as good as 0:01:43.640 --> 0:01:47.000 one hundred percent given the complexities of figuring all that out, 0:01:47.480 --> 0:01:50.360 and so you can expect a rate increase twenty five 0:01:50.400 --> 0:01:53.919 basis points. Then the question becomes, what does J. Powell 0:01:53.920 --> 0:01:55.840 tell us about the future. We do not get a 0:01:55.920 --> 0:01:59.280 new set of Dot plot projections, and we don't get 0:01:59.320 --> 0:02:03.320 new economic projections, but in general economists think inflation will 0:02:03.360 --> 0:02:06.200 continue to fall for a little bit, and unemployment will 0:02:06.240 --> 0:02:08.960 hang in around the level it is. So does that 0:02:09.000 --> 0:02:11.600 mean the FED is done? They did tell us in 0:02:11.680 --> 0:02:13.840 June they thought they would go two more times, So 0:02:14.000 --> 0:02:17.079 is that second one still on the table, And if so, 0:02:17.440 --> 0:02:20.840 would it be in September at the next meeting or 0:02:20.880 --> 0:02:24.160 would they do another skip and go on to November. 0:02:24.480 --> 0:02:27.040 So the press conference is going to draw a lot 0:02:27.120 --> 0:02:27.799 of interest. 0:02:27.960 --> 0:02:30.120 Well, let's break down some of the data points that 0:02:30.240 --> 0:02:32.520 Chairman Palell and the other members of the FED are 0:02:32.560 --> 0:02:35.040 going to use to determine this decision. CPI. 0:02:35.360 --> 0:02:38.160 For June, the CPI numbers were very encouraging because they 0:02:38.160 --> 0:02:42.160 came in lower than anticipated, and a lot of categories 0:02:42.240 --> 0:02:45.520 did show some movement in the direction the FED wants, 0:02:45.560 --> 0:02:49.760 including rents, used cars, things that have been keeping the 0:02:50.360 --> 0:02:54.840 CPI higher. So if you believe that trend is going 0:02:54.880 --> 0:02:57.680 to continue, and the FED does believe that rents will 0:02:57.720 --> 0:03:00.320 continue to go down and use car prices acording to 0:03:00.360 --> 0:03:03.160 wholesalers are going to continue to go down, then that 0:03:03.200 --> 0:03:06.079 could be good news. They'll be watching the services industries 0:03:06.440 --> 0:03:10.560 to see if wage pressure is driving the service industry 0:03:10.960 --> 0:03:15.040 inflation higher, but so far in the last couple of months, 0:03:15.080 --> 0:03:18.240 it hasn't been, so the FED is on track. It 0:03:18.320 --> 0:03:21.800 just gets to the point where, because we've only got 0:03:22.080 --> 0:03:24.200 a percentage point to go on the CBI down to 0:03:24.240 --> 0:03:28.480 two percent, that it takes a little more than you 0:03:28.840 --> 0:03:32.959 each month to bring it down faster. We get very 0:03:33.000 --> 0:03:35.920 small moves and that's good news, but it isn't where 0:03:35.960 --> 0:03:36.480 they want to be. 0:03:36.760 --> 0:03:40.560 But the labor market resilient, still strong, the jobless rate 0:03:40.680 --> 0:03:43.360 last month falling down a three point six percent in June. 0:03:43.880 --> 0:03:45.040 That's got to be encouraging. 0:03:45.120 --> 0:03:49.400 Well, that's an argument that the FED has been considering 0:03:49.960 --> 0:03:53.240 for a couple of years now. They have felt, and 0:03:53.400 --> 0:03:55.920 most economists felt, that you have to drive unemployment up 0:03:55.920 --> 0:03:58.800 because historically that's what you do to bring down demand. 0:03:59.160 --> 0:04:02.040 But demand seems to be softening and inflation seems to 0:04:02.080 --> 0:04:05.760 be coming down without unemployment rising. Last month it actually 0:04:05.840 --> 0:04:09.840 went down a tick. So is this time different? It 0:04:09.920 --> 0:04:13.320 does seem that way. We had some economists saying you 0:04:13.320 --> 0:04:15.920 had to go as high as six percent. FED now 0:04:15.960 --> 0:04:18.520 thinks that you'll get to four point one percent. But 0:04:18.960 --> 0:04:21.560 is that even going to be the case. It's not 0:04:21.600 --> 0:04:23.560 going to matter to them. They'd be very happy to 0:04:23.680 --> 0:04:27.880 leave unemployment at three point six percent if inflation comes down, 0:04:28.200 --> 0:04:33.080 because that might show this is a different kind of recovery. 0:04:33.240 --> 0:04:35.800 Now, this doesn't impact the Fed's thinking too much, but 0:04:35.839 --> 0:04:38.760 certainly Wall Street and that is bank earnings have been 0:04:38.800 --> 0:04:41.960 a lot stronger than forecasts coming off that crisis in March. 0:04:42.240 --> 0:04:45.080 Everyone on Wall Street expecting the same thing. With tech 0:04:45.160 --> 0:04:46.520 earnings that are coming up. 0:04:46.440 --> 0:04:48.080 Well, you got to think that maybe the same thing 0:04:48.120 --> 0:04:49.880 will happen. The tech earnings will be a little bit 0:04:49.920 --> 0:04:52.800 better than anticipated. I was at a conference last week 0:04:52.800 --> 0:04:57.239 with some tech officials who said the business is pretty 0:04:57.240 --> 0:05:02.159 good and that the worst is over for the tech industry. 0:05:02.760 --> 0:05:07.240 There has been a lot of talk that we're still 0:05:07.279 --> 0:05:10.799 having trouble finding workers, and therefore companies are going more 0:05:11.040 --> 0:05:15.640 into automation, which should help boost that sector. And the 0:05:15.680 --> 0:05:19.359 other thing, of course, obviously, is AI artificial intelligence and 0:05:19.680 --> 0:05:22.280 what that means and how fast that is expanding. 0:05:22.360 --> 0:05:24.800 Let's turn to someone we haven't heard from it in 0:05:24.800 --> 0:05:28.360 a while, former FED chairman Ben Bernanke. Just last week 0:05:28.800 --> 0:05:31.760 he said on a webinar organized by Fidelity Investments he 0:05:31.839 --> 0:05:34.040 thinks the FED will raise rates by another twenty five 0:05:34.080 --> 0:05:37.000 basis points. This week, As you mentioned, ninety five percent 0:05:37.040 --> 0:05:39.480 of economists do. But he also said it might be 0:05:39.560 --> 0:05:41.200 the last one for the year. Now, what are your 0:05:41.200 --> 0:05:41.920 thoughts on that. 0:05:41.839 --> 0:05:44.440 Well, you'd have to parse that and whether he means 0:05:44.440 --> 0:05:46.520 they'll do something next year. But one assumes that he 0:05:46.640 --> 0:05:48.839 means that's it, that this is the end of the 0:05:48.880 --> 0:05:52.040 tightening cycle. Then the question moves on to how long 0:05:52.120 --> 0:05:56.240 does the FED leave rates high? Markets think by March 0:05:56.320 --> 0:05:59.200 or April, the Fed might be cutting rates, not because 0:05:59.240 --> 0:06:03.440 the economy is in recession, that narrative is starting to change, 0:06:03.480 --> 0:06:07.839 but because inflation is coming down, so that pushes up 0:06:07.920 --> 0:06:11.120 real rates if that happens, and they want to keep 0:06:11.160 --> 0:06:14.080 those from getting too high, So they might be cutting 0:06:14.120 --> 0:06:17.240 rates in response to a much lower inflation rate. But 0:06:17.360 --> 0:06:22.680 that's months away. We'll see if ben Berdenke's prognostication is 0:06:22.720 --> 0:06:24.360 any better than anyone else's now. 0:06:24.400 --> 0:06:26.839 In the upcoming months, there's a few things that could 0:06:26.960 --> 0:06:31.000 really impact the Fed's thinking, the markets, the general economy, 0:06:31.360 --> 0:06:33.680 and let's break down a few of these. Number one, 0:06:34.720 --> 0:06:38.880 labor strife. There are things going on right now. Since 0:06:39.000 --> 0:06:42.839 May second, we've had this writer strike, now a sag 0:06:42.880 --> 0:06:44.920 after it, But there are a few others you're watching closely. 0:06:45.000 --> 0:06:49.080 Yeah, the thing for the FED is that, yes, the 0:06:49.200 --> 0:06:52.279 data have been going in the right direction, but there is, 0:06:52.320 --> 0:06:54.520 as you mentioned, a lot that could change that, and 0:06:54.680 --> 0:06:59.640 of course one of them is the possibility of labor action. Obviously, 0:06:59.680 --> 0:07:03.480 the the actors and writers are on strike already. The 0:07:03.760 --> 0:07:08.160 Yellow truck Company Yellow Trucking is looking at a possible 0:07:08.200 --> 0:07:10.320 strike at the end of July, and that would be 0:07:10.360 --> 0:07:15.160 about one hundred thousand workers. UPS and the Teamsters are negotiating, 0:07:15.600 --> 0:07:20.400 and that's over two hundred thousand workers. So we could 0:07:20.440 --> 0:07:26.240 see some major issues out there with people being off work. 0:07:26.280 --> 0:07:29.160 And if you're off work and you're being paid on 0:07:29.200 --> 0:07:32.920 a strike fund, you're getting less money and so you're 0:07:32.960 --> 0:07:35.840 spending may go down. Now, the FED would look past 0:07:35.920 --> 0:07:41.080 that initially to see if these things get settled quickly, 0:07:41.360 --> 0:07:43.080 and if they do, it really isn't going to have 0:07:43.160 --> 0:07:45.120 much of an impact. But if those things drag on, 0:07:45.640 --> 0:07:49.160 then you could see major problems. Not to mention that 0:07:49.760 --> 0:07:52.760 bad enough that Yellow Trucking might be down, but if 0:07:52.880 --> 0:07:58.400 UPS stops delivering packages, that slows the whole economy because 0:07:58.400 --> 0:08:00.680 so much of it is intermediate good that gets then 0:08:00.720 --> 0:08:05.400 put into other goods, and so you could have a 0:08:05.520 --> 0:08:09.600 real roadblock. I guess we go back to this supply 0:08:09.760 --> 0:08:13.160 chain problems that we've been worried about for years. Those 0:08:13.240 --> 0:08:15.600 come back and the economy takes a hit. 0:08:15.720 --> 0:08:18.400 Well, another thing they come back is food inflation after 0:08:18.520 --> 0:08:23.040 Russia broke a grain export agreement, which is obviously already 0:08:23.080 --> 0:08:25.120 having an impact not so much here in the US, 0:08:25.480 --> 0:08:28.480 but in Africa, in the Middle East, in Europe, and 0:08:29.040 --> 0:08:31.480 that could really burge in into something really awful. 0:08:31.560 --> 0:08:34.160 Yeah, that's a little bit longer term because and let's 0:08:34.200 --> 0:08:37.959 say we've got good grain supplies. It's gonna be a 0:08:37.960 --> 0:08:41.040 good harvest year in the Western Hemisphere, and so the 0:08:41.040 --> 0:08:42.520 grain's going to be out there, be a little more 0:08:42.559 --> 0:08:45.760 expensive because it has to travel longer distances. But next 0:08:45.920 --> 0:08:50.160 year you run into a problem. And so the FED 0:08:50.920 --> 0:08:54.320 can't go to sleep on this and say, well, inflation 0:08:54.520 --> 0:08:57.400 is going to go away. When this is lurking out there. 0:08:57.440 --> 0:09:01.480 They can't do anything about food inflation, but it does 0:09:01.880 --> 0:09:06.400 influence psychology, and if you're cutting back on spending because 0:09:06.600 --> 0:09:09.200 you're having to pay more for food, that's a problem. 0:09:09.440 --> 0:09:11.960 The other issue that comes out of the war is 0:09:12.040 --> 0:09:17.120 also energy. Energy prices. What's OPEC and OPEC plus which 0:09:17.160 --> 0:09:19.319 includes Russia going to do? Are they going to keep 0:09:19.360 --> 0:09:23.520 cutting rates? So I mean keep raising prices cutting I'm 0:09:23.559 --> 0:09:26.319 thinking FED keep raising prices so they can make up 0:09:26.360 --> 0:09:30.319 for some of the lost revenue they've gotten to come 0:09:30.640 --> 0:09:34.240 more countries start trying to evade the embargoes on oil 0:09:35.360 --> 0:09:38.800 energy prices could be another wild card for the FED 0:09:38.840 --> 0:09:39.599 out there. 0:09:39.520 --> 0:09:43.360 And another really bump on the horizon, but maybe be 0:09:43.440 --> 0:09:46.280 more impactful for the fed's next meeting in September. But 0:09:46.600 --> 0:09:49.600 the resumption of federal student loan payments. 0:09:49.360 --> 0:09:51.400 That is going to be an interesting question because we 0:09:52.080 --> 0:09:54.240 have a lot of numbers, but we don't know exactly 0:09:54.320 --> 0:09:58.400 how this will play out. In September, they start collecting 0:09:58.440 --> 0:10:01.040 interest again on the loans, and in October people have 0:10:01.120 --> 0:10:04.480 to start paying. And so the question is have people 0:10:04.520 --> 0:10:06.880 been spending all this extra money on other things and 0:10:06.920 --> 0:10:09.440 that spending goes away and the money goes straight back 0:10:09.480 --> 0:10:14.320 to the student loan servicers and sort of disappears from 0:10:14.320 --> 0:10:19.840 the overall economy. There are some surveys that show a 0:10:19.880 --> 0:10:23.480 lot of people continued to make their payments even though 0:10:23.480 --> 0:10:27.000 they didn't have to. So if they did, then you 0:10:27.120 --> 0:10:31.560 won't see a huge a huge problem, but it is 0:10:31.720 --> 0:10:35.520 expected to hit a significant number of people, especially at 0:10:35.559 --> 0:10:38.440 the lower levels of income, who spend pretty much everything 0:10:38.440 --> 0:10:41.040 they have, and so that could be another problem. 0:10:41.120 --> 0:10:44.680 That was Bloomberg's Global Economics and Policy editor Michael McKee, 0:10:44.679 --> 0:10:47.200 and coming up on Bloomberg day Break weekend, decision day 0:10:47.400 --> 0:10:49.800 for the Bank of Japan also about to hit us 0:10:49.960 --> 0:11:03.200 this week. I'm Tom Busby, and this is Bloomberg. This 0:11:03.360 --> 0:11:06.040 is Bloomberg Daybreak Weekend, our global look ahead at the 0:11:06.040 --> 0:11:08.880 top stories for investors in the coming week. I'm Tom 0:11:08.920 --> 0:11:11.920 Busby in New York. As we've been reporting, investors are 0:11:11.960 --> 0:11:15.320 watching the coming week's Federal Reserve meeting. We're also watching 0:11:15.320 --> 0:11:18.640 events in Togyo very closely. And for more, let's go 0:11:18.679 --> 0:11:22.320 to Hong Kong and Bloomberg Daybreak Asia host Brian Curtis. 0:11:22.720 --> 0:11:25.200 Tom, we look forward to the upcoming meeting of the 0:11:25.240 --> 0:11:28.520 Bank of Japan with more than an ounce of anticipation. 0:11:29.000 --> 0:11:34.240 Calls abound for change in the boj's ultra loose monetary policy. However, 0:11:34.400 --> 0:11:38.000 Governor Kazua Ueitas said recently that the central Bank was 0:11:38.080 --> 0:11:42.400 continuing with easing on the premise, the premise that Japan 0:11:42.679 --> 0:11:46.400 is still some distance from achieving its two percent inflation goal. 0:11:46.800 --> 0:11:49.440 Now we set a change in that premise is needed 0:11:49.760 --> 0:11:52.880 in order to shift policy. The end weakened as the 0:11:52.920 --> 0:11:56.520 market appeared to conclude that no change is in the offing. 0:11:56.920 --> 0:11:59.679 Yet some strategists are saying that they won't rule out 0:11:59.679 --> 0:12:03.360 a change in yield curve control policy sometime soon. 0:12:03.760 --> 0:12:03.920 Well. 0:12:04.000 --> 0:12:06.319 Joining us now for some insights on all of this 0:12:06.400 --> 0:12:11.400 is Kathleen Hayes, Bloomberg's Global Economics and Policy editor. Kathleen 0:12:11.480 --> 0:12:15.040 the boj has a tradition of not liking to be 0:12:15.040 --> 0:12:17.920 pushed around to a certain degree by the media or 0:12:18.000 --> 0:12:22.439 the investor community. So it seems like people are expecting something. 0:12:22.480 --> 0:12:24.920 Does that maybe mean given that that we might see 0:12:24.960 --> 0:12:26.240 more delay, Well. 0:12:26.080 --> 0:12:29.240 People have changed their minds. It's interesting, Brian. If you 0:12:29.360 --> 0:12:34.080 look at the Bloomberg Eco team survey that they did 0:12:34.360 --> 0:12:37.640 just in these past few days, you'll see that in 0:12:38.040 --> 0:12:40.600 they do an April survey, they do a July survey. 0:12:41.040 --> 0:12:44.120 They do these surveys before the meetings. Anyway, before people 0:12:44.160 --> 0:12:47.000 were looking forty percent of them thought that there would 0:12:47.080 --> 0:12:50.600 be some kind of move of this July meeting, and 0:12:50.960 --> 0:12:54.719 now it's eighty two percent who don't see a move 0:12:54.840 --> 0:12:59.240 at this meeting. People are now looking to October, nothing 0:12:59.280 --> 0:13:02.280 in September, something in October. And if you add up 0:13:02.320 --> 0:13:04.480 all the people who see a chance of July and 0:13:04.520 --> 0:13:07.120 the people who see a chance of September and then October, 0:13:07.200 --> 0:13:09.640 you get over fifty percent. So that's where the market 0:13:09.679 --> 0:13:10.640 expectation has moved. 0:13:11.440 --> 0:13:14.560 The BOJ is a funny institution. It's unlike they're fed 0:13:14.640 --> 0:13:17.120 in that it does like to surprise markets. 0:13:17.160 --> 0:13:20.240 Why is that, Well, it's kind of old fashioned if 0:13:20.240 --> 0:13:22.040 you ask me. That's what Paul Wolker used to do. 0:13:22.160 --> 0:13:24.440 And back in the day, back when you had the 0:13:24.559 --> 0:13:27.160 worst still inflation ever in the US, he wanted to 0:13:27.160 --> 0:13:29.120 get more impact on the markets. And I expect that 0:13:29.160 --> 0:13:32.959 the BOJ has that same sense that if you want 0:13:33.120 --> 0:13:36.319 markets to react, if you want expectations to change, when 0:13:36.360 --> 0:13:42.319 you surprise people, you have a longer lasting effect potentially. 0:13:43.080 --> 0:13:46.040 Yeah, and Alan Greenspan didn't exactly tip his hand. 0:13:45.880 --> 0:13:47.800 Much, did he not, like they knew nowadays? 0:13:48.160 --> 0:13:50.600 Yeah, absolutely, So how likely is it then, do you 0:13:50.640 --> 0:13:53.839 think that we might see perhaps something like yield curve 0:13:53.960 --> 0:13:56.280 control adjusted at the next meeting. 0:13:56.800 --> 0:14:00.760 Not too likely. What I has struck me so far 0:14:00.960 --> 0:14:04.960 has become a very good communicator. He keeps saying that 0:14:05.240 --> 0:14:07.720 he just wants to be sure that inflation is stably 0:14:07.840 --> 0:14:12.400 and sustainably at two percent, and he often refers to 0:14:12.840 --> 0:14:15.920 twenty twenty two when he was back on the board 0:14:15.920 --> 0:14:19.480 of the BOJ and he dissented against a hike. They 0:14:19.480 --> 0:14:21.400 went ahead and hiked, and it turned out what was 0:14:21.400 --> 0:14:23.720 the wrong thing to do. Japan economy fell back. They 0:14:23.760 --> 0:14:25.880 had to cut raids. And I've been told there's a 0:14:25.880 --> 0:14:29.440 lot of BOJ staffers, you know, they've been there since 0:14:29.480 --> 0:14:32.680 then and they don't want to make that mistake again. 0:14:32.760 --> 0:14:36.560 And as I recall recently, former Deputy Governor Marca Tabe 0:14:36.920 --> 0:14:40.200 told me, you know, the BOJ wants to be behind 0:14:40.240 --> 0:14:42.160 the curve. They don't want to get out front because 0:14:42.200 --> 0:14:44.240 they want to make sure that they don't mess things up. 0:14:44.280 --> 0:14:45.960 And they feel that they for now they can wait. 0:14:45.960 --> 0:14:48.840 The YenS well behaved, the bond market's better behave. There's 0:14:48.920 --> 0:14:51.200 just no big pressure on them. And even though inflation 0:14:51.320 --> 0:14:54.600 is so far over target, and even though they'll probably 0:14:54.680 --> 0:14:58.680 boost their inflation forecast at the next meeting to just 0:14:59.360 --> 0:15:03.080 two point three per perhaps is what our survey said. 0:15:03.200 --> 0:15:04.560 They don't feel in a hurry to move. 0:15:05.400 --> 0:15:09.560 It's an interesting environment. Policy makers clearly think that the 0:15:09.600 --> 0:15:12.840 current levels of inflation are not sticky, and we've seen 0:15:12.880 --> 0:15:16.200 a lot of sticky inflation everywhere around the world, but 0:15:16.320 --> 0:15:19.360 the policymakers in Japan think that they will receive One 0:15:19.360 --> 0:15:23.479 of the main reasons that they think inflation will fall back. 0:15:23.800 --> 0:15:25.600 Well, one of the things they're watching very closely is 0:15:25.640 --> 0:15:29.080 the global economy. And in fact, another thing I was 0:15:29.160 --> 0:15:32.000 recently told we should be watching for is a change 0:15:32.040 --> 0:15:35.120 in the GDP outlook to less growth next year. And 0:15:35.160 --> 0:15:38.080 look what's happening in China, right, I mean, they're a 0:15:38.120 --> 0:15:42.760 big driver in the Asian economy. Overall, US economy holding 0:15:42.840 --> 0:15:45.240 up pretty well, but if the FED keeps hiking, what 0:15:45.280 --> 0:15:48.640 does that mean for demand for Japanese exports. I think 0:15:48.720 --> 0:15:52.880 that's a factor. The wage increases this past year were 0:15:52.920 --> 0:15:56.680 pretty good, and in terms of there's the summer bonuses 0:15:56.920 --> 0:15:59.640 which would start going out now, which apparently are still 0:15:59.640 --> 0:16:03.920 expect to be pretty good. But there's just that chance 0:16:04.440 --> 0:16:08.000 that you know that something will happen that it isn't 0:16:08.000 --> 0:16:10.720 that inflation they're going to have deflation. It's just not 0:16:10.840 --> 0:16:13.960 that they're going to have inflation staying so far above 0:16:14.760 --> 0:16:17.240 two percent on the core right now. I believe it's 0:16:17.280 --> 0:16:19.560 at like three point two to three point three percent 0:16:19.680 --> 0:16:22.040 year over there. That takes out fresh food prices. But 0:16:22.400 --> 0:16:25.880 they I think they still see not that they're so vulnerable, 0:16:25.880 --> 0:16:28.120 but the global economy is vulnerable, and that's something that 0:16:28.240 --> 0:16:28.760 keep an eye on. 0:16:29.440 --> 0:16:32.440 So obviously there's a lot of debate about growth, global growth, 0:16:32.600 --> 0:16:34.720 US growth. If we don't get a recession, if we 0:16:34.760 --> 0:16:38.120 actually have a little bit stronger growth than expected, I 0:16:38.120 --> 0:16:40.560 wonder whether or not that counter is the trend of 0:16:40.600 --> 0:16:44.520 what the boj would be. You know, that inflation would 0:16:44.560 --> 0:16:47.120 fall back below the target all the way to back 0:16:47.200 --> 0:16:50.000 below two percent, which is why they would want to 0:16:50.080 --> 0:16:53.400 keep the loose policy. How does it look for growth 0:16:53.400 --> 0:16:54.600 in Japan at the moment. 0:16:54.640 --> 0:16:57.800 Well, I think there's some there's some clouds over manufacturing. 0:16:58.520 --> 0:17:00.920 I think investments held up reason well, but that's something 0:17:00.920 --> 0:17:05.480 else they're looking at. Consumption spend holding up reasonably well. 0:17:06.200 --> 0:17:10.040 There's no big red flag, and again it's it's it 0:17:10.080 --> 0:17:12.600 remains to be seen, and what if China does finally 0:17:12.600 --> 0:17:15.080 take some more steps what if they bring back confidence 0:17:15.080 --> 0:17:18.040 in their domestic economy to get their their internal demand 0:17:18.040 --> 0:17:20.439 growing again. There's a lot of ifs there and what 0:17:20.480 --> 0:17:23.280 could happen. Just to speak about the FED for a minute, 0:17:23.560 --> 0:17:25.960 we spoke in the last couple of days with Rob Kaplan, 0:17:26.000 --> 0:17:29.320 former Dallas FED president, and his point is that what 0:17:29.359 --> 0:17:31.880 we're seeing in the US economy in this all these 0:17:31.880 --> 0:17:35.240 are Fed raid hikes in inflation coming down but not 0:17:35.440 --> 0:17:39.040 down enough. Potentially, all the fiscal stimulus, all the fiscal 0:17:39.040 --> 0:17:42.840 stimulus starting in you know, twenty twenty one, that's putting 0:17:42.920 --> 0:17:45.240 it's that's still flooding through the economy, and that's one 0:17:45.280 --> 0:17:48.080 reason why services are strong and why we see services inflation. 0:17:48.640 --> 0:17:52.359 So that could be, yes, a welcome sign for the 0:17:52.400 --> 0:17:53.760 boj because. 0:17:53.840 --> 0:17:56.439 It's really it's really interesting when you look at it 0:17:56.440 --> 0:17:58.880 in the US and think of the long and variable 0:17:58.960 --> 0:18:02.840 lag of fiscal policy matched up against the long and 0:18:02.920 --> 0:18:05.399 variable lag of FED interest rate hikes. 0:18:05.600 --> 0:18:08.200 Well, and then what you have to figure out if 0:18:08.359 --> 0:18:11.000 then you it isn't just the lag from the past, 0:18:11.119 --> 0:18:13.040 If you're still pouring money into the economy, if the 0:18:13.040 --> 0:18:16.280 federal government's doing that, out in that lag is going 0:18:16.359 --> 0:18:19.320 to get out even further right, it's going to continue 0:18:19.359 --> 0:18:22.720 to continue to continue. But even so people are figuring 0:18:22.720 --> 0:18:25.080 what to maybe three hikes. I think people figure it'd 0:18:25.119 --> 0:18:26.840 be a bit much for the Fed at this point 0:18:27.359 --> 0:18:30.720 and for getting back to the BOJ. They have also 0:18:30.800 --> 0:18:33.679 made it clear that if they do a tweak in 0:18:33.760 --> 0:18:37.600 yield curve control, they will still be easy on monetary policy, 0:18:37.640 --> 0:18:41.119 because they will not anytime soon be actually taking that 0:18:41.280 --> 0:18:44.399 negative rate, the key rate at the short end, and 0:18:44.440 --> 0:18:46.240 pushing it up to zero or higher. 0:18:47.320 --> 0:18:51.879 How closely aligned is the Keisha to administration with the BOJ. 0:18:52.040 --> 0:18:54.520 Seems it seems that there is a pretty good alignment 0:18:54.600 --> 0:18:58.760 right now, And of course that's the Keisha administration probably 0:18:58.800 --> 0:19:01.840 doesn't isn't looking forward to seeing any kind of reduction 0:19:01.920 --> 0:19:05.159 in monetary stimulus. Number one, because they do want to 0:19:05.200 --> 0:19:07.680 keep the economy growing, but also because they don't want 0:19:07.720 --> 0:19:10.240 to see yields rising. They've got a big debt to finance. 0:19:10.280 --> 0:19:13.200 They're going to be doubling what their defense spending this year. 0:19:14.000 --> 0:19:17.960 They don't want to have to raise taxes, so right now, 0:19:18.119 --> 0:19:20.400 I don't think that's why I don't really think there's 0:19:20.440 --> 0:19:23.159 any inch of the BOJ that's saying oh, we have 0:19:23.200 --> 0:19:26.480 to keep rates low to help the government finance its debt. 0:19:26.960 --> 0:19:29.760 At the same time, they probably realized that it's a 0:19:29.800 --> 0:19:32.000 nice spot to be in. You don't need to raise rates, 0:19:32.280 --> 0:19:34.040 you don't need to get in the government's way. So 0:19:34.200 --> 0:19:37.800 everybody's everybody's on the same page right now. 0:19:38.240 --> 0:19:40.879 Kathleen, thanks so much for your insights. Really appreciate it. 0:19:40.960 --> 0:19:46.120 Kathleen Hayes, Bloomberg Global Economics and Policy Editor. I'm Brian Curtis. 0:19:46.160 --> 0:19:49.000 You can catch Doug Krisner and me every weekday for 0:19:49.080 --> 0:19:51.399 Bloomberg day Break Gays at the beginning at six am 0:19:51.400 --> 0:19:54.439 in Hong Kong and six pm on Wall Street. 0:19:54.840 --> 0:19:57.479 Tom, thank you, Brian. And coming up on Bloomberg day 0:19:57.480 --> 0:20:00.240 Break weekend, we go to the UK and what's happening 0:20:00.320 --> 0:20:03.800 behind the scenes with an eyebrow raising story unfolding in 0:20:03.880 --> 0:20:07.360 the banking industry there right now. I'm Tom Busby, and 0:20:07.440 --> 0:20:08.000 this is. 0:20:07.960 --> 0:20:22.160 Bloomberg broadcasting live from the Bloomberg it a active brokers 0:20:22.160 --> 0:20:25.600 studio in New York. Bloomberg E Lemon free oh to Washington, 0:20:25.680 --> 0:20:29.000 d C, Bloomberg ninety nine one to Boston, Bloomberg one 0:20:29.000 --> 0:20:32.280 O six one to San Francisco, Bloomberg nine sixteen to 0:20:32.359 --> 0:20:36.080 the country, Sirius XM Channel one nineteen to London DAB 0:20:36.359 --> 0:20:39.680 Digital radio, and around the globe the Bloomberg Business app 0:20:39.760 --> 0:20:44.040 in Bloomberg Radio dot com. This is Bloomberg Daybreak weekend. 0:20:49.960 --> 0:20:52.080 I'm Tom Busby in New York with your global look 0:20:52.080 --> 0:20:54.560 ahead at the top stories for investors in the coming week. 0:20:54.800 --> 0:20:57.520 Nat West will report second quarter earnings next week in 0:20:57.560 --> 0:21:00.719 the UK after two quarters in which the bank missed 0:21:00.840 --> 0:21:04.040 on the key metric of net interest income. But the 0:21:04.080 --> 0:21:07.800 bank and its CEO, Alison Rose, are also under scrutiny 0:21:07.840 --> 0:21:11.000 for a very different issue, the closure the bank account 0:21:11.040 --> 0:21:15.560 of Brexit advocate Nigel Farage by Coots. That's a unit 0:21:15.600 --> 0:21:18.040 of Newest. Let's head over to our London bureau now 0:21:18.080 --> 0:21:20.680 and Bloomberg Daybreak anchor Caroline Hepgar. 0:21:21.000 --> 0:21:24.840 The former leader of the UK Independence and Brexit Party, 0:21:24.960 --> 0:21:29.840 Nigel Farage, has called for a parliamentary inquiry into why 0:21:29.960 --> 0:21:33.320 Coots closed his bank account last month. So the pro 0:21:33.440 --> 0:21:36.719 exit politician, speaking of Bloomberg Radio, says that the internal 0:21:36.760 --> 0:21:39.760 documents from the bank, a unit of nat West, show 0:21:39.840 --> 0:21:43.840 that his account was closed because of his views. Farage 0:21:43.880 --> 0:21:47.760 published a forty page report from Couts is not limited 0:21:47.800 --> 0:21:51.639 to Farage's financial position. It also includes analysis of his 0:21:51.720 --> 0:21:55.439