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Speaker 1: Keep tightening.

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Speaker 2: That is the message from the IMF to the ECB

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Speaker 2: and a new report out today the International Monetary funds

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Speaker 2: as a tightening bias is necessary to combat stubborn inflation.

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Speaker 2: Maria TODAYO is in Brussels, when Crystilina and Gorjeva IMF

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Speaker 2: Managing Director.

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Speaker 3: Maria indeed, and she is here with me in the studio.

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Speaker 4: Madame Irgheva is always very good to see.

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Speaker 3: And to some extent you're back home because well you're Bulgarian,

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Speaker 3: you used to be a commissioner, you have been on

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Speaker 3: a European tour, you're in Luxembourg.

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Speaker 4: Today you're in Brussels, and.

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Speaker 3: I know you watched that press conference yesterday from Madame Laguerote.

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Speaker 3: The message was very clear. We've got a hike, hike, hike.

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Speaker 3: Inflation is still too high. Is that something you want

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Speaker 3: to indorse?

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Speaker 5: That is something we endorse wholeheartedly because while headline inflation

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Speaker 5: seems to have picked and it's going slightly down, core

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Speaker 5: inflation is very stubborn, and in our projections we see

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Speaker 5: inflation going to the target of ICB only sometime in

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Speaker 5: twenty twenty five, very far off, too long, too high,

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Speaker 5: and so we think that some further tightening would be

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Speaker 5: necessary to bring inflation firmly under control.

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Speaker 1: And let me say why this is so important.

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Speaker 5: Because if inflation continues to run high, one that means

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Speaker 5: interest rates have to stay higher for longer. When they're

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Speaker 5: higher for longer, financial vulnerabilities could get exposed. Too high inflation,

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Speaker 5: high interest rates. Inevitably, this is going to impact growth.

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Speaker 5: And we want the European economy, world economy to grow.

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Speaker 5: We worried that our projections for growth are kind of

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Speaker 5: on the week site. We only expect growth to three

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Speaker 5: percent over the next five years. We have to get

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Speaker 5: out of the inflation trap to create a better environment

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Speaker 5: for stronger growth.

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Speaker 3: And that was essentially what Madame Laguerre also said yesterday.

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Speaker 3: She also added, by the way, July, get ready for it.

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Speaker 3: There will be another hike. The debate today in Europe

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Speaker 3: everyone's talking about this is will there be another one

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Speaker 3: in September. I'm not sure we want to give me

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Speaker 3: a number of how many more hikes, but it's that

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Speaker 3: something that you say July September, whatever is needed.

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Speaker 5: I would say, Madame Leguarde, DICB there guided by data.

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Speaker 5: They would watch the data very carefully. They would make

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Speaker 5: a decision on that basis. If inflation continues to be

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Speaker 5: resisting the actions they take, they will have to do

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Speaker 5: some more. Of course, for the good of the economy.

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Speaker 5: We also have to make a call to the fiscal

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Speaker 5: policy side.

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Speaker 1: Yes, please don't spend too much. Because he's spent that

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Speaker 1: push his.

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Speaker 5: Demand up, that push his prices up, and then rates

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Speaker 5: have to stay higher for longer.

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Speaker 3: And you met with finance ministers yesterday, are they listening to.

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Speaker 4: You or do they tell you know.

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Speaker 3: My problem is actions across Europe. The energy situation, by

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Speaker 3: the way prices shut up yesterday, is still it's difficult

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Speaker 3: to find tune that you feel they listen to what

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Speaker 3: you're saying, or it's still.

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Speaker 4: Very difficult to navigate that space.

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Speaker 5: They are they see the problem in front of them.

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Speaker 5: I mean, we are in a situation when monetary policy

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Speaker 5: is putting a foot on the brake. Well, if fiscal

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Speaker 5: policy steps on the accelerated with for a very bad

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Speaker 5: right the car, everybody understands that we would crush the car.

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Speaker 5: The problem is that putting measures that support households and

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Speaker 5: firms is easy, Pulling them is hard. And yet policy

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Speaker 5: makers have to have the courage to let these measures expire.

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Speaker 5: If we get hit by another round of pick of

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Speaker 5: energy prices, then they can support those who need it.

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Speaker 1: But take the time now be prepared to.

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Speaker 5: Be more targeted so it is easier to carry on

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Speaker 5: the fiscal front.

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Speaker 4: And speaking of crashing, hopefully not.

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Speaker 3: But yesterday we had a better pred on the show,

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Speaker 3: and of course a former chief economist but the ECB,

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Speaker 3: and he did say the soft landing. However, it's becoming

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Speaker 3: hard now for the UCB. Do you trust madame like

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Speaker 3: Guast Do you think she can get to that point

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Speaker 3: and build that consensus, make the right choice.

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Speaker 1: I inherited her job at the imas she has done a.

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Speaker 5: Fabulous job there and I'm sure she would do a

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Speaker 5: very good job for the European people. And I trust

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Speaker 5: her because the ECB has been very, very focused on

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Speaker 5: what is the story data tells them and then make

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Speaker 5: decisions on that basis. And something that I find remarkable

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Speaker 5: we don't talk enough about it is how much more

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Speaker 5: coordination corporation there is across mega central banks.

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Speaker 3: You would say there is, because some would say it

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Speaker 3: started to look a little bit over the place, some cutting,

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Speaker 3: some maybe going we're gonna pause recess easily.

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Speaker 4: Yesterday shut that debate down. They said we're not gonna pass.

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Speaker 5: Well, let's remember that Easyly started somewhat later than the FAT.

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Speaker 5: And the situation in Europe is different from the situation

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Speaker 5: in the US. How is it different? Well, first, the

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Speaker 5: US has not been hit as hard by energy prices.

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Speaker 5: Europe suffered a bigger blow. What does it mean. It

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Speaker 5: means Europe had to give more help to households and

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Speaker 5: to firms, and that of course pushes demand up. And

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Speaker 5: the second way in which Europe and US are different

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Speaker 5: is what we see in the United States is that

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Speaker 5: the actions of the FAT are showing that there is

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Speaker 5: some softening of the economy here. I love being in Brussels.

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Speaker 5: I go around, well, restaurants are full, people are at work, and.

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Speaker 4: That's problem is and the services is going strong.

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Speaker 3: The manufacturer, however, there's a lot of years and Europe

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Speaker 3: about the picture of that sector.

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Speaker 1: Did you fear that? You see it in the data.

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Speaker 5: Countries that are more dependent on contact intensive industries, tourism,

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Speaker 5: they were badly hit in twenty twenty, but.

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Speaker 1: Now they're recovering very strongly.

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Speaker 5: They have a higher growth, whereas countries that are more

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Speaker 5: manufacturing dependent, more affected by energy prices, more affected by

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Speaker 5: the whole energy transition that Europe is carrying, and more

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Speaker 5: affected by external demand for manufacturing products. You see what

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Speaker 5: is happening in China slowing down, China slows down, Asia

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Speaker 5: slows down.

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Speaker 4: Do you fear the Chinese impact?

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Speaker 1: Onders what the Chinese looks like.

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Speaker 4: They want to stimulate the economy.

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Speaker 5: They have, they have ample fiscal and monetary policy space.

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Speaker 5: They were very cautious in prior years. And this is

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Speaker 5: why the Chines this economy one being clogged down. Two

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Speaker 5: not enough policy support. It went last year in the

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Speaker 5: unthinkable average growth lower than the global average. Never happened

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Speaker 5: in four years. Now they're starting to inject a little

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Speaker 5: bit of policy support to the economy. But I'll tell you,

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Speaker 5: I look at China. It is affected. The real estate

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Speaker 5: market is not quite yet fully recovered.

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Speaker 1: As a fatal critical and I don't think so. I

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Speaker 1: don't think so.

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Speaker 5: And the government and People Bank of China they're paying very.

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Speaker 1: Close attention to it, but it is harmed.

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Speaker 5: And then you look at the reshaping of global supply Chaine,

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Speaker 5: because obviously everybody recognizes you cannot be dependent on one

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Speaker 5: source on anything that is having implications for China. The

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Speaker 5: tradition China ahead of capital influence whenever, whenever the economy

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Speaker 5: is perking up, they get lots of capital folks. We

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Speaker 5: are not seeing that much of a bit happening. So

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Speaker 5: when I think of European manufacturers, those that have been

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Speaker 5: more integrated with China, of course they feel it. But

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Speaker 5: beyond China, what we see this year is growth is

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Speaker 5: slowing down. Ninety percent of advanced economies are slowing down.

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Speaker 5: And that has implications of course for European open economies

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Speaker 5: that are that are more integrated in the world economy.

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Speaker 3: And a very short question on this for that European

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Speaker 3: recession and technical recession. Now, do you feel this becoming

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Speaker 3: a mild one that can get solved or actually do

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Speaker 3: you go this get turn structural and there's a fundamental

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Speaker 3: growth problem here.

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Speaker 1: We think that it is one that will pass.

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Speaker 5: Our projections for this year still is to have a

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Speaker 5: po growth. We gave numbers zero point eight percent in

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Speaker 5: April for this year, one point four.

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Speaker 1: For next year.

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Speaker 5: We are going to update these numbers, but I can

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Speaker 5: tell you that we look at data and it looks

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Speaker 5: like pretty much the same European Central Bank went down

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Speaker 5: closer to our projections on growth, they went up closer

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Speaker 5: to our projections on inflation.

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Speaker 1: This is the problem for Europe.

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Speaker 5: Growth slowing down, but inflation not following suit as fast

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Speaker 5: as possible.

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Speaker 1: Ergo focus on breaking bringing inflation down.

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Speaker 4: And that's our entire credibility.

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Speaker 3: And just to wrap it up, maybe you can help

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Speaker 3: us figure out what is One of the key questions

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Speaker 3: is this week when you watch the press conference from

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Speaker 3: mister Powellen and the reason why I say this again

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Speaker 3: going back to central bank coordination, did you get what

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Speaker 3: he meant? Some say that hawkage pause, maybe yes, no,

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Speaker 3: maybe pause here or just back communication.

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Speaker 4: Did you understand it?

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Speaker 1: What did you mean?

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Speaker 5: Our understanding of where the US is is labor market

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Speaker 5: is still very strong. Demand is still very strong. So

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Speaker 5: what we're seeing is some reduction in lending, but not dramatic.

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Speaker 5: And therefore, when Chapel says pouse, he means pouse. He

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Speaker 5: doesn't mean stop and reverse. He doesn't mean stop and reverse.

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Speaker 5: So for you that pause means pouse is let's see

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Speaker 5: how we are going in the next month. Because our

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Speaker 5: concentration now is on a very simple question. When you

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Speaker 5: try to constraint demands with high interest rates, normally there

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Speaker 5: is response, demand shrinks lending contracts somewhat this time, at

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Speaker 5: this point of the hiking cycle without quite yet seat,

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Speaker 5: does it mean that there is a miracle and it

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Speaker 5: would disappear, this impact would disappear.

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Speaker 1: I doubt it. So there would be some slowing down.

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Speaker 5: And then we come to your question can we avoid

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Speaker 5: heart lending? And the answer is, with careful calibration of

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Speaker 5: monetary policy, take the post, look at the data.

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Speaker 1: And then you decide what to do next. It is possible,

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Speaker 1: but yes, the path, the path is narrow.

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Speaker 3: Well, Madame Ilkieva, what a time to be the head

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Speaker 3: of the IMF. But always great to see you in

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Speaker 3: this time around in Europe.

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Speaker 4: We tend to see in DC. But you're back to

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Speaker 4: some saying your own home because you used to.

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Speaker 1: Be very much. It is.

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Speaker 5: Some had seven years in Tibet, I have my seven

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Speaker 5: years in Brussels.

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Speaker 1: What stuff for?

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Speaker 4: I don't know.

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Speaker 3: Well, thank you so much for that, appreciate it, Thank

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Speaker 3: you very much.

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Speaker 1: Guy.

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Speaker 3: Of course I was Crystalline Geba, the managing director at

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Speaker 3: the International Manager Fund, joining us Today in Bloombery,