WEBVTT - Bloomberg Daybreak Weekend: Jackson Hole Preview (Radio) 0:00:02.560 --> 0:00:05.480 This is Bloomberg Daybreak Weekend, our global look at the 0:00:05.559 --> 0:00:07.920 top stories in the coming week from our Daybreak anchors 0:00:08.039 --> 0:00:10.400 all around the world. Just to him of the program, 0:00:10.440 --> 0:00:13.239 here comes the big gathering at Jackson Hole. I'm John 0:00:13.280 --> 0:00:16.080 Tucker in New York. I'm Stephen Carlin Londoner Pratization by 0:00:16.120 --> 0:00:18.520 the UK's energy regulator in the coming days will help 0:00:18.600 --> 0:00:21.880 tell us how high inflation is likely to go later 0:00:21.960 --> 0:00:25.400 this year. I'm Bryan Curtis in Hong Kong. Is inflation 0:00:25.720 --> 0:00:29.400 near peaking in South Korea? I'm Amy Morris in Washington. 0:00:29.440 --> 0:00:32.080 The White House has had a few political wins. Will 0:00:32.120 --> 0:00:36.680 that move the needle with goods? That's all straight ahead 0:00:36.720 --> 0:00:40.680 on Bloomberg Daybreak Weekend on Bloomberg eleven three O, New York, 0:00:40.840 --> 0:00:45.479 Bloomberg one, Washington d C, Bloomberg one oh six one, Boston, 0:00:45.600 --> 0:00:49.920 Bloomberg nine sixties, San Francisco, d A B, Digital Radio, London, 0:00:50.120 --> 0:00:53.040 Sirius x M one nineteen and around the world on 0:00:53.120 --> 0:01:01.120 Bloomberg Radio dot com and via the Bloomberg Business at Everybody. 0:01:01.160 --> 0:01:04.200 I'm John Tucker. Let's start today's program with becoming annual 0:01:04.240 --> 0:01:07.240 gathered in Jackson Hole that officially he kicks off this 0:01:07.319 --> 0:01:11.800 coming Thursday. Blumber Global economics policy er Mike McKee is 0:01:11.800 --> 0:01:15.520 among those going and he joins us now for some insights. 0:01:15.520 --> 0:01:18.120 So you're gonna say it's really important this year because 0:01:18.160 --> 0:01:23.880 you're going, it's important ever justified your trip for for 0:01:23.880 --> 0:01:25.760 for people who don't know, we're not talking about going 0:01:25.760 --> 0:01:29.000 to do some early skiing or you know, fly fishing. 0:01:29.160 --> 0:01:33.280 This is a symposium of sorts. We might have some fishing. 0:01:34.080 --> 0:01:37.600 This is the Kansas City fat To Annual Economic Symposium. 0:01:37.640 --> 0:01:43.840 Started back in moved to Jackson Hole in one I believe, 0:01:44.000 --> 0:01:46.560 and has been going on ever since. Uh, they did 0:01:46.560 --> 0:01:48.160 a virtually the last couple of years. So this is 0:01:48.200 --> 0:01:51.800 a return to Jackson Lake Lodge in Grand Teton National Park. 0:01:52.120 --> 0:01:56.880 It's central bankers and academic economists from all over. They 0:01:56.960 --> 0:02:00.840 present like really boring papers nobody understands, and then there's 0:02:00.880 --> 0:02:03.360 like a few highlights where they say stuff that could 0:02:03.400 --> 0:02:05.960 move markets potentially. Well, if I were going to be honest, 0:02:06.000 --> 0:02:08.639 I totally agree with you. I don't think anybody there 0:02:08.639 --> 0:02:11.000 would say that their papers that people don't understand, because 0:02:11.000 --> 0:02:14.240 all those people understand it. There is a misconception about 0:02:14.320 --> 0:02:17.200 Jackson Hole that it is someplace where central bankers come 0:02:17.240 --> 0:02:19.919 to discuss the issues that face them and figure out 0:02:19.919 --> 0:02:23.400 how they're going to attack them. It's really an academic conference. 0:02:23.440 --> 0:02:28.200 Papers are submitted on topics related to monetary policy, and 0:02:28.320 --> 0:02:31.760 people do sort of exploratory work that sets the stage 0:02:31.840 --> 0:02:35.440 for thinking about ways to do things. But the average 0:02:35.480 --> 0:02:37.919 person probably would not if you don't have an economics 0:02:37.960 --> 0:02:40.480 theree would not understand a lot of it. Uh. And 0:02:40.600 --> 0:02:44.200 it is not as dramatic or exciting as people make 0:02:44.240 --> 0:02:48.400 it out to be. But by tradition, every year the 0:02:48.440 --> 0:02:52.800 FED Chairman gives a keynote address, and most years it 0:02:53.000 --> 0:02:56.160 falls under the category of nice to see you, glad 0:02:56.160 --> 0:02:59.120 you're all here. This is a really important topic. But 0:02:59.200 --> 0:03:01.880 a couple of times, most notably with Ben burn Anki 0:03:02.520 --> 0:03:06.560 during the Great Financial Crisis, he laid out strategies for 0:03:06.680 --> 0:03:10.000 the FED uh in monetary policy to deal with a 0:03:10.080 --> 0:03:12.640 financial crisis. And there is a hope or a feeling 0:03:12.720 --> 0:03:15.440 or a thought that J. Powe might do something similar 0:03:15.639 --> 0:03:19.919 at this meeting on Friday. Okay, where are we right 0:03:19.960 --> 0:03:23.760 now with the economic data? I mean, there's all sorts 0:03:23.760 --> 0:03:27.119 of speculation fifty or seventy five basis points at the 0:03:27.160 --> 0:03:30.720 next FEDER Reserve meeting that's coming up, what in September 0:03:31.320 --> 0:03:34.280 um And yet we've got this data that seems to 0:03:34.360 --> 0:03:39.400 indicate the rate of inflation may be slowing at this point. 0:03:39.400 --> 0:03:42.920 So I'm kind of wondering has the FED done its 0:03:43.040 --> 0:03:48.480 job or inflation data that we're getting is working against 0:03:48.520 --> 0:03:51.800 the Fed. There's a message that j Pal is going 0:03:51.840 --> 0:03:53.840 to want to deliver if he's going to talk about 0:03:53.840 --> 0:03:56.360 things like that, is that no, we're not anywhere near 0:03:56.440 --> 0:03:59.960 close to done yet. Uh. The markets took the idea 0:04:00.120 --> 0:04:03.120 that they could do fifty basis points in seven instead 0:04:03.160 --> 0:04:05.880 of seventy five, which was just laid out as a 0:04:06.160 --> 0:04:09.640 kind of a talking point by Jay Paula in July. 0:04:10.520 --> 0:04:11.960 They took it as a sort of a hint that 0:04:12.000 --> 0:04:13.880 the FED was going to pivot, and they look at 0:04:13.920 --> 0:04:15.920 some of the slowing economic data and they say, well, 0:04:15.960 --> 0:04:17.560 the Fed's gonna have to back off and next year 0:04:17.600 --> 0:04:20.640 they're gonna have to cut rates, and that's not gonna happen. 0:04:21.120 --> 0:04:25.440 The FED is committed to keeping infest rates higher for 0:04:25.640 --> 0:04:29.280 longer to make sure that inflation is squeezed out of 0:04:29.279 --> 0:04:31.080 the economy. So if you know what I mean, that 0:04:31.320 --> 0:04:34.240 the data that we recently got is that because of 0:04:34.279 --> 0:04:36.640 FED policy or because of something else. I mean, do 0:04:36.720 --> 0:04:39.479 you know when it's the policies working and done. That's 0:04:39.560 --> 0:04:42.039 part of the problem if you're a policy maker. You 0:04:42.120 --> 0:04:46.560 don't have real time confirmation because all the economic data 0:04:46.640 --> 0:04:49.640 is by nature backward looking, so you're trying to extrapolate 0:04:49.680 --> 0:04:54.880 from what you see and figure out what that means six, eight, ten, 0:04:55.040 --> 0:04:59.440 twelve months down the road. Now, we've seen inflation ease 0:04:59.560 --> 0:05:03.720 up a little bit one month's data, and a lot 0:05:03.760 --> 0:05:06.120 of that had to do with energy prices, and energy 0:05:06.160 --> 0:05:09.320 prices aren't anything at the FED deals with. The FED 0:05:09.440 --> 0:05:13.120 is crypt housing, and we've seen declines in new home 0:05:13.160 --> 0:05:17.760 sales and existing home sales and housing starts. So that 0:05:17.880 --> 0:05:20.600 is starting to affect the economy. But we're only just 0:05:20.960 --> 0:05:23.800 starting to see the impacts. And that's one of the 0:05:23.839 --> 0:05:26.800 discussions they have in their meetings is how far do 0:05:26.839 --> 0:05:29.400 we want to go? Because we want to go as 0:05:29.400 --> 0:05:33.239 far as we can without damaging the economy, and nobody 0:05:33.360 --> 0:05:36.800 quite knows where that is. Maybe it's something that Paul 0:05:36.880 --> 0:05:40.440 would address, all right, So who knows best the markets 0:05:40.720 --> 0:05:45.040 or the policy makers? Because it correct me if I'm wrong. 0:05:45.080 --> 0:05:48.480 It seems there's a bit of a disconnect between those 0:05:48.520 --> 0:05:51.440 two thinking. There's an old saying don't fight the Fed, 0:05:51.600 --> 0:05:54.360 and the young people who are in the markets these 0:05:54.440 --> 0:05:58.479 days are fighting the Fed. They haven't been around. You 0:05:58.520 --> 0:06:01.480 don't fight the Fed because they make the policy and 0:06:01.680 --> 0:06:04.760 they have pretty much unlimited funds when it comes to 0:06:04.960 --> 0:06:07.200 But what's happened over the years is you know what 0:06:07.360 --> 0:06:11.120 people jokingly referred to as the Greenspan Bernankee, Yell and 0:06:11.120 --> 0:06:16.120 and now Powell put where if markets get disrupted enough, 0:06:16.200 --> 0:06:19.000 the FED will come into the markets and save them. Uh. 0:06:19.080 --> 0:06:21.120 The Fed seems to be of the mind now that 0:06:21.200 --> 0:06:23.280 they're not going to do that because the markets aren't 0:06:23.279 --> 0:06:26.760 going to need saving. They don't. They're functioning just fine. 0:06:26.839 --> 0:06:29.599 It's just maybe that some people are losing money on 0:06:29.680 --> 0:06:32.719 this or that trade. So they want to make sure 0:06:33.040 --> 0:06:35.400 Inflation to them is the worst enemy, and they want 0:06:35.400 --> 0:06:38.039 to make sure that they get it out of the economy. 0:06:38.120 --> 0:06:40.680 So they want to deliver the message that's what they're 0:06:40.680 --> 0:06:43.000 going to do. Mike, thanks very much. We'll be hosting 0:06:43.000 --> 0:06:46.880 Bloomberg Surveillance Live for you from the Jackson Bowl Gallery 0:06:46.920 --> 0:06:50.040 here on Bloomberg Radio. And on Bloomberg Television as well. 0:06:50.760 --> 0:06:53.440 Just ahead on Bloomberg day Break weekend, the UK braces 0:06:53.520 --> 0:07:06.040 for a surgeon energy prices. This yeah, this is Bloomberg 0:07:06.120 --> 0:07:08.640 Daybreak weekend, our global look ahead of the top stories 0:07:08.680 --> 0:07:11.080 for investors in the coming week. I'm John Tucker in 0:07:11.160 --> 0:07:15.160 New York. Up later in the program, inflation and monetary 0:07:15.240 --> 0:07:20.120 policy in South Korea takes center stage. But first, Despite 0:07:20.160 --> 0:07:23.160 hitting double digits in July, inflation in the UK still 0:07:23.280 --> 0:07:26.800 hasn't passed a peak. An upcoming decision with the country's 0:07:26.960 --> 0:07:30.400 energy regulator will play a major role in deciding how 0:07:30.480 --> 0:07:32.520 much higher it's going to go. And for more, let's 0:07:32.520 --> 0:07:36.160 tend to London and bringing Bloomberg Daybreak Europe anchor Stephen 0:07:36.240 --> 0:07:40.440 Carroll John. Since the UK's energy regulator, off Jam has 0:07:40.440 --> 0:07:43.800 been setting maximum prices that energy firms can charge households 0:07:43.840 --> 0:07:46.680 for electricity and natural gas. The next price rise comes 0:07:46.680 --> 0:07:49.120 into a fact in October, and in the coming days 0:07:49.120 --> 0:07:51.800 we'll find out just how much it will be rising by. 0:07:52.080 --> 0:07:53.960 It's a move that will be a major driver of 0:07:54.040 --> 0:07:57.360 inflation in the UK for the latter months of this year. 0:07:57.400 --> 0:07:59.880 For more on this, I'm joined by Bloomberg's Renewable Energy 0:07:59.880 --> 0:08:02.120 and Climate Change of porter Will Mathis and our E M. E. 0:08:02.200 --> 0:08:06.000 A Economics and government correspondent, Buzzy Barden. Welcome to you both. Well, 0:08:06.040 --> 0:08:08.480 can you explain, first of all, what actually is the 0:08:08.520 --> 0:08:11.480 price cap and is it the maximum price that consumers 0:08:11.480 --> 0:08:14.560 can expect to pay this year? So this is a 0:08:14.800 --> 0:08:19.080 really good question and something that's pretty widely misunderstood. The 0:08:19.120 --> 0:08:23.120 price cap is a tool that the off Jim, the 0:08:23.200 --> 0:08:27.240 energy regulator, uses to cap like the unit price of energy. 0:08:27.320 --> 0:08:32.440 So for every megawatt hour of electricity and gas that 0:08:32.480 --> 0:08:35.400 you use in your home, the energy suppiers can only 0:08:35.480 --> 0:08:39.480 charge you a certain rate poor per unit of energy. 0:08:39.520 --> 0:08:42.920 But they when they're communicating this, they know that no 0:08:42.960 --> 0:08:46.040 one really knows what a kill watt hour electricity is. 0:08:46.080 --> 0:08:48.160 And if they come out and say, oh, we've kept 0:08:48.240 --> 0:08:52.520 energy prices at five p per kill watt hour, you 0:08:52.559 --> 0:08:55.480 know that means nothing to anyone, including you know me 0:08:55.600 --> 0:08:57.960 and I write about this stuff all the time. So 0:08:58.200 --> 0:09:00.640 what they do is they take that cap and then 0:09:00.679 --> 0:09:04.440 they multiply it by the average energy use across the 0:09:04.480 --> 0:09:07.640 country over a year, and then they put out that 0:09:07.720 --> 0:09:10.320 number to everyone. And that's what all the headlines are 0:09:10.440 --> 0:09:13.960 and so they say, for a whole year, the average 0:09:14.120 --> 0:09:16.960 energy bill in the country is going to be, you know, 0:09:17.120 --> 0:09:19.800 whatever it is. Most recently it was one thousand nine 0:09:20.240 --> 0:09:24.679 pounds and we're expecting a mere dart in the background 0:09:24.800 --> 0:09:27.439 now such a small price. Now we're talking about something 0:09:27.480 --> 0:09:30.199 that's much larger. So yeah, yeah, so that they use 0:09:30.280 --> 0:09:33.320 it as a way to communicate what people can expect 0:09:33.400 --> 0:09:36.960 their bills will be. But um, it is a bit 0:09:36.960 --> 0:09:39.200 more complicated, but it is just to kind of limit 0:09:39.320 --> 0:09:43.120 how much um suppliers can charge and they want to 0:09:43.160 --> 0:09:45.559 make sure that's in line with what it is costing 0:09:45.559 --> 0:09:48.000 those suppliers to actually buy energy and so they're not 0:09:48.080 --> 0:09:51.600 just you know, making obscene profits. So how exactly is 0:09:51.679 --> 0:09:56.520 the cop calculates it? Then basically they, um, you know, 0:09:57.080 --> 0:10:01.120 calculate what it costs the suppliers. And the absolutely number 0:10:01.160 --> 0:10:05.680 one thing is wholesale gas prices. Gas in the UK 0:10:06.000 --> 0:10:10.040 sets the price electricity. Gas is the way that the 0:10:10.120 --> 0:10:12.520 vast majority of homes get their heating in the winter. 0:10:13.200 --> 0:10:16.440 So you know, there are other things like taxes and 0:10:16.600 --> 0:10:20.920 certain policies that get funded off of bills, but the 0:10:21.360 --> 0:10:23.920 really big thing on the bills, And the thing that 0:10:24.080 --> 0:10:27.520 is fluctuating right now is wholesale enterry prices, and those 0:10:27.559 --> 0:10:32.520 are changing so much right now that it's pretty difficult 0:10:32.720 --> 0:10:35.160 to you know, know, you know in the beginning of 0:10:35.160 --> 0:10:37.079 the year what the cap is going to be at 0:10:37.080 --> 0:10:39.240 the end of the year, because the entry prices just 0:10:39.360 --> 0:10:43.600 look so much different right now amid just record volatility 0:10:43.600 --> 0:10:46.160 we're seeing in the market. How much is the price 0:10:46.240 --> 0:10:49.960 cop expected to arise by for October? So for October 0:10:50.400 --> 0:10:54.440 they're expecting it to go up to about three thousand, 0:10:54.520 --> 0:10:57.440 six hundred pounds and that is for an estimate for 0:10:57.679 --> 0:11:01.160 bills for the year from October, or one for the 0:11:01.200 --> 0:11:03.720 next twelve months that in that period they would estimate 0:11:03.800 --> 0:11:07.400 that it would be about three thousand, six hundred pounds UM. 0:11:07.440 --> 0:11:10.720 It's expected to go up even more in the first 0:11:10.800 --> 0:11:13.720 quarter of next year. And so for like the winter period, 0:11:13.760 --> 0:11:18.560 the six months of winter from October to March, the 0:11:18.600 --> 0:11:21.840 bills are expected to have tripled from what it was 0:11:21.960 --> 0:11:25.800 a year ago. Lizzie Burton turning to you, this is 0:11:25.840 --> 0:11:28.640 going to be so important for the broader inflation picture. 0:11:28.679 --> 0:11:31.520 We had that blistering number in the past few days, 0:11:31.559 --> 0:11:34.760 ten point one percent the inflation rate in July. This 0:11:34.840 --> 0:11:37.079 is going to determine how much hire that goes. Yeah, 0:11:37.120 --> 0:11:40.640 we're in double digits already. Economists got it wrong again. 0:11:40.720 --> 0:11:42.959 This is a new forty year high. It's more than 0:11:43.000 --> 0:11:45.840 five times the Bank of England's target and as you imply, 0:11:46.000 --> 0:11:48.080 we're not even at the peak yet. So the Bank 0:11:48.120 --> 0:11:51.120 of England had forecasts that when the energy price cup 0:11:51.200 --> 0:11:54.000 rises in October, peak inflation was going to be above 0:11:55.080 --> 0:11:57.960 but given that we're already above ten percent, that could 0:11:58.000 --> 0:12:01.880 be even higher. Now City economists are saying that peak 0:12:01.920 --> 0:12:05.360 inflation could be fifteen percent in the first quarter of 0:12:06.120 --> 0:12:09.920 three um. But remember it's not just about energy. In 0:12:10.080 --> 0:12:13.240 the data, the UK inflation data that we've just had, 0:12:13.880 --> 0:12:17.920 the main driver actually was food and actually as well 0:12:18.200 --> 0:12:21.319 it was quite broad based this inflation. The next biggest 0:12:21.400 --> 0:12:25.000 drivers were recreation and culture. You've had a big contribution 0:12:25.120 --> 0:12:27.800 from services. So the worry for the Bank of England 0:12:27.960 --> 0:12:30.240 is that this inflation surge is going to be long 0:12:30.320 --> 0:12:35.360 lasting because it's spreading beyond energy across the economy as 0:12:35.360 --> 0:12:39.559 people's inflation expectations keep running themselves. So what sort of 0:12:39.640 --> 0:12:42.120 challenges does this present now for the Bank of England. 0:12:42.440 --> 0:12:45.200 It's such a difficult moment for the Bank of England because, 0:12:45.440 --> 0:12:48.840 as officials explained after the last meeting, they're having to 0:12:48.880 --> 0:12:52.840 inflict pain on consumers in order to bring down inflation. 0:12:52.920 --> 0:12:55.480 So they've already done one jumbo rate hike in August 0:12:55.600 --> 0:12:59.280 fifty basis points. Now our economists at Bloomberg Economics and 0:12:59.320 --> 0:13:04.160 many others are expecting another fifty basis point hike in September, 0:13:04.320 --> 0:13:06.240 and the Bank of England has said that this is 0:13:06.240 --> 0:13:09.600 going to cause a long, shallow recession the likes of 0:13:09.600 --> 0:13:14.040 which we haven't seen since the nineteen nineties. UM Former 0:13:14.200 --> 0:13:17.640 Monetary Policy Committee member Andrew Sentence has said that the 0:13:17.720 --> 0:13:19.480 key rate might have to go up to three to 0:13:19.600 --> 0:13:22.960 four percent because policymakers at the beer we have got 0:13:23.000 --> 0:13:26.000 so behind the curve. And the other thing is that 0:13:26.360 --> 0:13:31.000 this inflation is swallowing up wage growth, which really makes 0:13:31.080 --> 0:13:33.880 the issue so much more pressing for the Bank of England. 0:13:34.600 --> 0:13:39.160 But because of the recession risk, that's what's worrying investors, 0:13:39.440 --> 0:13:41.760 and you've seen the yield curve in voting the most 0:13:41.840 --> 0:13:46.120 since the financial crisis because of the pain that the 0:13:46.160 --> 0:13:49.040 necessary rate cuts will inflict on the economy. Is. The 0:13:49.320 --> 0:13:52.200 energy price cap is something that we talk about so much. 0:13:52.320 --> 0:13:54.520 It is a major part of the debate that's happening 0:13:54.520 --> 0:13:57.040 at the moment on the political front, the toy leadership 0:13:57.080 --> 0:14:00.560 debate as well. What are politicians saying about how they're 0:14:00.559 --> 0:14:03.760 going to tackle high energy prices. Well, finally, for the 0:14:03.800 --> 0:14:06.280 first time in ages, cursed arm of the opposition, Labor 0:14:06.320 --> 0:14:09.240 Party leader managed to cut through with his proposal to 0:14:10.080 --> 0:14:14.040 continue the windfall tax and freeze energy bills this winter. 0:14:14.520 --> 0:14:17.160 And so in the hustings between Richard Sunac and those 0:14:17.200 --> 0:14:20.000 Trusts to be the next Conservative Party leader and Prime 0:14:20.000 --> 0:14:23.440 Minister this week, they had to respond to this proposal. 0:14:23.960 --> 0:14:26.880 Richie Sunac ruled it out. He said that he would 0:14:26.920 --> 0:14:30.160 target support the poorest households. Liz Trust said she doesn't 0:14:30.160 --> 0:14:32.600 want to throw money at a short term fix, but 0:14:32.680 --> 0:14:34.880 she wouldn't really be drawn on how else she would 0:14:34.880 --> 0:14:38.480 help other than repeating her promise of tax cuts. Okay, 0:14:38.520 --> 0:14:40.960 thank you very much to Bloomberg's Will Mathis and Lizzie 0:14:40.960 --> 0:14:44.120 Burden for those insights. I'm Stephen Caroline London. You can 0:14:44.120 --> 0:14:47.320 catch us every weekday morning for Bloomberg Daybreak Europe, beginning 0:14:47.320 --> 0:14:50.160 at six am. In London and one am on Wall Street, 0:14:50.400 --> 0:14:53.600 John Stephen, Thanks a lad, Just be UPO brig Daybreak 0:14:53.640 --> 0:14:56.680 the weekend. Here comes that big central bank meeting in 0:14:57.000 --> 0:15:08.280 South Korea. Is bloom broadcasting live from the Bloomberg Interactive 0:15:08.320 --> 0:15:12.160 Broker Studio in New York. Bloomberg eleven three oh to Washington, 0:15:12.240 --> 0:15:16.320 d C, Bloomberg to Boston, Bloomberg one O six one 0:15:16.480 --> 0:15:20.280 to San Francisco, Bloomberg nine to the country Sirius XM 0:15:20.360 --> 0:15:23.800 Channel one nine to London d A B Digital Radio, 0:15:23.880 --> 0:15:27.000 and around the globe the Bloomberg Business app and Bloomberg 0:15:27.080 --> 0:15:37.000 Radio dot Com. This is Bloomberg day Break Weekend, John 0:15:37.000 --> 0:15:40.240 Tucker in New York with your global Boocancademy talk stories 0:15:40.280 --> 0:15:43.640 for investment coming week. The pressure is on central banks 0:15:43.760 --> 0:15:47.280 in Asia and South Korea in focus right now for more, 0:15:47.400 --> 0:15:50.320 Let's into Hong Kong and Bloomberg day Break Asia host 0:15:50.360 --> 0:15:54.360 Brian Curtis and his colleague Doug Chrisner. John. The cost 0:15:54.400 --> 0:15:58.040 of living in South Korea is soaring. Last month, consumer 0:15:58.040 --> 0:16:01.000 inflation soared to the highest level in twenty four years, 0:16:01.000 --> 0:16:03.480 and it's raised questions as to whether or not the 0:16:03.520 --> 0:16:05.800 Bank of Korea will in the week ahead be so 0:16:05.920 --> 0:16:09.320 bold as to raise rates by another fifty basis points, 0:16:09.360 --> 0:16:11.560 as it did in July. For a closer look at 0:16:11.560 --> 0:16:14.760 the b okay meeting and the South Korean economy overall, 0:16:15.000 --> 0:16:20.200 we're joined by Kathleen Hayes, Bloomberg's Global Economics and Policy editor. Kathleen, 0:16:20.240 --> 0:16:23.920 thanks so much for joining us for the discussion. We've 0:16:23.960 --> 0:16:28.200 seen four rate hikes from the b ok this year 0:16:28.240 --> 0:16:30.760 and quite a lot of aggressive movement there. What are 0:16:30.760 --> 0:16:33.280 we expecting this time? Well, you know, the last rate 0:16:33.320 --> 0:16:37.480 hike was fifty basis point and that was a definitely 0:16:37.520 --> 0:16:40.880 the more aggressive move. So now the question is will 0:16:40.880 --> 0:16:44.600 they do another one? You just mentioned consumer prices up 0:16:44.640 --> 0:16:49.280 six point three percent from a year earlier. UM, that's 0:16:49.320 --> 0:16:53.320 a slight acceleration from the month before there. Uh. I 0:16:53.320 --> 0:16:58.680 think it's the highest since four So they are definitely 0:16:58.880 --> 0:17:03.320 in a position where want to get inflation down. Uh. 0:17:03.360 --> 0:17:09.040 And recently, however, Chingyong Ri, the new relatively new head 0:17:09.040 --> 0:17:12.399 of the Bank of Korea, signaled a move maybe of 0:17:12.520 --> 0:17:16.359 twenty five even with the high inflation. There's enough clouds, 0:17:16.720 --> 0:17:20.439 you know, dark clouds over the h Create economy, as 0:17:20.440 --> 0:17:22.280 there are many economies now in the world. I think 0:17:22.280 --> 0:17:25.560 they're getting a little less ready and eager to do 0:17:25.600 --> 0:17:27.600 the more aggressive hikes. They were one of the first 0:17:27.640 --> 0:17:31.359 central banks to begin tightening, I recall, and as with 0:17:31.440 --> 0:17:33.760 any central bank, it's trying to strike a balance right 0:17:33.800 --> 0:17:37.240 between tackling inflation on one hand and supporting economic growth. 0:17:37.520 --> 0:17:41.119 This is a very unique economy because it's so strongly 0:17:41.600 --> 0:17:45.080 export driven, but at the same time, there are a 0:17:45.080 --> 0:17:48.119 lot of internal things here that make it a little complex. 0:17:48.440 --> 0:17:52.520 The household sector is very heavily levered, right, You've got 0:17:52.520 --> 0:17:55.879 food inflation that's beginning to pop up. There are labor 0:17:55.960 --> 0:17:58.240 problems that the new government is having to deal with. 0:17:58.320 --> 0:18:00.879 So it's a complicated situation I think for the b Okay. 0:18:00.920 --> 0:18:02.640 And it's interesting because one of the reasons they're having 0:18:02.640 --> 0:18:05.679 those labor problems is because of rising prices. That's a 0:18:05.720 --> 0:18:08.320 big part of it. You know, we think more maybe 0:18:08.320 --> 0:18:14.000 about um food unrest in some poorer countries, but in 0:18:14.000 --> 0:18:17.399 in Korea, that's that's gotten people off their feet. I 0:18:17.440 --> 0:18:19.360 think it's that's one of the reasons why coming back 0:18:19.400 --> 0:18:24.200 to what the tone has been lately that uh, the 0:18:24.200 --> 0:18:26.320 the moves they're going to, they're gonna keep moving. They're 0:18:26.320 --> 0:18:29.280 gonna fight, but the moves are going to be gradual. 0:18:29.400 --> 0:18:31.960 That seems to be their message. Now they hope to 0:18:32.000 --> 0:18:34.520 get I believe to about two point seven five three 0:18:35.000 --> 0:18:37.040 by the end of the year, so they that means 0:18:37.080 --> 0:18:40.280 they have some more to run. But again maybe the 0:18:40.280 --> 0:18:45.720 fifty basis point hike isn't quite as UH probable, particularly 0:18:45.760 --> 0:18:48.160 after you see the slow down in China and we're 0:18:48.160 --> 0:18:51.040 seeing action on the fiscal side to the finance minister 0:18:51.160 --> 0:18:55.560 recently was talking about cutting spending pretty significantly. I think 0:18:55.600 --> 0:18:58.120 for ten years in a row, Um, you've been adding 0:18:58.200 --> 0:19:02.080 to extra spending year and year out with the previous administration. 0:19:02.080 --> 0:19:04.720 But the new administration wants to cut spending and get 0:19:04.760 --> 0:19:08.479 a lot more disciplined. How might that impact inflation? Well, 0:19:08.600 --> 0:19:11.080 if you cut back on spending, it's you know, your 0:19:11.240 --> 0:19:13.960 there's the money you add to melus or of subtract it. 0:19:14.160 --> 0:19:16.720 So the question is, I guess where they would be 0:19:17.160 --> 0:19:19.920 UH cutting their spending. Who would they be pulling back 0:19:20.000 --> 0:19:23.000 on And I don't think it's entirely clear yet exactly 0:19:23.480 --> 0:19:27.399 how that is UH is going to play out, So 0:19:27.720 --> 0:19:31.240 UH for the immediate future, I think that the b 0:19:31.359 --> 0:19:33.399 Okay and what they do. They're going to keep an 0:19:33.440 --> 0:19:36.240 eye on that, and they're very supportive of that. But 0:19:36.359 --> 0:19:38.480 I think that it's right now, it's going to be 0:19:38.520 --> 0:19:42.000 again more growth, uh. And it's not just China slowing down, 0:19:42.000 --> 0:19:44.040 of course that they're looking at. Their looking aggressive rate 0:19:44.119 --> 0:19:46.760 hikes by the FED. You mentioned the FED. It's interesting 0:19:46.840 --> 0:19:49.440 because we just had the FED Minutes recently and one 0:19:49.440 --> 0:19:51.119 of the things that I took away from it is 0:19:51.720 --> 0:19:55.080 a reminder that monetary policy works with a lag. We're 0:19:55.119 --> 0:19:57.480 going to need some time to be able to see 0:19:57.560 --> 0:20:00.680 more clearly how the tightening is playing out in the economy. 0:20:00.680 --> 0:20:02.159 And I would imagine the be Okay is in the 0:20:02.240 --> 0:20:06.920 exact same situation. They certainly are, and that's another reason 0:20:07.000 --> 0:20:11.560 why presumably they have to be sending out the message 0:20:11.640 --> 0:20:13.760 that they're going to keep hiking. They're ready to hike, 0:20:13.800 --> 0:20:16.480 but they've also stated publicly that this is one of 0:20:16.520 --> 0:20:19.359 the things they're watching very closely. But certainly Korea, what 0:20:19.480 --> 0:20:21.440 is it, the leventh biggest country in the world, it's 0:20:21.440 --> 0:20:24.000 the fourth biggest exporter, so it's something they're very much 0:20:24.000 --> 0:20:26.240 in tune to. And then something uh that's in the 0:20:26.240 --> 0:20:28.720 background for everybody, the war in Ukraine, the fact that 0:20:28.760 --> 0:20:31.919 it's not going away, the fact that commodity prices are 0:20:31.920 --> 0:20:35.560 being affected, and that washes over their economy too. All right, Kathleen, 0:20:35.600 --> 0:20:39.080 thanks so much for joining us an interesting discussion. Kathleen Hayes, 0:20:39.119 --> 0:20:43.320 Bloomberg's Global Economics and Policy editor. I'm Brian Curtis, along 0:20:43.320 --> 0:20:45.760 with Doug Krisner. You can catch us every weekday here 0:20:45.800 --> 0:20:48.960 for Bloomberg Daybreak Asia, beginning at six am in Hong 0:20:49.040 --> 0:20:52.639 Kong and six pm on Wall Street. John Bryan and 0:20:52.720 --> 0:20:55.639 Doug Thanks alive, just to hand on Bloomberg Daybreak weekend. 0:20:55.800 --> 0:20:59.119 The President Biden has had some big wins lately. How 0:20:59.200 --> 0:21:02.040 much traction and he get out of it? As politics 0:21:02.080 --> 0:21:06.239 gets more fractures have a big key midterm election. I'm 0:21:06.320 --> 0:21:14.480 John Tuckers. Busy is Bloomberg Daybreak weekend, our global look 0:21:14.480 --> 0:21:17.000 ahead of the top stories for investors in the coming week. 0:21:17.240 --> 0:21:20.199 I'm John Tuckery in New York. President Biden has had 0:21:20.240 --> 0:21:22.760 some big wins lightly and the question for him is 0:21:22.920 --> 0:21:25.560 how much traction can he get out of all of this? 0:21:26.040 --> 0:21:30.280 For more? Let's into our Bloomberg room in Washington and 0:21:30.480 --> 0:21:33.440 Amy Morris Amy, thank you, John. We are looking at 0:21:33.440 --> 0:21:36.880 the possibility that the Democrats may be feeling some momentum, 0:21:36.920 --> 0:21:39.960 a question that's especially important for President Biden right now 0:21:40.000 --> 0:21:43.480 ahead of the midterms. Bloomberg White House reporter Jordan Fabian 0:21:43.560 --> 0:21:46.520 joins me now is bringing us some insight. Jordan's it's 0:21:46.520 --> 0:21:48.359 a pleasure. Thanks so much for taking the time with 0:21:48.440 --> 0:21:51.080 us today. Thanks for having me on Amy. Now, let's 0:21:51.080 --> 0:21:54.280 start with the laundry list of wins for President Biden. 0:21:54.440 --> 0:21:57.800 The Inflation Reduction Act, the Chips Bill uh signs that 0:21:57.840 --> 0:22:01.199 inflation may be starting to moderate um. That analysis that 0:22:01.240 --> 0:22:03.199 was in the New York Times this past week asking 0:22:03.200 --> 0:22:06.240 the question if the Biden administration is at a turning point, 0:22:06.880 --> 0:22:09.800 Let me ask you, is the Biden administration at a 0:22:09.800 --> 0:22:12.040 turning point? I think it's fair to say it is. 0:22:13.040 --> 0:22:17.280 All these wins, especially the Inflation Reduction Act, weren't thought 0:22:17.359 --> 0:22:21.240 possible just weeks ago, and they did manage to push 0:22:21.280 --> 0:22:23.399 these through and not to mention it, you know, in 0:22:23.440 --> 0:22:27.280 a fifty Senate where there they really don't have a 0:22:27.320 --> 0:22:30.920 margin for error. So this is a real These are 0:22:30.920 --> 0:22:33.479 some real achievements for the White House. The the issue 0:22:33.560 --> 0:22:37.359 is is it coming too late for them to turn 0:22:38.000 --> 0:22:42.120 prospects around for Democrats in the November midterm elections. They 0:22:42.200 --> 0:22:45.399 really need these winds to try to generate momentum for 0:22:45.440 --> 0:22:49.399