Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: So here's the LISUS this morning, the ECB warning tarras
Speaker 2: may be more disinflationary than inflationary for Europe. This after
Speaker 2: President Trump said he's confident of reaching a trade deal
Speaker 2: with the EU. Joining us around the table here in
Speaker 2: our studio in Washington, d C. The Chief economist of
Speaker 2: the European Central Bank, Philip Blank. Philip is good to
Speaker 2: see you, sir, Good morning, Thanks for being able to
Speaker 2: hear in Washington. So the Government Council meeting, I imagine,
Speaker 2: was very different this time around than a number of
Speaker 2: months ago when you walked into that room and presented
Speaker 2: changes to the economy. What did you tell a team?
Speaker 1: Sure, I mean I think it was a gear change
Speaker 1: for several reasons. So of course, our core business has
Speaker 1: been to try and get inflation back down from a
Speaker 1: high number to our targets. So I think there was
Speaker 1: a milestone in this meeting in the sense of the
Speaker 1: most recent data had come in quite low. What we'd
Speaker 1: been waiting for services inflation to kind of drop, and
Speaker 1: it has been dropped. And then we had surveys showing
Speaker 1: that basically the weight dynamic this year and in twenty
Speaker 1: six is lower than we expected. So basically, if you like,
Speaker 1: if you clear the table about the historic issue, are
Speaker 1: we safely bringing inflation back to target? I think a
Speaker 1: lot it's not entirely settled, but a lot of it
Speaker 1: is settled. So the gear change was of course, now
Speaker 1: we have new things to talk about, and really since
Speaker 1: all the way back to last summer, trade policy uncertainty
Speaker 1: has been part of what we've had to talk about.
Speaker 1: But we still have trade policy uncertainty, but we also
Speaker 1: have trade policy news. You know, lots has happened that
Speaker 1: the and then the other element of what we've seen
Speaker 1: is of course, and that happened, by the way, like
Speaker 1: a day or two before our March meeting, was a
Speaker 1: German break through and fiscal policy, so we already had
Speaker 1: that if you like, in the early incarnation at the
Speaker 1: March meeting. We know more now, but it's still, you know,
Speaker 1: in terms of what the other European countries are going
Speaker 1: to do, it's something that's still in discussion. So what
Speaker 1: I would say if you put all of that together,
Speaker 1: and I think you're probably hearing this from various colleagues
Speaker 1: and other people this week, is if I take a
Speaker 1: longer term perspective, and the IMF in their publications this week,
Speaker 1: a lot of the data go out to twenty thirty.
Speaker 1: If I take a twenty thirty perspective, you know, I
Speaker 1: think there's a lot of grants to have a renewed
Speaker 1: optimism that essentially, with more fiscal support, the credibility of
Speaker 1: delivering our two percent target on a kind of long
Speaker 1: term basis is stronger. The case for the European economy
Speaker 1: to be more resilient, to grow from a domestic source,
Speaker 1: not just from running a big export machine, is more credible.
Speaker 1: But of course we have to navigate from where we
Speaker 1: are now. Where As you said in your intro, immediately
Speaker 1: in the short term, the way it's playing out with
Speaker 1: euro appreciation, with a big drop in energy prices, the
Speaker 1: disinflatory forces are there. But I would say maybe the question,
Speaker 1: you know, I wouldn't load it all on the trade policy.
Speaker 1: What we also see now as a portfolio shift. So
Speaker 1: there's a clear portfolio shift going on, which is I
Speaker 1: think the way you can reconcile euro appreciation in the
Speaker 1: middle of this trade discussion.
Speaker 2: As you know, Philip, that sort of begs the question
Speaker 2: why you don't act more aggressively. Does that give you
Speaker 2: the space to act more preemptively.
Speaker 1: Well, I think a very important narrative we had last week,
Speaker 1: and it was repeated threat to Manto policy statement was resilience.
Speaker 1: What we're seeing is the European economy growing. Two years
Speaker 1: ago it was kind of more stagnating. So we said
Speaker 1: the European economy is going to recover. We saw, you know,
Speaker 1: modest but still market recovery last year is around zero nine.
Speaker 1: We have zero nine written down in March for this year,
Speaker 1: and that's basically because with incomes going up, consumption shough
Speaker 1: to cover with our multi policy and the general improvement
Speaker 1: of the economy, investments should recover with more government support.
Speaker 1: So all the domestic engines are there. So what you
Speaker 1: have to think about is all of that, if you like,
Speaker 1: is saying that the economies should be growing, even marking
Speaker 1: down some trait negative and this is why we're not
Speaker 1: in a situation where we see some dramatic change in
Speaker 1: the external environment or in fries pressures and so on.
Speaker 1: So steady is okay? Hold on a second, are you
Speaker 1: saying that what we've seen with respect to US policy
Speaker 1: and the uncertainty isn't increasing the chance of recession materially
Speaker 1: for the euroregion. Well, I mean, I think our overriding seam,
Speaker 1: of course is uncertainty. And let's not get ahead of
Speaker 1: ourselves in terms of being too sure about any any
Speaker 1: path for the ecomon But I think the message is
Speaker 1: but it's not me dreaming it up. If you look
Speaker 1: at the external watchers, if you look at the IMF,
Speaker 1: it's fairly modest mark dance on the growth trade for
Speaker 1: the European economy. The US, of course has a major
Speaker 1: trade policy issue all with the world. We have a
Speaker 1: trade policy issue with the US. The US is an
Speaker 1: important trading partner, but it's not our only trading partner,
Speaker 1: so directionally it is a markdown. There is a markdown,
Speaker 1: but it's important to say it's a markdown from a
Speaker 1: growth trade around zero nine to a little bit less.
Speaker 1: Let's see in the coming weeks how much less. And
Speaker 1: I think if you look at the surveys this week,
Speaker 1: the surveys have elements of people being concerned, but they
Speaker 1: also have elements Right now, we're busy. Manufacturing is a
Speaker 1: bit busier than it was. That could be a little
Speaker 1: bit of front running of taris for sure, but it's
Speaker 1: also remember the recovery narrative. Europe has been stagnating. The
Speaker 1: American economy has grown quickly, So if you like, in
Speaker 1: terms of if there is room for the American ecomomy
Speaker 1: to decelerate, and then trade policy is adding to that,
Speaker 1: what I'm saying to you is essentially the baseline for
Speaker 1: Europe was to grow a bit more quickly, and so
Speaker 1: the resilience is there. You can take a trade hit
Speaker 1: without going to using that word which I of that
Speaker 1: you mentioned. You mentioned, of course that Europe has more
Speaker 1: trading partners.
Speaker 2: Than the United States.
Speaker 1: How concerned are you that if the walls keep going
Speaker 1: up in the United States, China will have to just
Speaker 1: dump somewhere. It's going to be on the continent. So
Speaker 1: I think directly an element with that must be you know,
Speaker 1: must be expected. But I think you know, China fully
Speaker 1: understands that. You know, if you listen to their policy
Speaker 1: announcements they're going to do. Their focus is on improving
Speaker 1: domestic demand. So in terms of the re orientation from
Speaker 1: the US, fairmount to domestic demand some amount to around
Speaker 1: the world. But I think also China understands it's a
Speaker 1: large economy and a bit of restraint in exporting may
Speaker 1: make sense.
Speaker 2: For the twenty seconds left, I just wanted to jump in.
Speaker 2: Olie Rain was busy this morning, your governing council partner,
Speaker 2: and he made the point that we should be open
Speaker 2: to larger interest rate cuts. Is that a position that
Speaker 2: you and the team agree with?
Speaker 1: Philosophically, we don't pre commit to any rate path, of course,
Speaker 1: and so this is why again it's important, and I
Speaker 1: think the Government Council, I think, tries hard to maintain
Speaker 1: this is. You can express that in different ways, and
Speaker 1: in particular there's no reason to say we're always going
Speaker 1: to do the default twenty five. Philosophically I agree with that. Okay,
Speaker 1: what I said to you earlier on is right now
Speaker 1: the growth performance I'm sure to be marked down. It's
Speaker 1: still a growing economy with inflation I think to the downside.
Speaker 1: But we don't need too dramatic
Speaker 2: About Philip Lane, the Chafe economist of the e c
Speaker 2: B