1 00:00:00,240 --> 00:00:07,680 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:10,520 --> 00:00:13,960 Speaker 2: This is Bloomberg Daybreak Weekend, our global look at the 3 00:00:13,960 --> 00:00:16,680 Speaker 2: top stories in the coming week from our Daybreak anchors 4 00:00:16,720 --> 00:00:19,279 Speaker 2: all around the world. Straight Ahead on the program, we 5 00:00:19,320 --> 00:00:22,200 Speaker 2: look ahead to the next FED meeting and big tech earnings. 6 00:00:22,280 --> 00:00:23,960 Speaker 2: I'm Nathan Hager in Washington. 7 00:00:24,120 --> 00:00:26,840 Speaker 3: I'm calin Hepcoon London, where we're discussing the outlet for 8 00:00:26,880 --> 00:00:29,840 Speaker 3: the Bank of England against a backdrop of renewed conflict 9 00:00:29,880 --> 00:00:32,680 Speaker 3: in the Middle East and a new UK government. 10 00:00:32,840 --> 00:00:36,000 Speaker 4: I'm Doug Chrisner looking ahead to next week's interest rate 11 00:00:36,040 --> 00:00:37,640 Speaker 4: decision from the Bank of Japan. 12 00:00:38,360 --> 00:00:42,400 Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 13 00:00:42,400 --> 00:00:46,120 Speaker 1: eleven three year, New York, Bloomberg ninety nine to one, Washington, DC, 14 00:00:46,600 --> 00:00:51,640 Speaker 1: Bloomberg ninety two nine, Boston, DAB Digital Radio, London, Syria, 15 00:00:51,920 --> 00:00:55,440 Speaker 1: XM one twenty one, and around the world on Bloomberg Radio, 16 00:00:55,480 --> 00:00:57,640 Speaker 1: dot Com and the Bloomberg Business app. 17 00:01:02,720 --> 00:01:05,600 Speaker 2: Good day to you. I'm Nathan Hager. We begin today's 18 00:01:05,600 --> 00:01:09,240 Speaker 2: program with the Federal Reserve. Kevin Warsh and company begin 19 00:01:09,360 --> 00:01:12,480 Speaker 2: their latest two day policy meeting this Tuesday with the 20 00:01:12,480 --> 00:01:15,720 Speaker 2: interest rate decision to come Wednesday here to get us 21 00:01:15,760 --> 00:01:17,440 Speaker 2: ready for it is our man in the room for 22 00:01:17,480 --> 00:01:21,720 Speaker 2: the Fed's policy moves, Bloomberg International Economics and Policy correspondent 23 00:01:22,120 --> 00:01:25,640 Speaker 2: Michael McKee. And it's really interesting, Mike. Leading up to 24 00:01:25,680 --> 00:01:29,039 Speaker 2: this decision, it seems like the market's pretty split on 25 00:01:29,080 --> 00:01:31,640 Speaker 2: which way the Fed could go. Is that the way 26 00:01:31,720 --> 00:01:34,120 Speaker 2: Kevin worsh likes it. 27 00:01:34,120 --> 00:01:36,800 Speaker 5: It's going to be interesting to see how he characterizes 28 00:01:36,840 --> 00:01:39,000 Speaker 5: all of this when he does get to the news conference, which, 29 00:01:39,040 --> 00:01:41,880 Speaker 5: by the way, he is going to have. Okay, we 30 00:01:41,880 --> 00:01:44,280 Speaker 5: were able to confirm that because they always send out 31 00:01:44,319 --> 00:01:48,440 Speaker 5: a reservation form for reporters to say, yes, we're coming, 32 00:01:48,800 --> 00:01:50,920 Speaker 5: So we got that, So we figured that he's going 33 00:01:50,920 --> 00:01:54,280 Speaker 5: to hold the press conference. Now the question is is 34 00:01:55,040 --> 00:01:58,560 Speaker 5: what's he going to say? And that's there is, as 35 00:01:58,600 --> 00:02:02,720 Speaker 5: you mentioned, a growing debate about that the markets are 36 00:02:02,760 --> 00:02:06,120 Speaker 5: beginning to get more worried about inflation. We've now got 37 00:02:06,200 --> 00:02:09,600 Speaker 5: one hundred dollars rent oil this week. We had Google 38 00:02:10,040 --> 00:02:14,120 Speaker 5: come out with a very large spend on AI, and 39 00:02:14,160 --> 00:02:19,720 Speaker 5: the Fed's been worried about short term demand caused AI inflation. 40 00:02:20,400 --> 00:02:24,360 Speaker 5: And on top of that, tariffs are back, so there's 41 00:02:24,400 --> 00:02:26,600 Speaker 5: a lot of reasons to think that in the near 42 00:02:26,680 --> 00:02:29,919 Speaker 5: term future we're going to have more inflation, which then 43 00:02:30,080 --> 00:02:33,560 Speaker 5: has people in the button markets, especially pushing yields up 44 00:02:33,720 --> 00:02:34,760 Speaker 5: to account for that. 45 00:02:35,639 --> 00:02:39,840 Speaker 2: And we've heard from Warsh himself since he took the Rains, 46 00:02:39,840 --> 00:02:42,040 Speaker 2: well even before he took the Rains, that you know, 47 00:02:42,280 --> 00:02:46,079 Speaker 2: he's not satisfied with where inflation is right now. He's 48 00:02:46,160 --> 00:02:49,519 Speaker 2: not declaring mission accomplished when it comes to getting back 49 00:02:49,560 --> 00:02:52,720 Speaker 2: to the two percent target. What does that tell us 50 00:02:52,760 --> 00:02:55,360 Speaker 2: about where the lean could be. 51 00:02:56,760 --> 00:02:59,320 Speaker 5: That's an interesting question because there's sort of two camps 52 00:02:59,400 --> 00:03:01,919 Speaker 5: at the FED right now, well three if you put 53 00:03:02,000 --> 00:03:04,840 Speaker 5: Kevin Warsh by himself, because he says he's not participating 54 00:03:04,880 --> 00:03:09,160 Speaker 5: in the forward guidance stuff. But there's the camp that 55 00:03:09,440 --> 00:03:12,680 Speaker 5: is okay with raising interest rates if they think the 56 00:03:12,880 --> 00:03:18,280 Speaker 5: inflation danger is growing, and that's a very large group 57 00:03:18,360 --> 00:03:20,600 Speaker 5: of people. And then there are people like Beth Hammock 58 00:03:20,680 --> 00:03:24,760 Speaker 5: of Cleveland, Lorie Logan of Dallas, Jeff Schmid of Kansas 59 00:03:24,800 --> 00:03:28,560 Speaker 5: City who think that the FED has been behind the 60 00:03:28,600 --> 00:03:32,119 Speaker 5: curve on inflation in terms of their target of two 61 00:03:32,120 --> 00:03:35,400 Speaker 5: percent for five years now and it's about time that 62 00:03:35,560 --> 00:03:39,960 Speaker 5: they get that done, and that the longer they wait, 63 00:03:40,240 --> 00:03:42,280 Speaker 5: the harder it just gets, and then people start to 64 00:03:42,400 --> 00:03:46,160 Speaker 5: anticipate that inflation will be higher, so they say, we're 65 00:03:46,160 --> 00:03:48,760 Speaker 5: not tight enough because inflation is not going down to 66 00:03:48,800 --> 00:03:52,720 Speaker 5: two percent, and we think we should raise rates right now. 67 00:03:52,840 --> 00:03:55,520 Speaker 5: So if there's enough of a concern in the first 68 00:03:55,560 --> 00:03:58,880 Speaker 5: group about those who are worried about if inflation picks up, 69 00:03:58,920 --> 00:04:01,880 Speaker 5: we could hike, then you could see a movement to 70 00:04:03,200 --> 00:04:07,760 Speaker 5: do that. Probably the most likely scenario is that you 71 00:04:07,800 --> 00:04:11,400 Speaker 5: get some descents, maybe Hammock, maybe Logan, maybe both. But 72 00:04:12,000 --> 00:04:13,960 Speaker 5: we could have a surprise. 73 00:04:14,120 --> 00:04:16,640 Speaker 2: And talk a little bit about what the potential economic 74 00:04:16,720 --> 00:04:20,400 Speaker 2: impact could be if we do get that surprise. If 75 00:04:20,440 --> 00:04:24,480 Speaker 2: the FED decides to deliver an interest rate hike this week, 76 00:04:24,560 --> 00:04:27,599 Speaker 2: what could the impact be in terms of economic growth? 77 00:04:27,640 --> 00:04:29,240 Speaker 2: What could the market impact be. 78 00:04:30,200 --> 00:04:33,919 Speaker 5: Well, it will probably be disparate in the equity markets. 79 00:04:33,960 --> 00:04:37,800 Speaker 5: It could certainly be a concern because we have all 80 00:04:37,839 --> 00:04:40,800 Speaker 5: these tech companies and software companies and all of the 81 00:04:40,839 --> 00:04:44,880 Speaker 5: people who are leading the markets making these big bets 82 00:04:45,120 --> 00:04:49,440 Speaker 5: on AI and the capital spend for that, and if 83 00:04:49,480 --> 00:04:52,719 Speaker 5: they have to pay more in interest to borrow or 84 00:04:53,880 --> 00:05:00,120 Speaker 5: for their dividends, then it's it's going to hurt and 85 00:05:00,160 --> 00:05:03,480 Speaker 5: you could see a decline in the equity markets and 86 00:05:03,520 --> 00:05:05,920 Speaker 5: the bond markets. What we've seen in the last week 87 00:05:06,000 --> 00:05:09,800 Speaker 5: or so is a big increase in yields, and so 88 00:05:09,839 --> 00:05:12,560 Speaker 5: the bond markets are pretty much priced in the idea 89 00:05:12,839 --> 00:05:15,719 Speaker 5: of a rate cut. They don't have to react as much. 90 00:05:16,040 --> 00:05:18,160 Speaker 5: What you'd be looking for there is in the longer end, 91 00:05:18,200 --> 00:05:21,839 Speaker 5: are they pricing in more cuts more increases after they 92 00:05:22,240 --> 00:05:25,479 Speaker 5: did one. So it's going to be a kind of 93 00:05:25,480 --> 00:05:28,760 Speaker 5: a different reaction in different markets and for the as 94 00:05:28,760 --> 00:05:30,880 Speaker 5: far as the economy is going to be concerned, it's 95 00:05:30,880 --> 00:05:33,039 Speaker 5: not going to have a big impact because twenty five 96 00:05:33,040 --> 00:05:36,240 Speaker 5: basis points that will take time to get into the economy. 97 00:05:36,440 --> 00:05:39,760 Speaker 5: The bond markets have already adjusted borrowing costs, so you 98 00:05:39,800 --> 00:05:42,440 Speaker 5: wouldn't notice it as much in your day to day life. 99 00:05:42,680 --> 00:05:46,960 Speaker 2: Oh, we've talked about the price increases around the chip 100 00:05:47,040 --> 00:05:51,400 Speaker 2: supply crunch, the tech sector inflation as well as this 101 00:05:52,160 --> 00:05:56,440 Speaker 2: growing risk of war driven inflation as well. Is Federal 102 00:05:56,480 --> 00:06:00,320 Speaker 2: reserve policy and effective tool against either of those of 103 00:06:00,360 --> 00:06:01,040 Speaker 2: price pressures. 104 00:06:01,080 --> 00:06:05,000 Speaker 5: Mike, that is kind of the counter argument to the 105 00:06:05,040 --> 00:06:08,160 Speaker 5: idea that the Fed should do something because inflation is 106 00:06:08,200 --> 00:06:11,159 Speaker 5: too high. The Fed can raise interest rates all at once. 107 00:06:11,240 --> 00:06:13,200 Speaker 5: It's not going to bring down the price of oil 108 00:06:13,600 --> 00:06:16,320 Speaker 5: unless it were to throw the economy into recession and 109 00:06:16,360 --> 00:06:19,600 Speaker 5: we didn't all go to work. The Fed can do that, 110 00:06:19,760 --> 00:06:22,800 Speaker 5: and it's not going to change the view of people 111 00:06:22,839 --> 00:06:25,520 Speaker 5: that AI is worth spending money on because there's a 112 00:06:25,560 --> 00:06:28,320 Speaker 5: payoff in the long run. So at this point it 113 00:06:28,400 --> 00:06:31,839 Speaker 5: may have an impact because over a longer period of 114 00:06:31,880 --> 00:06:35,920 Speaker 5: time that would slow economic growth and hopefully that would 115 00:06:36,200 --> 00:06:39,279 Speaker 5: bring down some inflation, but mostly inflation is supply caused 116 00:06:39,320 --> 00:06:42,719 Speaker 5: at this point, and it's difficult to have an impact 117 00:06:42,800 --> 00:06:46,120 Speaker 5: on that with monetary policy. So that's the argument for 118 00:06:46,320 --> 00:06:47,719 Speaker 5: why they might not do anything. 119 00:06:48,000 --> 00:06:50,440 Speaker 2: Well, Mike, looking forward to the FED decision. Looking forward 120 00:06:50,480 --> 00:06:52,640 Speaker 2: to seeing you back in DC this week. That is 121 00:06:52,720 --> 00:06:56,919 Speaker 2: Michael McKee, Bloomberg International Economics and Policy Correspondent. Ahead of 122 00:06:56,920 --> 00:07:00,560 Speaker 2: the Fed decision this Wednesday, two pm WAI Street Time. 123 00:07:00,560 --> 00:07:03,239 Speaker 2: We will have full coverage, of course for you throughout 124 00:07:03,279 --> 00:07:06,520 Speaker 2: the day on Bloomberg Radio. Let's take a look now 125 00:07:06,600 --> 00:07:08,680 Speaker 2: at some stocks making news in the week ahead. I'm 126 00:07:08,720 --> 00:07:11,360 Speaker 2: Nathan Hager, joined by Man Deep Saying, Global head of 127 00:07:11,360 --> 00:07:14,760 Speaker 2: Tech Research at Bloomberg Intelligence. Because it is another big 128 00:07:14,760 --> 00:07:17,640 Speaker 2: week for big tech earnings. Correct me if I'm wrong, man, deep, 129 00:07:17,640 --> 00:07:20,360 Speaker 2: but I think we're hearing from what three more of 130 00:07:20,400 --> 00:07:23,120 Speaker 2: the four major hyperscalers after we heard from Alphabet this 131 00:07:23,120 --> 00:07:23,960 Speaker 2: past week. 132 00:07:24,200 --> 00:07:28,720 Speaker 6: We are, indeed, and look, we know Microsoft hasn't done 133 00:07:28,760 --> 00:07:33,240 Speaker 6: well in the past quarter, and they will be for me, 134 00:07:33,720 --> 00:07:39,960 Speaker 6: one of the big ones. Amazon and you know Apple 135 00:07:41,640 --> 00:07:45,640 Speaker 6: and Meta as well, like all these companies have had 136 00:07:45,800 --> 00:07:50,560 Speaker 6: a decent quarter. So from that perspective, I think where 137 00:07:50,720 --> 00:07:55,280 Speaker 6: expectations are really low, I would say it's Microsoft and 138 00:07:56,000 --> 00:07:59,880 Speaker 6: for me, Google had a slight increase in their full 139 00:08:00,120 --> 00:08:03,160 Speaker 6: year capex for twenty twenty six, they raised it by 140 00:08:03,200 --> 00:08:07,080 Speaker 6: about four percent, and they said twenty twenty seven capex 141 00:08:07,120 --> 00:08:11,200 Speaker 6: would be significantly higher, and so from that perspective, it'll 142 00:08:11,200 --> 00:08:15,240 Speaker 6: be interesting to see what Microsoft and Amazon end up doing, 143 00:08:15,680 --> 00:08:16,760 Speaker 6: as well as Meta. 144 00:08:16,880 --> 00:08:20,080 Speaker 2: Absolutely well, let's start with Microsoft, as you say, probably 145 00:08:20,080 --> 00:08:22,800 Speaker 2: the biggest player of the three major hyperscalers we're going 146 00:08:22,840 --> 00:08:26,280 Speaker 2: to hear from this week. After we heard from Alphabet, 147 00:08:26,560 --> 00:08:29,360 Speaker 2: two hundred and five billion dollars that increase on the 148 00:08:29,360 --> 00:08:32,560 Speaker 2: top line in terms of their forecast for capital expenditure 149 00:08:32,880 --> 00:08:35,960 Speaker 2: for this year. If we see similar numbers from Microsoft. 150 00:08:36,120 --> 00:08:38,640 Speaker 2: What kind of a market reaction could that Sparkmandate? 151 00:08:39,160 --> 00:08:44,160 Speaker 6: Actually, I expect a negative reaction if they significantly raise 152 00:08:44,240 --> 00:08:47,520 Speaker 6: their CAPEX, and I feel the bar is now quite 153 00:08:47,600 --> 00:08:51,000 Speaker 6: high with Alphabet going over two hundred billion dollars for 154 00:08:51,080 --> 00:08:55,480 Speaker 6: this year. So with Microsoft, the challenge is they don't 155 00:08:55,480 --> 00:08:59,800 Speaker 6: have the vertical integration that Alphabet has with Gemini and 156 00:09:00,240 --> 00:09:05,160 Speaker 6: TPU Systems, which that Google has highlighted could be a 157 00:09:05,280 --> 00:09:09,240 Speaker 6: separate line of business. So from that perspective, you know, 158 00:09:09,360 --> 00:09:13,440 Speaker 6: Microsoft has to show Azure growth, and that Azure growth 159 00:09:13,480 --> 00:09:17,960 Speaker 6: has been more like around forty percent. Google posted cloud 160 00:09:17,960 --> 00:09:20,600 Speaker 6: growth of around eighty two percent in their second quarter, 161 00:09:20,800 --> 00:09:24,480 Speaker 6: So from that perspective, there's a lot that Microsoft has 162 00:09:24,520 --> 00:09:27,760 Speaker 6: to prove in terms of both the cloud growth rates 163 00:09:27,800 --> 00:09:31,120 Speaker 6: that I've been trailing and also how else they can 164 00:09:31,160 --> 00:09:36,160 Speaker 6: monetize that CAPEX beyond their cloud segment growth as Google 165 00:09:36,160 --> 00:09:39,600 Speaker 6: has shown with TPU Systems, and you know how they 166 00:09:39,600 --> 00:09:42,640 Speaker 6: are deploying their own Gemini model on top of it. 167 00:09:42,920 --> 00:09:45,920 Speaker 2: And when it comes to Meta also reporting on Wednesday, 168 00:09:46,120 --> 00:09:50,040 Speaker 2: if they see a major increase to their capital expenditure, 169 00:09:50,080 --> 00:09:52,000 Speaker 2: it's a little bit different, isn't it In terms of 170 00:09:52,240 --> 00:09:54,640 Speaker 2: how they deploy that kind of spending. 171 00:09:55,080 --> 00:09:59,239 Speaker 6: Yeah, I said it was a bigger bar for Microsoft. 172 00:09:59,400 --> 00:10:03,040 Speaker 6: For Meta, it's even higher because they don't even have 173 00:10:03,120 --> 00:10:06,240 Speaker 6: a cloud business. So in the case of Microsoft, at 174 00:10:06,360 --> 00:10:09,520 Speaker 6: least they have a cloud business, where Azure segment would 175 00:10:09,720 --> 00:10:15,520 Speaker 6: probably see accelerating sequentially accelerating growth. In the case of Meta, 176 00:10:15,600 --> 00:10:18,199 Speaker 6: it all has to show up in their top line 177 00:10:18,320 --> 00:10:22,480 Speaker 6: ads business, which we have seen from Google, the search 178 00:10:22,559 --> 00:10:26,160 Speaker 6: business didn't accelerate. It was really their cloud business that 179 00:10:26,280 --> 00:10:29,319 Speaker 6: went from you know, sixty percent growth to over eighty 180 00:10:29,320 --> 00:10:32,679 Speaker 6: percent growth. So Meta doesn't have a cloud business. And 181 00:10:32,760 --> 00:10:35,440 Speaker 6: so if Meta comes out and says they are raising 182 00:10:35,480 --> 00:10:39,840 Speaker 6: their CAPEX for second half, I totally expect a negative reaction, 183 00:10:40,240 --> 00:10:43,280 Speaker 6: going by how the market has reacted to the Google 184 00:10:43,440 --> 00:10:44,319 Speaker 6: capex increase. 185 00:10:44,520 --> 00:10:47,960 Speaker 2: How do you see Mark Zuckerberg's strategy when it comes 186 00:10:48,000 --> 00:10:51,240 Speaker 2: to AI deployment right now, particularly after all the spending 187 00:10:51,280 --> 00:10:55,000 Speaker 2: metas done just building a super intelligence team and all 188 00:10:55,040 --> 00:10:56,839 Speaker 2: the partnerships that it's gotten into. 189 00:10:57,360 --> 00:11:00,360 Speaker 6: Yeah. So, look, they've released a new model, the new 190 00:11:00,400 --> 00:11:04,720 Speaker 6: Spark model. They're looking to monetize that through API use 191 00:11:05,040 --> 00:11:09,559 Speaker 6: and also get into cloud rentals like the Neo Clouds 192 00:11:09,679 --> 00:11:13,640 Speaker 6: That would be very interesting for me who the buyers 193 00:11:13,720 --> 00:11:18,600 Speaker 6: of Meta compute could be, because we've seen SpaceX rent 194 00:11:18,640 --> 00:11:22,800 Speaker 6: their compute to Google and Google did say that, you know, 195 00:11:22,920 --> 00:11:26,840 Speaker 6: because of the third party compute rentals, the margins may 196 00:11:26,920 --> 00:11:32,440 Speaker 6: actually go down. So in effect, we expect maybe Google 197 00:11:32,480 --> 00:11:35,680 Speaker 6: may end up renting compute from Meta in the near trump. 198 00:11:35,720 --> 00:11:38,920 Speaker 6: It would be interesting if that happens, and I think 199 00:11:38,920 --> 00:11:42,120 Speaker 6: there are speculations that Meta wants to get into cloud 200 00:11:42,160 --> 00:11:45,200 Speaker 6: rental business. That's where it could be a new line 201 00:11:45,240 --> 00:11:49,720 Speaker 6: of business for them to justify any CAPEX increase that 202 00:11:49,800 --> 00:11:52,079 Speaker 6: they may have during their earnings call. 203 00:11:52,120 --> 00:11:53,920 Speaker 2: In the time we have left, Mandy, but I'd be 204 00:11:53,920 --> 00:11:56,520 Speaker 2: curious to get your view as well on Apple they 205 00:11:56,559 --> 00:12:01,080 Speaker 2: report Thursday. Maybe not a hyperscaler along the line of Meta, 206 00:12:01,160 --> 00:12:05,920 Speaker 2: Microsoft or Amazon, but how do you see Apple's results 207 00:12:05,960 --> 00:12:06,760 Speaker 2: coming out? 208 00:12:07,080 --> 00:12:10,280 Speaker 6: I mean, they have a new CEO, they have been 209 00:12:10,320 --> 00:12:13,360 Speaker 6: at the receiving end of all these memory and the 210 00:12:13,440 --> 00:12:17,160 Speaker 6: component price increases which they have passed on to their 211 00:12:17,400 --> 00:12:20,240 Speaker 6: or they plan to pass it on to their customers 212 00:12:20,240 --> 00:12:24,600 Speaker 6: in terms of higher prices. I think, you know, even 213 00:12:24,679 --> 00:12:30,080 Speaker 6: though expectations are for mid teens double digit growth, it'll 214 00:12:30,120 --> 00:12:32,959 Speaker 6: be hard for them to come up with any upside 215 00:12:33,600 --> 00:12:37,160 Speaker 6: given price increases are a big part of that top 216 00:12:37,240 --> 00:12:43,240 Speaker 6: line growth. So given the CEO change and the price increases, 217 00:12:44,000 --> 00:12:47,320 Speaker 6: I think it'll be hard to see any big positive 218 00:12:47,360 --> 00:12:48,960 Speaker 6: surprises coming out of app. 219 00:12:49,120 --> 00:12:51,679 Speaker 2: Really appreciate the perspective as we get ready for the 220 00:12:51,720 --> 00:12:54,440 Speaker 2: fire hose of tech earnings this week. Man Deep Sing 221 00:12:54,520 --> 00:12:58,199 Speaker 2: with us there, global head of tech research at Bloomberg Intelligence, 222 00:12:58,480 --> 00:13:01,280 Speaker 2: and coming up on Bloomberg day Break weekend, we look 223 00:13:01,320 --> 00:13:04,800 Speaker 2: ahead to the Bank of England's next rate decision. I'm 224 00:13:04,840 --> 00:13:19,080 Speaker 2: Nathan Hager, and this is Bloomberg. This is Bloomberg day 225 00:13:19,080 --> 00:13:21,720 Speaker 2: Break Weekend, our global look ahead at the top stories 226 00:13:21,720 --> 00:13:24,760 Speaker 2: for investors in the coming week. I'm Nathan Hager in Washington. 227 00:13:25,040 --> 00:13:26,880 Speaker 2: Up later in the program we'll look ahead to a 228 00:13:26,920 --> 00:13:30,280 Speaker 2: monetary policy decision from the Bank of Japan. But first 229 00:13:30,280 --> 00:13:32,240 Speaker 2: in the coming days, we get the Bank of England's 230 00:13:32,280 --> 00:13:35,840 Speaker 2: decision on interest rates. That says UK inflation hit a 231 00:13:35,880 --> 00:13:38,760 Speaker 2: fifteen month low in June, but the renewed conflict in 232 00:13:38,800 --> 00:13:42,560 Speaker 2: the Middle East means ever present energy price concerned. So 233 00:13:42,840 --> 00:13:45,600 Speaker 2: how will the BOE navigate it all? Let's go to 234 00:13:45,640 --> 00:13:48,600 Speaker 2: London and bring in Bloomberg Daybreak. You're a banker, Caroline 235 00:13:48,640 --> 00:13:49,880 Speaker 2: hepgar Nathan. 236 00:13:49,880 --> 00:13:52,960 Speaker 3: The Bank of England faces inflationary pressures from the Ivan Wall, 237 00:13:53,200 --> 00:13:57,440 Speaker 3: a loosening jobs market, and sluggish economic growth. It also 238 00:13:57,520 --> 00:14:00,600 Speaker 3: must get used to a new administration in ten and 239 00:14:00,720 --> 00:14:04,280 Speaker 3: number eleven Downing Street. Prime Minister Anty Burnham has promised 240 00:14:04,360 --> 00:14:07,880 Speaker 3: a new economic model for the UK and measures to 241 00:14:08,000 --> 00:14:11,520 Speaker 3: tackle the cost of living. His Chancellor, John Healey, has 242 00:14:11,559 --> 00:14:15,160 Speaker 3: signaled room to maneuver on tax and spending, but he's 243 00:14:15,200 --> 00:14:18,880 Speaker 3: also spoken about the need for fiscal credibility. He is 244 00:14:19,080 --> 00:14:22,720 Speaker 3: giving an inaugural address to staff at the UK Treasury. 245 00:14:23,320 --> 00:14:28,920 Speaker 7: I'm still burning with a passion about this institution as 246 00:14:28,960 --> 00:14:36,760 Speaker 7: a force for stability, for security, for growth, a force 247 00:14:37,440 --> 00:14:38,880 Speaker 7: for a successful Britain. 248 00:14:39,360 --> 00:14:43,000 Speaker 3: John Healey, the new UK Chancellor and former Defense Minister 249 00:14:43,120 --> 00:14:46,840 Speaker 3: speaking there. So all sunshine and roses for now, but 250 00:14:47,160 --> 00:14:51,080 Speaker 3: this Chancellor faces all manner of challenges and pressure to 251 00:14:51,160 --> 00:14:55,400 Speaker 3: deliver quickly on economic growth. And while markets widely expect 252 00:14:55,400 --> 00:14:57,800 Speaker 3: the Bank of England to hold interest rates at three 253 00:14:57,840 --> 00:15:01,080 Speaker 3: point seventy five percent on the thirtieth of July, the 254 00:15:01,200 --> 00:15:04,280 Speaker 3: energy shot from the Iran War keeps the UK's inflation 255 00:15:04,440 --> 00:15:08,120 Speaker 3: expectations elevated, So how will the Bank of England chart 256 00:15:08,240 --> 00:15:12,160 Speaker 3: a path through this period of change, conflict and volatility. 257 00:15:12,520 --> 00:15:15,880 Speaker 3: Joining me now is Bloomberg's UK Economy reported Tom Reese 258 00:15:16,000 --> 00:15:19,560 Speaker 3: and Bloomberg's Chief UK economist Dan Hanson. Dan, can I 259 00:15:19,600 --> 00:15:24,120 Speaker 3: start with you? The UK has seen inflation pretty elevated 260 00:15:24,160 --> 00:15:25,560 Speaker 3: for some three years. 261 00:15:25,680 --> 00:15:26,720 Speaker 1: Things seem to be. 262 00:15:26,720 --> 00:15:30,000 Speaker 3: Improving a little bit in June. Does that change the 263 00:15:30,040 --> 00:15:33,040 Speaker 3: picture for the Bank of England's decision next Thursday? 264 00:15:33,680 --> 00:15:35,560 Speaker 8: Well, I think it definitely makes their decision a little 265 00:15:35,560 --> 00:15:39,760 Speaker 8: bit easier because inflation has come in quite substantially below 266 00:15:39,840 --> 00:15:44,320 Speaker 8: their forecasts, and that's obviously for any central bank. That's 267 00:15:44,360 --> 00:15:48,200 Speaker 8: good news. Of course, the challenge at the moment for 268 00:15:48,280 --> 00:15:50,400 Speaker 8: the bank, and at this sort of juncture is that 269 00:15:50,720 --> 00:15:54,240 Speaker 8: you've got inflation and the data not throwing up any 270 00:15:54,280 --> 00:15:58,120 Speaker 8: red flags. Good news. On the other hand, re escalation 271 00:15:58,200 --> 00:16:01,240 Speaker 8: in the Middle East, and that is obviously a significant 272 00:16:01,520 --> 00:16:03,560 Speaker 8: issue for the Bank of England and all central banks 273 00:16:03,560 --> 00:16:08,040 Speaker 8: because all prices have risen. Importantly for European central banks, 274 00:16:08,080 --> 00:16:12,080 Speaker 8: gas prices have risen significantly as well, and you sort 275 00:16:12,080 --> 00:16:14,000 Speaker 8: of add those two things up and you've got this 276 00:16:14,120 --> 00:16:16,600 Speaker 8: picture where in the near term there's no rush to 277 00:16:16,600 --> 00:16:19,560 Speaker 8: do anything, but you've got to keep your options open 278 00:16:19,680 --> 00:16:21,960 Speaker 8: because we just do not know where this is heading 279 00:16:22,120 --> 00:16:25,680 Speaker 8: into the second latter half of this year. So I think, 280 00:16:26,120 --> 00:16:28,360 Speaker 8: you know, if you look at market pricing, they're bedding 281 00:16:28,360 --> 00:16:31,600 Speaker 8: on an interest rate hike as early as September, which 282 00:16:31,640 --> 00:16:34,320 Speaker 8: is the next meeting after July. Equally, if you look 283 00:16:34,320 --> 00:16:36,400 Speaker 8: back two months from where we are now, you know 284 00:16:36,520 --> 00:16:38,120 Speaker 8: a lot has changed, So a lot can change in 285 00:16:38,160 --> 00:16:41,360 Speaker 8: two months. That's the point. So I think big picture 286 00:16:41,440 --> 00:16:43,400 Speaker 8: is the bank can afford to stick with its wait 287 00:16:43,440 --> 00:16:46,480 Speaker 8: and see approach, but it's certainly not going to be 288 00:16:47,640 --> 00:16:49,640 Speaker 8: sort of saying it's all clear. We can think about, 289 00:16:49,920 --> 00:16:51,800 Speaker 8: you know, potentially go back to where we were prior 290 00:16:51,840 --> 00:16:53,680 Speaker 8: to the war and think about when we can next 291 00:16:53,760 --> 00:16:55,720 Speaker 8: cut interest rates. They're very much in a wait and 292 00:16:55,760 --> 00:16:57,520 Speaker 8: see holding pattern. 293 00:16:57,400 --> 00:17:00,680 Speaker 3: Okay, Tom. The Bank of England Governor Andrew Bailey I 294 00:17:00,720 --> 00:17:02,920 Speaker 3: said pretty much that to the beginning of this month 295 00:17:03,000 --> 00:17:06,120 Speaker 3: that it was too early to consider interest rate cuts 296 00:17:06,119 --> 00:17:08,640 Speaker 3: and in warning the household yet to feel the full 297 00:17:08,680 --> 00:17:13,640 Speaker 3: effects from the Iran war in terms of this conflict 298 00:17:13,720 --> 00:17:16,679 Speaker 3: and the energy shock it has resumed, and re escalated, 299 00:17:16,960 --> 00:17:19,320 Speaker 3: when do you think households are going to start to 300 00:17:19,480 --> 00:17:21,040 Speaker 3: feel that leg higher? 301 00:17:21,800 --> 00:17:25,080 Speaker 9: So they could feel it relatively soon. In terms of 302 00:17:25,520 --> 00:17:29,919 Speaker 9: petrol prices if well, they've already started increasing again in 303 00:17:30,000 --> 00:17:32,639 Speaker 9: response to what we're seeing in oil markets since that 304 00:17:32,720 --> 00:17:35,760 Speaker 9: re escalation. I think what Bailey was referring to at 305 00:17:35,800 --> 00:17:39,440 Speaker 9: that moment was the July increase in the price cup 306 00:17:39,480 --> 00:17:41,080 Speaker 9: that we've just had. You know, that price cap that 307 00:17:41,160 --> 00:17:44,920 Speaker 9: sets kind of household gas electricity bills. So we've only 308 00:17:44,920 --> 00:17:48,679 Speaker 9: had inflation data up to June so far. So because 309 00:17:48,800 --> 00:17:51,359 Speaker 9: the UK has this kind of unusual price cap that 310 00:17:51,480 --> 00:17:54,200 Speaker 9: gets updated every free months, it sort of delays the 311 00:17:54,520 --> 00:17:58,040 Speaker 9: impact of the changes that we've seen in energy markets. 312 00:17:58,040 --> 00:18:00,440 Speaker 9: So that price cup went up thirteen percent in July. 313 00:18:00,960 --> 00:18:03,840 Speaker 9: That adds about zero point four percentage points of inflation. 314 00:18:04,280 --> 00:18:06,520 Speaker 9: You know, we had some new estimates from Cornmore Insight 315 00:18:06,840 --> 00:18:08,639 Speaker 9: that showed that the price cap might go up a 316 00:18:08,640 --> 00:18:11,320 Speaker 9: little bit more later in the year, so he was 317 00:18:11,720 --> 00:18:14,679 Speaker 9: referring to that impact. But obviously there's other ways that 318 00:18:14,760 --> 00:18:17,520 Speaker 9: this walk can kind of feed through to consumers later on. 319 00:18:17,960 --> 00:18:21,280 Speaker 9: The kind of delayed effect, you know, particularly businesses you know, 320 00:18:21,359 --> 00:18:25,760 Speaker 9: start to pass on their higher energy costs back to consumers. 321 00:18:26,359 --> 00:18:28,640 Speaker 3: In terms of the other data that we've had at 322 00:18:28,680 --> 00:18:31,960 Speaker 3: in the past few days, it's also about the labor market. 323 00:18:32,400 --> 00:18:34,840 Speaker 3: Do you think that that reinforces the case for a 324 00:18:34,920 --> 00:18:38,040 Speaker 3: hold in terms of interest rates because wages obviously are 325 00:18:38,119 --> 00:18:38,960 Speaker 3: very important too. 326 00:18:39,600 --> 00:18:42,560 Speaker 9: Yeah, so that the latest laid market day was quite 327 00:18:42,560 --> 00:18:44,399 Speaker 9: interesting this week. You know, it was kind of showing 328 00:18:44,440 --> 00:18:47,679 Speaker 9: that the number of employees on company payrolls, which is 329 00:18:47,680 --> 00:18:50,040 Speaker 9: what economists are looking at most in that release currently, 330 00:18:50,080 --> 00:18:52,760 Speaker 9: has been broadly flat over the last couple of months. 331 00:18:52,760 --> 00:18:55,040 Speaker 9: You know, that could be shown that the downtown the 332 00:18:55,119 --> 00:18:56,520 Speaker 9: lad market that we've had in the last couple of 333 00:18:56,560 --> 00:18:59,359 Speaker 9: years is beginning to fade. That date, it comes with 334 00:18:59,359 --> 00:19:02,040 Speaker 9: a big caveat is revise quite often and quite heavily. 335 00:19:02,480 --> 00:19:04,199 Speaker 9: But the most important thing for the BWI is that, 336 00:19:04,280 --> 00:19:06,680 Speaker 9: you know, demand for labor is very weak. You know, 337 00:19:06,800 --> 00:19:09,840 Speaker 9: vacancies are you know, around their lowest since twenty one. 338 00:19:10,280 --> 00:19:13,639 Speaker 9: Private set to pay growth is lowest since twenty twenty. 339 00:19:13,920 --> 00:19:15,960 Speaker 9: So the BERY kind of hopes that that's enough to 340 00:19:16,320 --> 00:19:20,320 Speaker 9: contain any of those second round effects to inflation, you 341 00:19:20,320 --> 00:19:24,000 Speaker 9: know that effect where you know, workers trying to compensate 342 00:19:24,040 --> 00:19:26,840 Speaker 9: from you know, their losses from inflation try and bid 343 00:19:26,880 --> 00:19:30,160 Speaker 9: up wages. The lay market being weak sort of contains 344 00:19:30,160 --> 00:19:30,600 Speaker 9: that risk. 345 00:19:31,320 --> 00:19:31,560 Speaker 5: Dan. 346 00:19:31,800 --> 00:19:34,240 Speaker 3: The Bank of England doesn't currently have a labor market 347 00:19:34,280 --> 00:19:37,560 Speaker 3: remit though, so what do you think about the soft 348 00:19:38,000 --> 00:19:40,879 Speaker 3: job's data and what it means in terms of the 349 00:19:40,920 --> 00:19:42,480 Speaker 3: meeting for the Bank of England in July. 350 00:19:43,000 --> 00:19:45,440 Speaker 8: I mean, I agree with completely with Tom that you're right. 351 00:19:45,480 --> 00:19:47,879 Speaker 8: They don't have a labor market remit like the FED does. 352 00:19:47,920 --> 00:19:50,280 Speaker 8: They don't have a dual mandate, so they're not thinking 353 00:19:50,280 --> 00:19:54,800 Speaker 8: about full employment. But the consequence of where the economy 354 00:19:54,880 --> 00:19:57,200 Speaker 8: is relative to full employment tells you something about the 355 00:19:57,240 --> 00:19:59,960 Speaker 8: outlook for inflation, so they do take it into account, 356 00:20:00,040 --> 00:20:01,880 Speaker 8: and I think one of these it's one of these 357 00:20:01,880 --> 00:20:04,479 Speaker 8: things that people talk about in terms of adding gross 358 00:20:04,520 --> 00:20:07,080 Speaker 8: to the Bank of England's or the economy. If you 359 00:20:07,240 --> 00:20:08,920 Speaker 8: as a whole or the labour markets to the Bank 360 00:20:08,960 --> 00:20:10,960 Speaker 8: of England's mandate, would it really change the path of 361 00:20:11,000 --> 00:20:13,680 Speaker 8: interest rates. I'm not sure it would, to be honest 362 00:20:13,720 --> 00:20:16,520 Speaker 8: with you, I think they think about the labor market 363 00:20:16,560 --> 00:20:19,040 Speaker 8: a lot. The path of the labor market is very 364 00:20:19,080 --> 00:20:21,480 Speaker 8: much linked to the path of the economy, so you 365 00:20:21,560 --> 00:20:24,360 Speaker 8: sort of all of those things are interlink they all 366 00:20:24,480 --> 00:20:27,800 Speaker 8: speak to each other, and the result is inflation. Effectively. 367 00:20:28,080 --> 00:20:30,680 Speaker 8: I mean to answer your question again, it's another reason 368 00:20:30,680 --> 00:20:33,320 Speaker 8: to think they won't move the economy. As the labor 369 00:20:33,359 --> 00:20:36,919 Speaker 8: market is loose, That, as Tom rightly said, makes it 370 00:20:37,000 --> 00:20:39,240 Speaker 8: less likely that workers are able to bid up wages 371 00:20:39,320 --> 00:20:42,280 Speaker 8: in response to higher prices, and so it makes it 372 00:20:42,359 --> 00:20:45,920 Speaker 8: less likely that we get this dynamic that economists talk about, 373 00:20:45,920 --> 00:20:49,520 Speaker 8: this wage price spiral dynamics where prices go up wages follow. 374 00:20:49,680 --> 00:20:52,800 Speaker 8: That makes inflation stickier. And that's the problem we had 375 00:20:52,840 --> 00:20:55,520 Speaker 8: in following the twenty twenty two shock, is that we 376 00:20:55,600 --> 00:20:57,960 Speaker 8: experience that in twenty twenty three and twenty twenty four. 377 00:20:58,720 --> 00:21:02,040 Speaker 8: I think the chance of that happening this time are 378 00:21:02,080 --> 00:21:04,400 Speaker 8: far far lower, and not least one, because the lave 379 00:21:04,480 --> 00:21:08,639 Speaker 8: market's loose to the shock is far smaller relative to 380 00:21:08,640 --> 00:21:10,480 Speaker 8: twenty twenty two and three. Interest rates are in a 381 00:21:10,560 --> 00:21:14,120 Speaker 8: much better place the twenty twenty two shock. Interest rates 382 00:21:14,160 --> 00:21:17,880 Speaker 8: were far far too low. Right now they're in what 383 00:21:17,880 --> 00:21:20,680 Speaker 8: we call restrictive territory. So monetary policy is still bearing 384 00:21:20,720 --> 00:21:21,640 Speaker 8: down on the economy. 385 00:21:22,119 --> 00:21:26,240 Speaker 3: More broadly, Tom, with this new government coming in Andy, 386 00:21:26,240 --> 00:21:29,960 Speaker 3: Burnham and John Healey. I mean we've had a few phrases, 387 00:21:30,000 --> 00:21:34,600 Speaker 3: haven't we from Burnham about his vision a new economic model, 388 00:21:34,720 --> 00:21:38,200 Speaker 3: the biggest changes in the last forty years, a circuit breaker. 389 00:21:39,000 --> 00:21:41,880 Speaker 3: They are interesting phrases. They didn't give us that much 390 00:21:41,920 --> 00:21:45,439 Speaker 3: in terms of policy. How do you think that in 391 00:21:45,480 --> 00:21:47,480 Speaker 3: the context of the Bank of England decision and of 392 00:21:47,520 --> 00:21:50,000 Speaker 3: monitory policy, we should be thinking about Burnham. 393 00:21:50,320 --> 00:21:53,280 Speaker 9: Yeah, so we've had quite i would say, mixed messages 394 00:21:53,280 --> 00:21:55,439 Speaker 9: on how radical this government is going to be. You know, we, 395 00:21:55,680 --> 00:21:58,320 Speaker 9: like you said, we've had Burnham talk about new economic 396 00:21:58,359 --> 00:22:01,920 Speaker 9: models and rolling back you know, the last forty years, 397 00:22:01,960 --> 00:22:04,280 Speaker 9: et cetera. Then we've also had him talk about being 398 00:22:04,359 --> 00:22:07,040 Speaker 9: very prudent with public finances for the bank. It very 399 00:22:07,119 --> 00:22:09,480 Speaker 9: much depends on kind of not only what Burnham does, 400 00:22:09,520 --> 00:22:12,879 Speaker 9: but if Burnham is prudent sticks with largely kind of 401 00:22:12,920 --> 00:22:16,320 Speaker 9: small tinkering, like you know, the VAT cut on electricity 402 00:22:16,359 --> 00:22:18,880 Speaker 9: bills and he pays for that, you know, largely by 403 00:22:18,920 --> 00:22:21,080 Speaker 9: cutting elsewhere or you know, raising tax a little bit. 404 00:22:21,320 --> 00:22:23,720 Speaker 9: I'm not sure it massively affects, you know, the central 405 00:22:24,040 --> 00:22:27,159 Speaker 9: banks thinking and you know, the Bee has sort of 406 00:22:27,160 --> 00:22:30,000 Speaker 9: signaled in the past that it's minded to look through 407 00:22:30,560 --> 00:22:33,960 Speaker 9: these sort of measures on energy bills. You know, even 408 00:22:33,960 --> 00:22:36,320 Speaker 9: if it does improve the kind of mood music around 409 00:22:36,520 --> 00:22:39,560 Speaker 9: interest rate decisions, we will obviously be in different territory, 410 00:22:39,560 --> 00:22:43,119 Speaker 9: if you know, if they do push things into you know, 411 00:22:43,160 --> 00:22:46,119 Speaker 9: the more radical territory. You know, he's talked to the 412 00:22:46,200 --> 00:22:48,800 Speaker 9: idea of finding more flexibility within the fiscal wards. It's 413 00:22:48,800 --> 00:22:51,359 Speaker 9: hard to know exactly what he means by that, and 414 00:22:51,359 --> 00:22:54,040 Speaker 9: I'm not sure he knows himself, but you know, people, 415 00:22:54,320 --> 00:22:55,680 Speaker 9: I mean term of that is, you know, using a 416 00:22:55,720 --> 00:22:58,600 Speaker 9: bit more leeway provided by the debt rules, you know, 417 00:22:58,760 --> 00:23:03,600 Speaker 9: using the UK's public financial institutions like the National Wealth Fund, 418 00:23:03,600 --> 00:23:06,199 Speaker 9: that sort of thing. So yeah, it's a wait and 419 00:23:06,240 --> 00:23:07,000 Speaker 9: see on that front. 420 00:23:07,440 --> 00:23:10,200 Speaker 3: Yeah, I suppose it just depends what those policies actually are. 421 00:23:10,280 --> 00:23:14,320 Speaker 3: Dan John Heally has, though criticized previously, the Treasury is 422 00:23:14,600 --> 00:23:18,320 Speaker 3: a dead hand on dynamic government. So again it's another 423 00:23:18,359 --> 00:23:21,399 Speaker 3: phrase that has gotten people's attention. Do you think that 424 00:23:22,080 --> 00:23:25,199 Speaker 3: he's going to run treasury very differently? How do you 425 00:23:25,200 --> 00:23:27,800 Speaker 3: think about the new administration in this context? 426 00:23:28,400 --> 00:23:30,840 Speaker 8: I always find that amazing, this idea that the Treasury 427 00:23:30,840 --> 00:23:33,159 Speaker 8: doesn't want economic growth and everything it does is to 428 00:23:33,160 --> 00:23:35,960 Speaker 8: stop economic growth. The reason the Treasury acts the way 429 00:23:35,960 --> 00:23:38,600 Speaker 8: it acts is to put a break on decisions that 430 00:23:38,680 --> 00:23:42,720 Speaker 8: are politically oriented and trying to buy vote, you know, 431 00:23:42,920 --> 00:23:47,800 Speaker 8: and fiscal prudence is a very important component of a 432 00:23:47,840 --> 00:23:51,480 Speaker 8: stable economy, and therefore economic growth in any case runs over. 433 00:23:51,800 --> 00:23:54,720 Speaker 8: I think in terms of the Burnham Healey dynamic, I 434 00:23:54,760 --> 00:23:58,359 Speaker 8: think John Healy's got experience in the Treasury many years ago, 435 00:23:58,480 --> 00:24:02,240 Speaker 8: but he wasn't the Treasury before. I think the dynamic 436 00:24:02,280 --> 00:24:03,960 Speaker 8: between the two of them is very much going to 437 00:24:03,960 --> 00:24:06,400 Speaker 8: be He is going to, i would say, in act 438 00:24:06,640 --> 00:24:09,800 Speaker 8: whatever Burnham's platform proves to be, and I agree with 439 00:24:09,840 --> 00:24:11,960 Speaker 8: you both, it's not completely clear. But whatever that proves 440 00:24:12,000 --> 00:24:14,560 Speaker 8: to be, Heal's going to be charged with enacting that 441 00:24:14,840 --> 00:24:18,320 Speaker 8: through the Treasury. So the one big question I think 442 00:24:18,359 --> 00:24:21,520 Speaker 8: he has and the big tension, is around defense spending. 443 00:24:21,840 --> 00:24:25,680 Speaker 8: Of course, he quit the Starmer government because of a 444 00:24:25,800 --> 00:24:28,760 Speaker 8: lack of funding for defense. He'll need to find that 445 00:24:28,840 --> 00:24:30,720 Speaker 8: money and it looks like he's going to want to 446 00:24:30,760 --> 00:24:33,920 Speaker 8: find that money as well. And Tom alluded to there. 447 00:24:34,000 --> 00:24:36,720 Speaker 8: That means really difficult decisions because it's a lot of 448 00:24:36,760 --> 00:24:39,640 Speaker 8: cash that's needed to get defense spending up to even 449 00:24:39,680 --> 00:24:41,399 Speaker 8: three percent of GDP and then up to three and 450 00:24:41,400 --> 00:24:44,280 Speaker 8: a half percent of GDP. So that's the thing that 451 00:24:44,400 --> 00:24:47,000 Speaker 8: I think is the It's probably his biggest challenge, but 452 00:24:47,040 --> 00:24:49,880 Speaker 8: that would have been any chancellor's challenge coming in because 453 00:24:49,880 --> 00:24:53,360 Speaker 8: we knew that they have to be really, really careful. 454 00:24:53,359 --> 00:24:55,720 Speaker 8: We've already seen a bit of a response to the 455 00:24:55,960 --> 00:24:59,000 Speaker 8: using the flexibility and the fiscal rules. We've already seen 456 00:24:59,480 --> 00:25:01,679 Speaker 8: you know, this idea of a tax cut floated and 457 00:25:01,680 --> 00:25:05,440 Speaker 8: then taken back on income tax, raising the personal allowance. 458 00:25:06,359 --> 00:25:08,200 Speaker 8: So they need to get their messaging right. 459 00:25:08,760 --> 00:25:11,000 Speaker 3: So perhaps no change from the Bank of England in 460 00:25:11,080 --> 00:25:13,800 Speaker 3: terms of the rate decision, but all the focus really 461 00:25:13,880 --> 00:25:17,640 Speaker 3: on the politics and the policy of a new set 462 00:25:17,680 --> 00:25:20,240 Speaker 3: of leaders here in the UK. Dan, thank you so 463 00:25:20,320 --> 00:25:23,040 Speaker 3: much for being with us on the program. That is 464 00:25:23,040 --> 00:25:26,640 Speaker 3: Bloomberg's Chief UK economist Dan Hanson and Bloomberg's UK Economy 465 00:25:26,720 --> 00:25:29,840 Speaker 3: reported Tom Reees. Really appreciate you coming onto the program 466 00:25:30,000 --> 00:25:32,240 Speaker 3: in just the days ahead of the Bank of England's 467 00:25:32,280 --> 00:25:33,480 Speaker 3: interest rate decision. 468 00:25:33,640 --> 00:25:34,040 Speaker 6: Thank you. 469 00:25:34,359 --> 00:25:36,560 Speaker 3: I'm Calain Hepge here in London. You can catch us 470 00:25:36,640 --> 00:25:39,280 Speaker 3: every weekday morning for Blueberg Daybreak. You are beginning at 471 00:25:39,320 --> 00:25:42,160 Speaker 3: six am in London. That's one am on war Street. 472 00:25:42,280 --> 00:25:46,280 Speaker 2: Nathan, Thanks Caroline, and coming up on Bloomberg day Break Weekend, 473 00:25:46,280 --> 00:25:48,200 Speaker 2: we'll look ahead to the next rate decision from the 474 00:25:48,280 --> 00:25:52,159 Speaker 2: Bank of Japan. I'm Nathan Hager and this is Bloomberg. 475 00:26:03,000 --> 00:26:06,000 Speaker 2: This is Bloomberg Daybreak Weekend, our global look ahead at 476 00:26:06,000 --> 00:26:08,120 Speaker 2: the top stories for investors in the coming week. I'm 477 00:26:08,160 --> 00:26:10,919 Speaker 2: Nathan Haker in Washington. The Fed and the Bank of 478 00:26:10,920 --> 00:26:14,080 Speaker 2: England aren't the only central banks with rate decisions in 479 00:26:14,119 --> 00:26:16,480 Speaker 2: the coming week. We will also hear from the Bank 480 00:26:16,520 --> 00:26:19,120 Speaker 2: of Japan. For more, Let's go to Doug Prisner, host 481 00:26:19,200 --> 00:26:21,360 Speaker 2: of the Bloomberg Daybreak Asia podcast. 482 00:26:21,760 --> 00:26:25,600 Speaker 4: Thanks Nathan. You'll remember last month the BOJ raised its 483 00:26:25,640 --> 00:26:28,359 Speaker 4: policy rate to one percent. Now that's the highest in 484 00:26:28,480 --> 00:26:31,720 Speaker 4: thirty one years. We know very well that inflation in 485 00:26:31,800 --> 00:26:35,440 Speaker 4: Japan is still a problem it has been for a while. Yes, 486 00:26:35,560 --> 00:26:37,960 Speaker 4: higher rates would be a remedy, although for the moment, 487 00:26:38,119 --> 00:26:41,000 Speaker 4: the boj is widely expected to hold the policy rates 488 00:26:41,000 --> 00:26:43,480 Speaker 4: steady at next week's meeting. For a closer look, I'm 489 00:26:43,520 --> 00:26:46,840 Speaker 4: joined by Bloomberg's Molly Smith. Molly is part of the 490 00:26:46,920 --> 00:26:50,080 Speaker 4: team that covers the Japanese economy and government, and she 491 00:26:50,200 --> 00:26:52,960 Speaker 4: joins us from our studios in Tokyo, thank you for 492 00:26:53,000 --> 00:26:57,040 Speaker 4: being here. And the timing is actually perfect because as 493 00:26:57,080 --> 00:26:59,639 Speaker 4: we walk up to this BOJ meeting, Bloomberg had a 494 00:27:00,040 --> 00:27:03,520 Speaker 4: very interesting story about some officials at the BOJ being 495 00:27:03,640 --> 00:27:07,480 Speaker 4: open to raising interest rates at an accelerated rate. Give 496 00:27:07,520 --> 00:27:09,000 Speaker 4: me a sense of what's happening here. 497 00:27:09,840 --> 00:27:13,040 Speaker 10: It is interesting that the BOJ officials do seem to 498 00:27:13,080 --> 00:27:16,879 Speaker 10: be willing to move faster than this pre prescribed pace 499 00:27:16,920 --> 00:27:19,960 Speaker 10: of roughly every six months, which is not written in 500 00:27:20,000 --> 00:27:22,480 Speaker 10: stone anywhere. I think that's just come to be the 501 00:27:22,520 --> 00:27:26,639 Speaker 10: consensus among economists of the pace that the BOJ is 502 00:27:26,680 --> 00:27:29,080 Speaker 10: moving at and what they've done so far in the past. 503 00:27:29,560 --> 00:27:32,520 Speaker 10: But there does seem to be a case to now 504 00:27:32,600 --> 00:27:35,359 Speaker 10: move a bit faster than that. So since the BOJ 505 00:27:35,720 --> 00:27:39,000 Speaker 10: just moved in June, the standard formula would call for 506 00:27:39,080 --> 00:27:43,520 Speaker 10: another rate increase by December, but you have seen growing 507 00:27:43,560 --> 00:27:48,560 Speaker 10: market odds that there could be another hike by October, 508 00:27:48,600 --> 00:27:51,160 Speaker 10: and there's a couple of meetings between now in October 509 00:27:51,200 --> 00:27:54,360 Speaker 10: to consider, obviously the July one being one of them. 510 00:27:54,400 --> 00:27:56,800 Speaker 10: But no one's really calling for a move at that meeting, 511 00:27:57,000 --> 00:28:00,239 Speaker 10: So it's interesting to see the market odds be so 512 00:28:00,560 --> 00:28:04,040 Speaker 10: high for a chance of a hike by October, Whereas 513 00:28:04,119 --> 00:28:07,919 Speaker 10: we recently conducted a survey of economists here at Bloomberg 514 00:28:08,080 --> 00:28:11,480 Speaker 10: and there seem to be a bit unconvinced that the 515 00:28:11,480 --> 00:28:14,639 Speaker 10: BOJ would really move faster, And the big reason for 516 00:28:14,720 --> 00:28:19,400 Speaker 10: that is because they still see Prime Minister Takeichi's administration 517 00:28:19,480 --> 00:28:22,240 Speaker 10: as being in the way of the BOJ moving sooner. 518 00:28:22,680 --> 00:28:24,399 Speaker 4: You know, I think we can agree that the BOJ 519 00:28:24,560 --> 00:28:27,840 Speaker 4: has a reputation for being very, very cautious. Is there 520 00:28:27,920 --> 00:28:30,399 Speaker 4: the view now in Japan that the bank is behind 521 00:28:30,400 --> 00:28:30,800 Speaker 4: the curve? 522 00:28:30,880 --> 00:28:31,360 Speaker 2: Basically? 523 00:28:31,640 --> 00:28:35,720 Speaker 10: I think it's growing certainly, And I think the bigger concern, though, 524 00:28:35,840 --> 00:28:38,640 Speaker 10: is really that it's more a question of like how 525 00:28:38,800 --> 00:28:42,680 Speaker 10: independent really is the BOJ. That it's not the same 526 00:28:42,760 --> 00:28:45,080 Speaker 10: concept of independence the way we think of the Federal 527 00:28:45,120 --> 00:28:49,200 Speaker 10: Reserve and how fiercely that is debated and prized in 528 00:28:49,440 --> 00:28:52,800 Speaker 10: the US, but in Japan it's very different here that 529 00:28:53,240 --> 00:28:56,840 Speaker 10: there is a sense of BOJ autonomy. Yet, the government 530 00:28:56,920 --> 00:29:01,320 Speaker 10: recently put out its annual economic policy guideline, which usually 531 00:29:01,320 --> 00:29:04,800 Speaker 10: come out in late June, and it only just got 532 00:29:04,880 --> 00:29:08,360 Speaker 10: past in the past week, and that's because there were 533 00:29:08,440 --> 00:29:11,120 Speaker 10: so many times that the government had to go back 534 00:29:11,200 --> 00:29:16,120 Speaker 10: and revise the language, particularly around its expectations for the 535 00:29:16,120 --> 00:29:19,160 Speaker 10: BOJ and how it should work with the government in 536 00:29:19,200 --> 00:29:20,600 Speaker 10: achieving policy goals. 537 00:29:20,840 --> 00:29:23,040 Speaker 4: So I'm glad that you brought up the idea of 538 00:29:23,080 --> 00:29:27,000 Speaker 4: independence because the other big player, obviously in terms of 539 00:29:27,040 --> 00:29:30,160 Speaker 4: policy in Japan is the Ministry of Finance, which takes 540 00:29:30,200 --> 00:29:32,520 Speaker 4: us to the weakness of the end, which is I 541 00:29:32,520 --> 00:29:35,520 Speaker 4: think very much a part of the inflation story still. 542 00:29:35,560 --> 00:29:38,640 Speaker 4: I mean, we're at a forty year low against the greenback. 543 00:29:39,480 --> 00:29:42,360 Speaker 4: What is the scuttlebut in terms of the potential for 544 00:29:42,520 --> 00:29:46,440 Speaker 4: intervention on the part of the Ministry of Finance when 545 00:29:46,480 --> 00:29:49,880 Speaker 4: it comes to supporting the currency, or is the mof 546 00:29:49,960 --> 00:29:52,920 Speaker 4: basically backing away and saying this is not our problem. 547 00:29:53,000 --> 00:29:56,200 Speaker 4: The end weakness is really a reflection of BOJ policy. 548 00:29:56,760 --> 00:29:59,440 Speaker 10: It's so hard to tell right now. Honestly, this is 549 00:29:59,480 --> 00:30:02,200 Speaker 10: something that we are parsing the tea leaves here every 550 00:30:02,280 --> 00:30:06,440 Speaker 10: day for what's coming out of the Finance Minister Katayama 551 00:30:06,480 --> 00:30:09,040 Speaker 10: as well as the you know, the chair for the 552 00:30:09,360 --> 00:30:13,280 Speaker 10: Currency Chief Mimura, and whenever we get the chance to 553 00:30:13,400 --> 00:30:16,440 Speaker 10: hear from them, it is very closely watched to hear 554 00:30:16,480 --> 00:30:19,400 Speaker 10: if they are going to speak any stronger about any 555 00:30:19,440 --> 00:30:23,760 Speaker 10: references to quote bold or decisive action, which in Japan 556 00:30:23,880 --> 00:30:27,360 Speaker 10: is interpreted as intervention or you know, an allusion or 557 00:30:27,400 --> 00:30:31,760 Speaker 10: a reference to upcoming intervention. So that's what's really changed 558 00:30:31,840 --> 00:30:36,200 Speaker 10: in maybe the past like couple days from Katayama, that 559 00:30:36,320 --> 00:30:40,120 Speaker 10: she has sounded a bit more forceful with her language, 560 00:30:40,160 --> 00:30:43,400 Speaker 10: whereas in recent weeks she's kind of said, there's been 561 00:30:43,440 --> 00:30:46,600 Speaker 10: no change to our stance where we've I've maintained a 562 00:30:46,680 --> 00:30:52,400 Speaker 10: stable sense of communication. And after these last two couple 563 00:30:52,400 --> 00:30:55,480 Speaker 10: of days where she said we will take bold action 564 00:30:55,600 --> 00:30:59,880 Speaker 10: as needed or decisive action as appropriate, there hasn't really 565 00:30:59,880 --> 00:31:03,240 Speaker 10: been a subsequent reaction in the end. So I think 566 00:31:03,240 --> 00:31:07,480 Speaker 10: that tells you that markets are pretty unconvinced about at 567 00:31:07,560 --> 00:31:10,200 Speaker 10: least any form of verbal intervention. If that's what she 568 00:31:10,320 --> 00:31:13,360 Speaker 10: was trying to accomplish. You would think that since they 569 00:31:13,400 --> 00:31:16,720 Speaker 10: have the BOJ meeting next week, perhaps the Ministry of 570 00:31:16,760 --> 00:31:19,800 Speaker 10: Finance would wait until after that if there was going 571 00:31:19,840 --> 00:31:22,800 Speaker 10: to be any intervention. It's hard to say, though, So 572 00:31:23,160 --> 00:31:25,760 Speaker 10: that's definitely something that we are keeping an eye out for. 573 00:31:26,320 --> 00:31:29,240 Speaker 4: You're in a part of the world where semiconductor manufacturing 574 00:31:29,400 --> 00:31:32,840 Speaker 4: is a major industry, and we know that Japan has 575 00:31:32,920 --> 00:31:35,680 Speaker 4: companies that are very much connected to that supply chain. 576 00:31:35,760 --> 00:31:39,120 Speaker 4: And recently there has been a lot talked about as 577 00:31:39,160 --> 00:31:42,840 Speaker 4: it relates to the price of semiconductors rising not only 578 00:31:42,880 --> 00:31:47,400 Speaker 4: because of their scarcity, but because input prices are rising too. 579 00:31:47,480 --> 00:31:50,160 Speaker 4: And I'm wondering about the evidence away from let's say, 580 00:31:50,200 --> 00:31:54,200 Speaker 4: the chip industry, evidence to indicate that companies are basically 581 00:31:54,240 --> 00:31:56,520 Speaker 4: passing along higher cost across the board. 582 00:31:57,000 --> 00:31:59,800 Speaker 10: That is a very new concept here, and that definitely 583 00:32:00,120 --> 00:32:00,720 Speaker 10: is happening. 584 00:32:01,200 --> 00:32:01,360 Speaker 6: You know. 585 00:32:01,400 --> 00:32:05,520 Speaker 10: For instance, there are some economic indicators here that the 586 00:32:05,600 --> 00:32:08,560 Speaker 10: team will you know, monitor but not necessarily always right 587 00:32:08,680 --> 00:32:11,520 Speaker 10: up because sometimes they're just a bit more of the 588 00:32:11,560 --> 00:32:14,000 Speaker 10: same and nothing really happening there. And one of them 589 00:32:14,040 --> 00:32:17,040 Speaker 10: would be the Producer Price Index. But in the three 590 00:32:17,080 --> 00:32:19,960 Speaker 10: months that I've been here, we've written about that every 591 00:32:20,000 --> 00:32:24,120 Speaker 10: single time. And the PPI is a measure of wholesale inflation, 592 00:32:24,280 --> 00:32:27,120 Speaker 10: so that's more like B to B kind of pricing, 593 00:32:27,200 --> 00:32:30,960 Speaker 10: and that's where you're seeing that businesses are definitely more 594 00:32:31,000 --> 00:32:34,080 Speaker 10: willing to pass on higher costs to their customers. 595 00:32:34,520 --> 00:32:37,960 Speaker 4: So we know that the war in Iran has greatly 596 00:32:38,040 --> 00:32:41,760 Speaker 4: impacted the energy markets, and obviously Japan, being a major 597 00:32:41,920 --> 00:32:45,920 Speaker 4: energy importer, has really confronted this in a major way, 598 00:32:46,000 --> 00:32:49,200 Speaker 4: and I'm wondering how it's showing up in people's daily 599 00:32:49,280 --> 00:32:49,960 Speaker 4: lives there. 600 00:32:50,320 --> 00:32:52,400 Speaker 10: The one thing, at least for the energy cost that 601 00:32:52,520 --> 00:32:55,040 Speaker 10: is still helping out to an extent is that the 602 00:32:55,080 --> 00:33:00,000 Speaker 10: administration has put in place different energy subsidies to try 603 00:33:00,160 --> 00:33:04,440 Speaker 10: to cushion the impact on households from those cost tied 604 00:33:04,480 --> 00:33:07,400 Speaker 10: to the Middle East. So that's where you know, Takichi 605 00:33:07,480 --> 00:33:10,560 Speaker 10: and her administration put together an extra budget in recent 606 00:33:10,640 --> 00:33:12,880 Speaker 10: months to try to keep some of these subsidies in 607 00:33:12,960 --> 00:33:17,520 Speaker 10: place through the summer. But we are now finally experiencing 608 00:33:17,960 --> 00:33:21,280 Speaker 10: summer in Japan. I had been joking up until this 609 00:33:21,360 --> 00:33:23,720 Speaker 10: week that I've been warned about it for months, but 610 00:33:23,760 --> 00:33:26,880 Speaker 10: I only just experienced it, you know, in terms of 611 00:33:26,920 --> 00:33:29,840 Speaker 10: like fahrenheit. We're like roughly at like, you know, mid 612 00:33:29,960 --> 00:33:34,440 Speaker 10: nineties degrees this week, and it's fully humid and baking here. 613 00:33:34,920 --> 00:33:38,400 Speaker 10: And I did see that the Energy team had written 614 00:33:38,480 --> 00:33:41,440 Speaker 10: up the other day that power prices in Japan just 615 00:33:41,520 --> 00:33:44,280 Speaker 10: hit some sort of multi year high just based on 616 00:33:44,320 --> 00:33:47,000 Speaker 10: all of the you know, increased demand for air conditioning, 617 00:33:47,400 --> 00:33:49,400 Speaker 10: as well as the yen being as weak as it 618 00:33:49,440 --> 00:33:50,040 Speaker 10: is right now. 619 00:33:50,240 --> 00:33:52,840 Speaker 4: So anecdotally, what can you tell me about the way 620 00:33:52,880 --> 00:33:57,080 Speaker 4: in which average people are reacting to higher prices. 621 00:33:57,520 --> 00:34:00,240 Speaker 10: It's still very new for a lot of peace people 622 00:34:00,400 --> 00:34:05,920 Speaker 10: that Japan has really not experienced persistent or any meaningful 623 00:34:05,960 --> 00:34:10,360 Speaker 10: inflation in decades, and for some people this is maybe 624 00:34:10,400 --> 00:34:12,520 Speaker 10: like the first time in their lifetime they've ever seen 625 00:34:12,560 --> 00:34:15,319 Speaker 10: something like this. But I think it's really important to 626 00:34:15,440 --> 00:34:19,480 Speaker 10: note that for somebody like me, who's effectively almost like 627 00:34:19,520 --> 00:34:21,719 Speaker 10: a tourist because I'm still paid in dollars in the 628 00:34:21,760 --> 00:34:24,920 Speaker 10: short time that I'm here, I don't experience it the 629 00:34:24,960 --> 00:34:28,600 Speaker 10: same way that somebody who has lived here and works 630 00:34:28,600 --> 00:34:31,239 Speaker 10: here for a much longer amount of time will experience it. 631 00:34:31,760 --> 00:34:35,920 Speaker 10: So I was recently traveling over one weekend and met 632 00:34:36,040 --> 00:34:39,120 Speaker 10: up with a friend of a friend, and that person 633 00:34:39,320 --> 00:34:42,400 Speaker 10: is a tour guide here and she's been in Japan 634 00:34:42,560 --> 00:34:45,879 Speaker 10: for years now. She's from the US, so she's bilingual 635 00:34:46,040 --> 00:34:49,640 Speaker 10: in English and Japanese, and she was telling me how 636 00:34:50,000 --> 00:34:52,920 Speaker 10: she understands why tourists say this, but it still bothers 637 00:34:52,960 --> 00:34:56,640 Speaker 10: her when people say how cheap Japan is because it 638 00:34:56,680 --> 00:34:59,520 Speaker 10: doesn't feel that way for her, And I think that's 639 00:34:59,520 --> 00:35:01,839 Speaker 10: something to keep in mind of how these things can 640 00:35:01,880 --> 00:35:05,120 Speaker 10: be received, you know by local people, and like I 641 00:35:05,160 --> 00:35:07,520 Speaker 10: know that nobody means any harm by it, And I 642 00:35:07,560 --> 00:35:09,719 Speaker 10: think that what I said to her in response was 643 00:35:09,800 --> 00:35:12,480 Speaker 10: just something that in the US, this is just such 644 00:35:12,520 --> 00:35:16,280 Speaker 10: a foreign concept that you could have a really amazing, 645 00:35:16,600 --> 00:35:20,080 Speaker 10: full quality meal in a major city of the world 646 00:35:20,160 --> 00:35:22,880 Speaker 10: for less than ten dollars like that is just something 647 00:35:22,920 --> 00:35:26,400 Speaker 10: that doesn't compute coming from the States, and particularly me 648 00:35:26,920 --> 00:35:29,000 Speaker 10: coming from New York, where you know, we've had our 649 00:35:29,120 --> 00:35:33,399 Speaker 10: own ecosystem of inflation forever. So it is a very 650 00:35:33,440 --> 00:35:37,400 Speaker 10: different lived experience for somebody who is here and this 651 00:35:37,480 --> 00:35:41,600 Speaker 10: is their life, and especially if their wages aren't keeping 652 00:35:41,680 --> 00:35:43,080 Speaker 10: pace with inflation. 653 00:35:43,239 --> 00:35:46,520 Speaker 4: You know, as I'm listening to I'm remembering a conversation 654 00:35:46,640 --> 00:35:50,080 Speaker 4: that I had with Tara Kumura, who is the japan 655 00:35:50,120 --> 00:35:56,080 Speaker 4: economist for Bloomberg Economics. Young person relative to myself, and 656 00:35:56,600 --> 00:36:00,439 Speaker 4: I'm thinking that during this conversation about inflation, he said 657 00:36:00,440 --> 00:36:04,080 Speaker 4: that he was born into a culture, essentially a society 658 00:36:04,160 --> 00:36:08,520 Speaker 4: where he only knew disinflation or deflation. So when prices 659 00:36:09,360 --> 00:36:12,480 Speaker 4: began to rise, it was so unfamiliar. He didn't have 660 00:36:12,920 --> 00:36:16,000 Speaker 4: any sense of that concept aside from reading about it 661 00:36:16,040 --> 00:36:17,040 Speaker 4: in textbooks. 662 00:36:17,600 --> 00:36:20,680 Speaker 10: This is something that when I was writing about inflation 663 00:36:20,840 --> 00:36:23,360 Speaker 10: back in the US when it was really taking off 664 00:36:23,719 --> 00:36:26,839 Speaker 10: around like twenty twenty one and twenty twenty two, and 665 00:36:26,880 --> 00:36:31,400 Speaker 10: the idea of how psychological inflation is really started to 666 00:36:31,480 --> 00:36:35,200 Speaker 10: resonate with me then. And I think that's probably what 667 00:36:35,280 --> 00:36:38,399 Speaker 10: people in Japan are experiencing now that you have this 668 00:36:38,560 --> 00:36:43,560 Speaker 10: sort of memory or this expectation of what a price 669 00:36:43,600 --> 00:36:46,600 Speaker 10: of something should be, particularly for groceries, you know, that's 670 00:36:46,640 --> 00:36:48,680 Speaker 10: like always something we talk about that's like in your 671 00:36:48,680 --> 00:36:51,440 Speaker 10: face the most. Or if you get a particular kind 672 00:36:51,480 --> 00:36:54,480 Speaker 10: of meal at a restaurant, often like a hamburger in 673 00:36:54,480 --> 00:36:56,520 Speaker 10: the US or a bowl of ramen here, you have 674 00:36:56,600 --> 00:37:00,000 Speaker 10: a rough idea of what that should cost in your mind, 675 00:37:00,520 --> 00:37:03,320 Speaker 10: and to see something that deviates from that so much 676 00:37:04,000 --> 00:37:07,040 Speaker 10: is really quite shocking to people. That that I think 677 00:37:07,120 --> 00:37:10,160 Speaker 10: is very real, the sticker shock of what's going on. 678 00:37:10,920 --> 00:37:13,360 Speaker 4: So before I let you go, let's get back to 679 00:37:13,400 --> 00:37:15,440 Speaker 4: the BOJ meeting, and we're going to have this post 680 00:37:15,520 --> 00:37:20,000 Speaker 4: meeting news conference from Governor Uwada, and I'm wondering about 681 00:37:20,040 --> 00:37:23,440 Speaker 4: where he may place emphasis. Does he push back on 682 00:37:23,480 --> 00:37:27,120 Speaker 4: this Bloomberg report and the indication that the BOJ may 683 00:37:27,160 --> 00:37:30,600 Speaker 4: be leaning into an acceleration of rate hikes? How do 684 00:37:30,640 --> 00:37:31,759 Speaker 4: you think he may handle that? 685 00:37:32,239 --> 00:37:35,719 Speaker 10: From what I've seen of how of UDA's press conferences 686 00:37:35,760 --> 00:37:39,719 Speaker 10: so far, he and the bank as an institution, as 687 00:37:39,760 --> 00:37:43,000 Speaker 10: you said, tend to be very cautious, and especially for 688 00:37:43,080 --> 00:37:47,000 Speaker 10: somebody like Uda, who comes from an academic background, sometimes 689 00:37:47,040 --> 00:37:49,680 Speaker 10: can speak in a little bit of a roundabout way 690 00:37:49,880 --> 00:37:53,520 Speaker 10: and not be the most direct with his language. That 691 00:37:54,120 --> 00:37:56,440 Speaker 10: I think he would very much want to leave open 692 00:37:56,800 --> 00:38:00,440 Speaker 10: the possibility of the pace that the BOJ would move 693 00:38:00,480 --> 00:38:02,560 Speaker 10: at from here, and would not want to commit to 694 00:38:02,600 --> 00:38:06,160 Speaker 10: any kind of predetermined path. I think you would even 695 00:38:06,200 --> 00:38:09,600 Speaker 10: be hesitant to really open the door to the possibility 696 00:38:09,640 --> 00:38:12,280 Speaker 10: of moving sooner than every six months. 697 00:38:12,640 --> 00:38:15,719 Speaker 4: Mollie, this was a delightful conversation. Thank you so very 698 00:38:15,760 --> 00:38:18,600 Speaker 4: much for helping us set up the BOJ meeting in 699 00:38:18,640 --> 00:38:21,680 Speaker 4: the coming week. I look forward to your return to 700 00:38:21,760 --> 00:38:24,000 Speaker 4: the office in New York. We can talk more about 701 00:38:24,040 --> 00:38:26,839 Speaker 4: what your experience was like being in Japan. Bloomberg's Molly 702 00:38:26,920 --> 00:38:30,560 Speaker 4: Smith part of the team that covers the Japanese economy 703 00:38:30,600 --> 00:38:34,640 Speaker 4: and government. Joining from our studios in Tokyo, I'm Doug Krisner. 704 00:38:34,719 --> 00:38:37,480 Speaker 4: You can catch us weekdays for the Daybreak Asia podcast. 705 00:38:37,880 --> 00:38:39,960 Speaker 4: It's available wherever you get your podcast. 706 00:38:40,320 --> 00:38:43,319 Speaker 2: Nathan, Thanks Doug, and that does it for this edition 707 00:38:43,400 --> 00:38:46,719 Speaker 2: of Bloomberg Daybreak Weekend. Join us again Monday morning at 708 00:38:46,760 --> 00:38:49,400 Speaker 2: five am Wall Street Time for the latest on markets 709 00:38:49,400 --> 00:38:51,839 Speaker 2: overseas and the news you need to start your day. 710 00:38:52,160 --> 00:38:55,520 Speaker 2: I'm Nathan Hager. Stay with us. Top stories and global 711 00:38:55,560 --> 00:38:59,040 Speaker 2: business headlines are coming up right now.