1 00:00:09,840 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee. 2 00:00:13,960 --> 00:00:17,560 Speaker 1: We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,160 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. I 5 00:00:27,200 --> 00:00:29,400 Speaker 1: would say, equally as important as the three rate cuts 6 00:00:29,440 --> 00:00:32,519 Speaker 1: we've had through, just as big a change in the 7 00:00:32,600 --> 00:00:35,559 Speaker 1: last twelve months, the shift in the FEDS reaction function, 8 00:00:35,800 --> 00:00:38,239 Speaker 1: and I think Pow went some way yesterday to completing 9 00:00:38,240 --> 00:00:41,280 Speaker 1: that pivot in the last year. Did Steve Major do okay? 10 00:00:41,320 --> 00:00:43,800 Speaker 1: I'm like getting out front of what I think Steve 11 00:00:43,880 --> 00:00:46,280 Speaker 1: Major is always doing better than okay the last couple 12 00:00:46,320 --> 00:00:47,960 Speaker 1: of years. Pleased to say, it's with us in the 13 00:00:48,040 --> 00:00:51,120 Speaker 1: studios here in London, Steve Major, HSBC club willhead of 14 00:00:51,159 --> 00:00:53,520 Speaker 1: Fixed Income Research. Good morning, Good day to you, Steve. 15 00:00:53,800 --> 00:00:57,240 Speaker 1: Good morning. Your thoughts as you reflect on Shairman Powell 16 00:00:57,640 --> 00:00:59,840 Speaker 1: in the last twenty four hours, What does it take 17 00:01:00,120 --> 00:01:02,200 Speaker 1: through next year and beyond? How do you know when 18 00:01:02,200 --> 00:01:05,440 Speaker 1: a central banker is lying? How do you know his 19 00:01:05,520 --> 00:01:09,800 Speaker 1: lips move so so the the the point of that 20 00:01:10,319 --> 00:01:12,800 Speaker 1: is that we're not going to take too much from 21 00:01:12,800 --> 00:01:16,040 Speaker 1: what we're told. So for me, building an investment strategy 22 00:01:16,240 --> 00:01:19,000 Speaker 1: around a central bank head who tells me that they're 23 00:01:19,040 --> 00:01:22,080 Speaker 1: on hold isn't going to take me very far. And 24 00:01:22,400 --> 00:01:24,400 Speaker 1: if I had built my strategy around what he told 25 00:01:24,440 --> 00:01:26,920 Speaker 1: me this time last year, I would have been short 26 00:01:27,120 --> 00:01:30,520 Speaker 1: the market when it was rallying. Right. So I'm not 27 00:01:30,600 --> 00:01:32,840 Speaker 1: saying that that's the only way that we do things, 28 00:01:32,880 --> 00:01:35,679 Speaker 1: because it's easy to be contrarian. It's very easy to 29 00:01:35,720 --> 00:01:37,920 Speaker 1: just do the opposite. It's just that I don't get 30 00:01:37,920 --> 00:01:40,360 Speaker 1: a lot of guidance. I mean, he doesn't know what's 31 00:01:40,400 --> 00:01:43,440 Speaker 1: going to happen. Your point about the reaction function is 32 00:01:43,480 --> 00:01:48,640 Speaker 1: well made because rather than waiting for this grand announcement 33 00:01:48,760 --> 00:01:52,400 Speaker 1: in Q two two thousand and twenty on the on 34 00:01:52,560 --> 00:01:56,520 Speaker 1: the Fed's framework review, which they've already delayed once, it 35 00:01:56,680 --> 00:02:00,360 Speaker 1: is instead seeping into the reaction function in real time. 36 00:02:00,840 --> 00:02:03,240 Speaker 1: So we now know that when you get an upside 37 00:02:03,240 --> 00:02:06,320 Speaker 1: surprise as we've just seen, let's do nothing. They might 38 00:02:06,400 --> 00:02:10,200 Speaker 1: even cut challenge for me is how do you communicate 39 00:02:10,240 --> 00:02:14,400 Speaker 1: that to spot traders and bond traders and others, because 40 00:02:14,400 --> 00:02:18,160 Speaker 1: it's frankly quite patronizing to explain to them that those 41 00:02:18,240 --> 00:02:20,920 Speaker 1: kind of things, because they're all educated to respond in 42 00:02:20,960 --> 00:02:25,079 Speaker 1: different ways. So so so my best interpretation of all 43 00:02:25,080 --> 00:02:29,880 Speaker 1: of this is yields probably go up before they fall dramatically. 44 00:02:30,480 --> 00:02:33,040 Speaker 1: I'm going to take any increase in yield from here 45 00:02:33,080 --> 00:02:35,840 Speaker 1: as a buying opportunity because I think will end the 46 00:02:35,960 --> 00:02:38,600 Speaker 1: end of the year with lower yields. I need some 47 00:02:38,680 --> 00:02:42,280 Speaker 1: tips in the portfolio. Inflation protection makes a lot of 48 00:02:42,320 --> 00:02:45,120 Speaker 1: sense here, a very good diversification. Let's talk about that, 49 00:02:45,160 --> 00:02:48,480 Speaker 1: a cool option on the inflation store. Why, Steve, is 50 00:02:48,520 --> 00:02:51,079 Speaker 1: that market positioning or is that just you think things 51 00:02:51,120 --> 00:02:53,120 Speaker 1: are going to materialize a certain way of coming year. 52 00:02:53,400 --> 00:02:56,000 Speaker 1: I'll tell you why it's a cool option because if 53 00:02:56,080 --> 00:02:59,000 Speaker 1: things continue like they are, which is a good possibility, 54 00:02:59,480 --> 00:03:04,280 Speaker 1: then each yield, each basis point yield shift in the 55 00:03:04,320 --> 00:03:07,880 Speaker 1: treasury is mimicked by the tips. So the tips and 56 00:03:07,960 --> 00:03:12,679 Speaker 1: the treasuries are trading tick for tick um. If the 57 00:03:12,760 --> 00:03:15,720 Speaker 1: yields keep sinking, the tips are going to keep up 58 00:03:15,760 --> 00:03:19,120 Speaker 1: with the treasuries. But if something happens, like inflation was 59 00:03:19,160 --> 00:03:21,080 Speaker 1: to surge, you're gonna get paid on the infliction side. 60 00:03:21,080 --> 00:03:23,000 Speaker 1: There's a risk of this view. It could be hugely 61 00:03:23,040 --> 00:03:26,079 Speaker 1: wrong if the SMP goes down because then you weren't 62 00:03:26,120 --> 00:03:29,079 Speaker 1: better sell your tips. Steve Major longer going far away. 63 00:03:29,560 --> 00:03:32,360 Speaker 1: Um at Credit Suite's had that beautiful algorithm where they 64 00:03:32,400 --> 00:03:35,440 Speaker 1: would show a time series of interest rates and they 65 00:03:35,520 --> 00:03:39,160 Speaker 1: show along the way how everybody got wrong. The move 66 00:03:39,280 --> 00:03:41,120 Speaker 1: was going to be the higher rates. That were whispers 67 00:03:41,160 --> 00:03:44,520 Speaker 1: up of highers, wrong, wrong, wrong, wrong, wrong. Do you 68 00:03:44,560 --> 00:03:46,640 Speaker 1: feel like it's the same way and this call for 69 00:03:46,760 --> 00:03:49,960 Speaker 1: higher inflation, is it just another redux of a tenure 70 00:03:50,280 --> 00:03:53,440 Speaker 1: twelve year path. Yeah, that that that that is right, 71 00:03:53,840 --> 00:03:57,840 Speaker 1: and everyone's thinking inflation has to go up because it's low. 72 00:03:58,200 --> 00:04:00,440 Speaker 1: Central banks are trying to talk it up, but they're 73 00:04:00,480 --> 00:04:04,320 Speaker 1: not doing anything. There's no there's no action. Is there really? 74 00:04:04,520 --> 00:04:08,280 Speaker 1: In the honor of Paul Valker, this is really important. 75 00:04:08,760 --> 00:04:13,840 Speaker 1: Is there evidence a central bank can reflate? Mr? Volker 76 00:04:14,040 --> 00:04:18,640 Speaker 1: proved we could disinflate, but is there any evidence they 77 00:04:18,680 --> 00:04:23,360 Speaker 1: can lead to some level of inflation? It's appropriate. Central 78 00:04:23,360 --> 00:04:26,880 Speaker 1: bankers know they can create inflation. They know it. They 79 00:04:26,920 --> 00:04:30,479 Speaker 1: have to print money. Now that printing of money hasn't 80 00:04:30,520 --> 00:04:35,640 Speaker 1: actually happened so far, because again mainstream thinking will confuse 81 00:04:35,880 --> 00:04:39,200 Speaker 1: quee with money print When you know it's never been 82 00:04:39,240 --> 00:04:42,159 Speaker 1: anything like it, so we're not there yet. But central 83 00:04:42,200 --> 00:04:46,000 Speaker 1: banks know that they can create inflation um and some 84 00:04:46,000 --> 00:04:49,840 Speaker 1: some kind of step towards a radical government that that 85 00:04:50,120 --> 00:04:53,400 Speaker 1: puts more of a constraint on the reaction function that 86 00:04:53,440 --> 00:04:55,600 Speaker 1: could that could drive inflation. Steve, You're gonna stick with 87 00:04:55,680 --> 00:04:56,800 Speaker 1: us and we're going to talk about the e c 88 00:04:56,839 --> 00:04:58,240 Speaker 1: p A at a moment. I don't want to reflect 89 00:04:58,279 --> 00:05:00,480 Speaker 1: on the year we've had in the year ahead. It's 90 00:05:00,560 --> 00:05:02,440 Speaker 1: that time of the year when Steve Major goes out 91 00:05:02,520 --> 00:05:05,440 Speaker 1: visiting clients and Steve Major says rates are going to 92 00:05:05,520 --> 00:05:07,279 Speaker 1: go lower, and typically you get a ton of push 93 00:05:07,320 --> 00:05:09,520 Speaker 1: back and then rates go lower as the year grows older. 94 00:05:10,040 --> 00:05:12,240 Speaker 1: Are you finding that the world is coming around to 95 00:05:12,320 --> 00:05:14,680 Speaker 1: your perspective, your point of view just a little bit 96 00:05:14,680 --> 00:05:17,080 Speaker 1: more in the last twelve months, And how does that 97 00:05:17,120 --> 00:05:20,200 Speaker 1: make you reflect on your own framework for looking at 98 00:05:20,240 --> 00:05:22,839 Speaker 1: this bond market. When you've been the outlie, the contrarian 99 00:05:22,960 --> 00:05:25,359 Speaker 1: voice for so long and then the world starts coming 100 00:05:25,400 --> 00:05:27,920 Speaker 1: towards you, does it make you feel uncomfortable? Yes? And 101 00:05:28,040 --> 00:05:31,880 Speaker 1: the current presentation is called straw Man, which for the 102 00:05:31,920 --> 00:05:35,760 Speaker 1: American listeners, the straw Man is a fallacy that you 103 00:05:35,839 --> 00:05:38,839 Speaker 1: construct so you can tear it down. And the straw 104 00:05:38,920 --> 00:05:42,600 Speaker 1: man for me is higher yields and bear steepening. So 105 00:05:42,720 --> 00:05:46,360 Speaker 1: I want to play with that scenario because that scenario 106 00:05:46,440 --> 00:05:50,840 Speaker 1: has to be fully constructed, because it offsets the Japan scenario, 107 00:05:50,920 --> 00:05:52,599 Speaker 1: which is we go to zero and we stay there 108 00:05:52,680 --> 00:05:57,560 Speaker 1: for a long time. So these two polar opposites are 109 00:05:57,680 --> 00:06:02,320 Speaker 1: informing the current year. The yield level today of one 110 00:06:02,320 --> 00:06:05,840 Speaker 1: point eight that it's and and it's been a bit 111 00:06:05,880 --> 00:06:08,640 Speaker 1: inconvenient for me because I'm a bit too close to 112 00:06:08,680 --> 00:06:11,160 Speaker 1: my forecast level. So I'm having to be patient. I 113 00:06:11,200 --> 00:06:13,000 Speaker 1: want youels to go up so I can buy again. 114 00:06:14,040 --> 00:06:16,240 Speaker 1: It was an exciting week here in London. Of course 115 00:06:16,279 --> 00:06:18,000 Speaker 1: I've done a lot. You know. We were going to 116 00:06:18,040 --> 00:06:20,200 Speaker 1: go to the National Art Gallery and see the goga 117 00:06:21,040 --> 00:06:23,840 Speaker 1: and then there was Arsenal west Ham. You're gonna wind up, 118 00:06:23,839 --> 00:06:25,839 Speaker 1: Steve nature and can you do this at the end 119 00:06:25,880 --> 00:06:28,480 Speaker 1: of the next It was like a balanced fair match. 120 00:06:28,560 --> 00:06:32,039 Speaker 1: It was like you know when ECB press conference, Well 121 00:06:32,240 --> 00:06:35,599 Speaker 1: it was I had Steve. What was that Arsenal was 122 00:06:35,640 --> 00:06:39,520 Speaker 1: good or west Tom was challenged? Both teams are poor 123 00:06:40,320 --> 00:06:42,599 Speaker 1: and west Ham we're in front for sixty old minutes 124 00:06:42,640 --> 00:06:45,640 Speaker 1: and then they collapsed and there's no single point I 125 00:06:45,640 --> 00:06:48,480 Speaker 1: can focus on. It's like markets. Stuff happens, you get 126 00:06:48,560 --> 00:06:53,280 Speaker 1: inflection points and and stuff happens. How did they turn 127 00:06:53,279 --> 00:06:55,640 Speaker 1: it around? In the sprawl of London football, I mean, 128 00:06:55,640 --> 00:06:57,880 Speaker 1: what is the I mean the tina and build a stadium, 129 00:06:57,880 --> 00:06:59,719 Speaker 1: but they can't put a decent team in it. We've 130 00:06:59,720 --> 00:07:01,880 Speaker 1: proved and that yeah, well with west Ham we have 131 00:07:01,920 --> 00:07:04,960 Speaker 1: to be patient. The difference between west Ham, Chelsea, Tottenham 132 00:07:04,960 --> 00:07:07,960 Speaker 1: and Arsenal is that we don't have that high expectations. 133 00:07:08,040 --> 00:07:10,760 Speaker 1: The problem that they have, just the problem for Arsenal 134 00:07:10,920 --> 00:07:13,760 Speaker 1: is that they expect to win things that they feel entitled, 135 00:07:13,760 --> 00:07:15,240 Speaker 1: whereas we have a bit of fund really and you 136 00:07:15,280 --> 00:07:17,320 Speaker 1: also have an atmosphere in the stadium, which is something 137 00:07:17,360 --> 00:07:20,240 Speaker 1: these other London clubs. They're like libraries if you ever 138 00:07:20,320 --> 00:07:24,400 Speaker 1: make it. It's absolutely fantastic to go and watch west deadly. 139 00:07:24,560 --> 00:07:27,480 Speaker 1: I watched them last season west Ham versus Chelsea a 140 00:07:27,480 --> 00:07:30,240 Speaker 1: bit of a London Derby. Fantastic gang, great atmosphere, just 141 00:07:30,240 --> 00:07:34,000 Speaker 1: phenomenal atmosphere. This has been wonderful, great, Thank you, thank 142 00:07:34,040 --> 00:07:36,920 Speaker 1: you so much, greatly appreciate you. David Bloom and the 143 00:07:36,920 --> 00:07:39,480 Speaker 1: rest of your team's work this year. It just we 144 00:07:39,520 --> 00:07:43,600 Speaker 1: skip the CP. Did we skip the CP? Yeah? You know, Okay, 145 00:07:44,040 --> 00:07:47,200 Speaker 1: did you want to know what I mean? We've got 146 00:07:47,200 --> 00:07:51,760 Speaker 1: like thirty seconds left and Steve Major, thank you so much. 147 00:07:52,680 --> 00:08:10,440 Speaker 1: HC looking forward to catching up with Frederick du Crozette. 148 00:08:10,440 --> 00:08:12,160 Speaker 1: He joins us now. He joins us from pick Set 149 00:08:12,200 --> 00:08:15,240 Speaker 1: Wealth Management. He joins us ahead of an ECB news 150 00:08:15,280 --> 00:08:18,480 Speaker 1: conference that begins in a round about twenty seven minutes time. Fred, 151 00:08:18,520 --> 00:08:20,080 Speaker 1: great to have you with us on the program. Walk 152 00:08:20,120 --> 00:08:22,480 Speaker 1: me through what you expect to hear and what you 153 00:08:22,560 --> 00:08:25,320 Speaker 1: expect not to hear from President of the Guard instead. 154 00:08:25,400 --> 00:08:29,360 Speaker 1: Hmout's time. Well, I think it's always interesting for the 155 00:08:29,440 --> 00:08:31,880 Speaker 1: first best conference. We know a lot about her, to 156 00:08:31,880 --> 00:08:33,600 Speaker 1: be honest. We know a lot about her style, we 157 00:08:33,640 --> 00:08:37,360 Speaker 1: know a lot about her tweets about how she tends 158 00:08:37,400 --> 00:08:41,199 Speaker 1: to possibly change the CBS communication reaching out to the 159 00:08:41,240 --> 00:08:44,000 Speaker 1: broader public. We we know all that. So what makes 160 00:08:44,000 --> 00:08:46,800 Speaker 1: it even more interesting, I think is that most people 161 00:08:46,920 --> 00:08:49,920 Speaker 1: just make me expect nothing new today, and yet we 162 00:08:50,040 --> 00:08:53,280 Speaker 1: might still have a few surprises, or at least we'll 163 00:08:53,320 --> 00:08:56,920 Speaker 1: be focusing on what Mrs la Goud announces in terms 164 00:08:56,960 --> 00:08:59,440 Speaker 1: of the strategy review, which is a very I mean 165 00:08:59,520 --> 00:09:04,000 Speaker 1: strategy objective of the e c B under a new management, 166 00:09:04,240 --> 00:09:06,920 Speaker 1: and there might be a few surprises here or there, Fred, 167 00:09:06,920 --> 00:09:10,040 Speaker 1: Before the monetary policy review has even finished. At the FED, 168 00:09:10,200 --> 00:09:12,559 Speaker 1: it feels like they've already adapted to what they're about 169 00:09:12,559 --> 00:09:14,520 Speaker 1: to produce at some point in the future. It sounds bizarre, 170 00:09:14,520 --> 00:09:16,280 Speaker 1: but that seems to be what is happening. The way 171 00:09:16,280 --> 00:09:18,560 Speaker 1: they view the data has changed. They believe there's more 172 00:09:18,600 --> 00:09:21,200 Speaker 1: slack in the economy in the United States. The way 173 00:09:21,200 --> 00:09:24,520 Speaker 1: they will respond to the data has also shifted. They're 174 00:09:24,559 --> 00:09:27,559 Speaker 1: telling us now, the chairman is telling us that inflation, 175 00:09:27,800 --> 00:09:31,400 Speaker 1: when it picks up, if it's not significant, even then, 176 00:09:31,559 --> 00:09:34,719 Speaker 1: even a significant move up, we're not necessarily going to 177 00:09:34,800 --> 00:09:38,160 Speaker 1: hike rate even then, it's a real dovish shift. So Fred, 178 00:09:38,200 --> 00:09:39,839 Speaker 1: I'm wondering what that means for the e c B. 179 00:09:40,200 --> 00:09:42,240 Speaker 1: We don't have to wait for these monastery policy reviews 180 00:09:42,280 --> 00:09:44,240 Speaker 1: to start to finish. We can have a feel for 181 00:09:44,360 --> 00:09:46,360 Speaker 1: what it's about to happen. That's already happening at the FED, 182 00:09:46,520 --> 00:09:49,080 Speaker 1: what's about to happen at the e c B. I 183 00:09:49,120 --> 00:09:52,520 Speaker 1: couldn't agree more and we knew that President drag you 184 00:09:52,559 --> 00:09:56,120 Speaker 1: actually was being criticized for that being, you know, this 185 00:09:56,240 --> 00:10:00,680 Speaker 1: kind of very strong leader sometimes making in fact or 186 00:10:01,480 --> 00:10:03,960 Speaker 1: choices and emposing them on the rest of the Council, 187 00:10:04,280 --> 00:10:07,240 Speaker 1: and the one you just mentioned are clearly the same 188 00:10:07,280 --> 00:10:09,760 Speaker 1: for the ECB. By the way, sometimes I'm talking about this, 189 00:10:09,800 --> 00:10:11,520 Speaker 1: but the set is just healing a little bit from 190 00:10:11,520 --> 00:10:15,000 Speaker 1: the ECB playbooks talking about the system significant increasing in 191 00:10:15,120 --> 00:10:19,520 Speaker 1: station even though you are very closer to employment full 192 00:10:19,600 --> 00:10:22,599 Speaker 1: employment in the US obviously, but I fully agree, I 193 00:10:22,679 --> 00:10:25,240 Speaker 1: think a lot is already de factored and changed in 194 00:10:25,520 --> 00:10:28,240 Speaker 1: the your area as well. You know that the ECB 195 00:10:28,400 --> 00:10:31,600 Speaker 1: is only a single mandate on the headline inflation closer 196 00:10:31,640 --> 00:10:35,520 Speaker 1: to two This might be amended, but in practice we 197 00:10:35,760 --> 00:10:38,040 Speaker 1: know already that the CB is looking at core inflation 198 00:10:38,520 --> 00:10:40,920 Speaker 1: a bit like obviously in the US. That a few 199 00:10:41,040 --> 00:10:44,000 Speaker 1: changes could be made, but essentially the same idea prevails 200 00:10:44,120 --> 00:10:48,240 Speaker 1: that you need to see a sustained, robust convergence of 201 00:10:48,600 --> 00:10:51,560 Speaker 1: inflation and underlying inflation closer to the two percent targets 202 00:10:51,640 --> 00:10:53,440 Speaker 1: over the medium term. How do you think that would 203 00:10:53,440 --> 00:10:55,959 Speaker 1: officially manifest itself? Reread Because at the moment, as you know, 204 00:10:56,360 --> 00:10:58,360 Speaker 1: back in our three was the last monitor policy review 205 00:10:58,400 --> 00:11:01,199 Speaker 1: at the u c B. They interpret a mandata prostability 206 00:11:01,320 --> 00:11:04,319 Speaker 1: with inflation close to but below two percent. Is it 207 00:11:04,360 --> 00:11:06,559 Speaker 1: gonna be as boring as saying the new inflation targets 208 00:11:06,600 --> 00:11:08,760 Speaker 1: two percent or they're going to do something more than that? 209 00:11:10,640 --> 00:11:12,839 Speaker 1: I think that's one is. It's interesting because I do 210 00:11:12,960 --> 00:11:16,920 Speaker 1: expect a change to two percent full stuff, and anything 211 00:11:16,960 --> 00:11:21,240 Speaker 1: more complicated than that is. Yeah, it's use less. Yet, well, 212 00:11:21,360 --> 00:11:26,640 Speaker 1: we would say a symmetric or asymmetric. There's an asymmetric debate. 213 00:11:26,720 --> 00:11:29,359 Speaker 1: I had Charles Evans at the Council on Foreign Relations 214 00:11:29,960 --> 00:11:33,360 Speaker 1: four weeks ago. That was the thunderous topic from Mr 215 00:11:33,440 --> 00:11:38,440 Speaker 1: Evans of Chicago. Wonderful. Is there a symmetric study at 216 00:11:38,480 --> 00:11:41,240 Speaker 1: the ECB and within Europe? Or is it as you 217 00:11:41,360 --> 00:11:45,719 Speaker 1: say as Vanilla is two. It's true that when I 218 00:11:45,880 --> 00:11:49,040 Speaker 1: ask people in Thankfort or in Paris, the definition of 219 00:11:49,120 --> 00:11:53,520 Speaker 1: price stability can difference. So sixteen years ago the definition 220 00:11:53,600 --> 00:11:56,480 Speaker 1: and the clarification was close to but below two percent, 221 00:11:56,600 --> 00:11:59,480 Speaker 1: and there is an asymmetric dimension in that. You're right 222 00:12:00,240 --> 00:12:05,240 Speaker 1: is to be removed and interesting with That's really part 223 00:12:05,280 --> 00:12:08,199 Speaker 1: of the story because how you get their obviously, man, 224 00:12:09,880 --> 00:12:14,480 Speaker 1: explain to our audience, particularly in America, Explain the constraints 225 00:12:14,800 --> 00:12:18,520 Speaker 1: Madame Legarde and all of the ECB have because of 226 00:12:18,600 --> 00:12:22,439 Speaker 1: the odd fiscal structure of Europe. I mean, this is 227 00:12:22,480 --> 00:12:24,679 Speaker 1: not about having lunch and going on and I retreat 228 00:12:24,679 --> 00:12:26,800 Speaker 1: to the castle. John, were you invited to the castle? 229 00:12:27,280 --> 00:12:30,360 Speaker 1: To the retreat? I get, I asked Madame mcguard this morning, 230 00:12:32,040 --> 00:12:34,599 Speaker 1: lost in the mail. But but but freend this is 231 00:12:34,679 --> 00:12:40,720 Speaker 1: really important. I mean, they have huge institutional constraints because 232 00:12:40,760 --> 00:12:44,199 Speaker 1: of the odd structure, don't they. Yes, they do. We 233 00:12:44,320 --> 00:12:46,880 Speaker 1: know all the flows. We know. It's not only about 234 00:12:46,920 --> 00:12:49,160 Speaker 1: fiscal policy, by the way, that's something she made clear 235 00:12:49,320 --> 00:12:52,400 Speaker 1: and when doing her hearings at the European Parliament, it's 236 00:12:52,400 --> 00:12:56,480 Speaker 1: also about everything that is incomplete in the European Monetary Union. 237 00:12:56,880 --> 00:13:00,240 Speaker 1: To him, thinking about the Capital Market Union, the banking Union. 238 00:13:00,720 --> 00:13:03,559 Speaker 1: It's starting to move, lines of starting to shift, including 239 00:13:03,559 --> 00:13:05,880 Speaker 1: in Germany, but it's going too slow. And if you 240 00:13:05,960 --> 00:13:09,880 Speaker 1: add that to the fact that we had austerity everywhere 241 00:13:09,880 --> 00:13:12,640 Speaker 1: at the same time in the your area after the 242 00:13:12,960 --> 00:13:16,880 Speaker 1: double deprecession, it's a recipe for disaster. She's been clear, 243 00:13:17,080 --> 00:13:19,520 Speaker 1: just like to argue that we need more support from 244 00:13:19,600 --> 00:13:23,839 Speaker 1: ciscal slash institutional reform. The risk, as you said, is 245 00:13:23,920 --> 00:13:26,720 Speaker 1: that we're getting there too slow. In that next year, 246 00:13:27,160 --> 00:13:29,280 Speaker 1: the first thing the CD has to do is to 247 00:13:29,440 --> 00:13:32,880 Speaker 1: ease before we get there. Fred, just a final question. 248 00:13:33,000 --> 00:13:35,599 Speaker 1: As we approached this news conference, even the best of 249 00:13:35,679 --> 00:13:39,080 Speaker 1: the best have come up against difficulties when they take 250 00:13:39,160 --> 00:13:41,920 Speaker 1: on the role as the governor of a central bank. 251 00:13:42,040 --> 00:13:44,679 Speaker 1: The president, the chairman saw it from BANANKI, we sent 252 00:13:44,760 --> 00:13:46,400 Speaker 1: it from Yell and we saw it from Pal. Then 253 00:13:46,440 --> 00:13:48,200 Speaker 1: things settle down. They find out that the best thing 254 00:13:48,280 --> 00:13:51,000 Speaker 1: to do is to make it boring. It's that challenge, 255 00:13:51,080 --> 00:13:53,480 Speaker 1: the same challenge for Christine the guard or can she 256 00:13:53,720 --> 00:13:58,400 Speaker 1: change the rules of how to execute these news conferences? Yes, 257 00:13:58,480 --> 00:14:01,640 Speaker 1: I think the same as applies, except that she's very 258 00:14:01,760 --> 00:14:04,640 Speaker 1: experienced in that matter, even if it's not an essential banker, 259 00:14:04,720 --> 00:14:10,440 Speaker 1: and I'm quite convinced that she would avoid the biggest mistakes. Also, 260 00:14:10,640 --> 00:14:12,480 Speaker 1: I think the focus and she's been lucky, but that 261 00:14:12,559 --> 00:14:17,400 Speaker 1: a lucky about the timing the growth projections, inflation projections 262 00:14:17,480 --> 00:14:20,360 Speaker 1: today is likely to men broadly unchanged. She got time 263 00:14:20,400 --> 00:14:22,360 Speaker 1: ahead of her and the time will be spent to 264 00:14:22,480 --> 00:14:25,280 Speaker 1: really reflect on the strategy review to try and bring 265 00:14:25,400 --> 00:14:29,120 Speaker 1: back some cohesion and and you know, unity, credibility, strength 266 00:14:29,480 --> 00:14:32,440 Speaker 1: to the Governing Council for them to act if needed. 267 00:14:32,560 --> 00:14:35,480 Speaker 1: I mean that's the question mark if they do need 268 00:14:35,560 --> 00:14:38,400 Speaker 1: to do something, whether will they caturate again? Will they 269 00:14:38,480 --> 00:14:41,720 Speaker 1: increase we yield, increase the issue limits? And those are 270 00:14:41,880 --> 00:14:45,200 Speaker 1: very difficult questions in a very difficult political environment. And 271 00:14:45,320 --> 00:14:48,000 Speaker 1: for that to be credible, if she needs to do more, 272 00:14:48,120 --> 00:14:51,440 Speaker 1: she first needs to bring everyone back to the table. 273 00:14:51,760 --> 00:14:54,520 Speaker 1: And while we hear those famous words, whatever it takes, 274 00:14:54,680 --> 00:14:57,000 Speaker 1: she's been reluctant so far. Great to catch up with you, 275 00:14:57,280 --> 00:15:14,400 Speaker 1: Frederic Ducros either picked that Wealth Managements just this is 276 00:15:14,440 --> 00:15:18,000 Speaker 1: an exceptionally important, too short interview with Ted Alden the 277 00:15:18,080 --> 00:15:21,560 Speaker 1: Council on Foreign Relations on China. Ted, what are the 278 00:15:21,680 --> 00:15:26,840 Speaker 1: ramifications If the tariffs do not click in for China? 279 00:15:27,080 --> 00:15:30,200 Speaker 1: Is that good news for them? How do you gauge 280 00:15:30,760 --> 00:15:34,960 Speaker 1: what happens if we don't see new tariffs this this 281 00:15:35,240 --> 00:15:39,080 Speaker 1: in three days? Well, I mean, the Chinese clearly want 282 00:15:39,200 --> 00:15:41,680 Speaker 1: the tarra for it to de escalate. So if the 283 00:15:41,800 --> 00:15:45,240 Speaker 1: US doesn't move ahead on December, if k that's good 284 00:15:45,280 --> 00:15:47,960 Speaker 1: news for China. But but China is holding out for 285 00:15:48,440 --> 00:15:51,920 Speaker 1: removal of some of the tariffs that have already been 286 00:15:52,000 --> 00:15:54,160 Speaker 1: put in place. That's a big they want to go 287 00:15:54,360 --> 00:15:57,240 Speaker 1: first point in the current negotiate, they want to go further. Yeah, 288 00:15:57,240 --> 00:15:59,880 Speaker 1: the talk seem to be about some kind of rat 289 00:16:00,320 --> 00:16:04,480 Speaker 1: deal where the Chinese will agree to to make certain 290 00:16:04,560 --> 00:16:08,360 Speaker 1: quantities of agricultural purchases and if they meet those, then 291 00:16:08,440 --> 00:16:11,160 Speaker 1: gradually some of the tariffs that are already in place 292 00:16:11,240 --> 00:16:14,320 Speaker 1: will come off. So so obviously no new terroriffs good 293 00:16:14,320 --> 00:16:15,880 Speaker 1: news for the Chinese. But they want to go farther 294 00:16:15,960 --> 00:16:18,960 Speaker 1: than that. Why is this so difficult? I mean, if 295 00:16:19,040 --> 00:16:22,360 Speaker 1: there's the blunt instrument of Team A wants three things 296 00:16:22,480 --> 00:16:25,560 Speaker 1: and Team B wants three other things, you know, you 297 00:16:25,680 --> 00:16:29,040 Speaker 1: sit down and you come to an agreement. What's the 298 00:16:29,480 --> 00:16:33,360 Speaker 1: reason this time around that chemistry that that discourse is 299 00:16:33,440 --> 00:16:36,200 Speaker 1: not working. I mean, I think part of it is 300 00:16:36,320 --> 00:16:39,120 Speaker 1: that that what they're talking about is a pale shadow 301 00:16:39,200 --> 00:16:41,040 Speaker 1: of what the United States wanted. I mean, the Trump 302 00:16:41,040 --> 00:16:45,800 Speaker 1: administration hope the tariffs would force some real fundamental economic 303 00:16:45,880 --> 00:16:48,720 Speaker 1: changes in China, and now we're talking largely about a 304 00:16:48,800 --> 00:16:52,320 Speaker 1: purchasing deal and maybe a bit of investment. So there's 305 00:16:52,360 --> 00:16:55,960 Speaker 1: frustration on the U S side. Um. The other thing 306 00:16:56,120 --> 00:16:57,800 Speaker 1: is the president. You know, he's been pretty clear about 307 00:16:57,800 --> 00:17:00,640 Speaker 1: he loves tariffs, and so he's really sucked in to 308 00:17:00,800 --> 00:17:02,960 Speaker 1: remove tariff. He thinks it's the best weapon. He thinks 309 00:17:03,000 --> 00:17:05,159 Speaker 1: the US is winning with the tariffs in place. So 310 00:17:05,240 --> 00:17:07,639 Speaker 1: the Chinese, You're gonna have to provide something that he 311 00:17:07,720 --> 00:17:09,920 Speaker 1: can at least brag about before he wants to see 312 00:17:09,920 --> 00:17:12,080 Speaker 1: any of those tarrifts taken off. It said, when you 313 00:17:12,119 --> 00:17:14,800 Speaker 1: look at what's happening outside of this trade negotiation between 314 00:17:14,800 --> 00:17:16,920 Speaker 1: the United States and China, what you see is that 315 00:17:17,000 --> 00:17:19,720 Speaker 1: a heart stance versus China is perhaps one of the 316 00:17:19,800 --> 00:17:22,359 Speaker 1: only things, one of the few things that the Democrats 317 00:17:22,400 --> 00:17:25,520 Speaker 1: and Republicans in Washington actually agree on. That supply chains 318 00:17:25,600 --> 00:17:29,040 Speaker 1: are arguably already decoupling. We've seen that news again this 319 00:17:29,240 --> 00:17:31,359 Speaker 1: week with China. We saw it with Huawe as well, 320 00:17:31,400 --> 00:17:34,320 Speaker 1: when they have their recent phone release. There's an argument 321 00:17:34,440 --> 00:17:36,119 Speaker 1: is likely to get worse before it gets better. And 322 00:17:36,240 --> 00:17:37,800 Speaker 1: from what I'm saying is that there's a habit of 323 00:17:37,880 --> 00:17:41,200 Speaker 1: defining the current state of US China relations by wherever 324 00:17:41,320 --> 00:17:44,000 Speaker 1: we are in the current trade dispute. Is that a 325 00:17:44,080 --> 00:17:48,600 Speaker 1: mistake ted well I I actually think the bigger issue 326 00:17:48,680 --> 00:17:51,240 Speaker 1: is the one you mentioned, which is is the decoupling question, 327 00:17:51,280 --> 00:17:53,480 Speaker 1: and a lot of that's happening in the technology space. 328 00:17:54,040 --> 00:17:56,120 Speaker 1: I mean, you look at the Chinese announcement this week 329 00:17:56,160 --> 00:17:59,320 Speaker 1: that they're going to get all foreign computers and software 330 00:17:59,440 --> 00:18:02,639 Speaker 1: out of their systems over the next several years. Uh, 331 00:18:02,920 --> 00:18:06,919 Speaker 1: the recon executive order from the Trump administration for scrutinizing 332 00:18:07,000 --> 00:18:11,760 Speaker 1: all foreign technology coming into the United States, particularly focused 333 00:18:11,800 --> 00:18:15,880 Speaker 1: on China, the restrictions on Huawei and export control. I think, 334 00:18:15,920 --> 00:18:18,080 Speaker 1: to a lot of extent, that's the real game. I mean, 335 00:18:18,160 --> 00:18:21,440 Speaker 1: the tariffs have almost become a side show at this point. 336 00:18:21,480 --> 00:18:25,320 Speaker 1: What we're talking about the growing technology competition between the 337 00:18:25,400 --> 00:18:28,639 Speaker 1: US and China, and I think increasing isolation between the 338 00:18:28,720 --> 00:18:30,560 Speaker 1: two on that front. When do we see a new 339 00:18:30,560 --> 00:18:35,320 Speaker 1: addition of failure to adjust, Well, I'll probably write write 340 00:18:35,359 --> 00:18:38,120 Speaker 1: a different book. I'm kind of looking at where things 341 00:18:38,200 --> 00:18:40,400 Speaker 1: go in the global trading system, so I probably won't 342 00:18:40,440 --> 00:18:42,320 Speaker 1: be quite so domestically focused. But I know I need 343 00:18:42,359 --> 00:18:46,080 Speaker 1: to get another book out there. Last one, folks. This 344 00:18:46,240 --> 00:18:48,760 Speaker 1: is wonderful to say to Ted Alden because his books 345 00:18:48,760 --> 00:18:55,040 Speaker 1: are constructively and wonderfully incredibly dense, incredibly informed. I'm busting 346 00:18:55,119 --> 00:18:59,160 Speaker 1: his chops there on whipping off another book, Ted Alden's book, 347 00:18:59,240 --> 00:19:02,080 Speaker 1: Failure to a just I can't say enough about it, 348 00:19:02,160 --> 00:19:06,120 Speaker 1: with a broad reach of what happened to our multilateral 349 00:19:06,240 --> 00:19:10,760 Speaker 1: trade of truly forgotten generation? Ted Alden with a Council 350 00:19:10,880 --> 00:19:26,680 Speaker 1: on Foreign Relations. We are in London. We're looking forward 351 00:19:26,680 --> 00:19:29,080 Speaker 1: to this news conference taking place in frank Firt, Germany 352 00:19:29,160 --> 00:19:31,879 Speaker 1: with the new ECB President, Christine Legard. I can tell 353 00:19:32,000 --> 00:19:34,560 Speaker 1: you she has entered the room with the vice President 354 00:19:34,600 --> 00:19:36,399 Speaker 1: of the e c B, Lewis to Gindosi is currently 355 00:19:36,480 --> 00:19:39,120 Speaker 1: standing in front of a whole host of photographers Tom 356 00:19:39,359 --> 00:19:41,680 Speaker 1: having her photo taken. So she hasn't even managed to 357 00:19:41,720 --> 00:19:43,959 Speaker 1: sit down yet and look at her notes and get 358 00:19:44,000 --> 00:19:47,639 Speaker 1: in front of a microphone. Those photos are still snapping away. 359 00:19:47,840 --> 00:19:51,560 Speaker 1: I think it's the smartest press conference, John, I mean 360 00:19:51,600 --> 00:19:54,800 Speaker 1: it's very seriously. I think I think that the press 361 00:19:55,080 --> 00:19:58,719 Speaker 1: is more informed. There. There are more Michael mckeys, there 362 00:19:58,760 --> 00:20:02,800 Speaker 1: are more you know, Steve Policeman and the others that 363 00:20:02,920 --> 00:20:05,400 Speaker 1: ask smart, smart questions, and I think more importantly, Tom, 364 00:20:05,440 --> 00:20:08,080 Speaker 1: you get some follow ups sometimes as well. There's a 365 00:20:08,160 --> 00:20:10,520 Speaker 1: dialogue there with the journalists, and I think that's that's 366 00:20:10,560 --> 00:20:13,800 Speaker 1: evolved over time. With the former ECP President Mario Dragi. 367 00:20:13,880 --> 00:20:15,960 Speaker 1: We can now cross over to catch up with ECB 368 00:20:16,040 --> 00:20:22,840 Speaker 1: President Christine Lagarde. Ladies and gentlemen, welcome to our press conference. 369 00:20:23,880 --> 00:20:25,800 Speaker 1: Today is the first time that I have had the 370 00:20:25,880 --> 00:20:29,440 Speaker 1: privilege and pleasure of sharing the monetary policy meeting of 371 00:20:29,520 --> 00:20:32,960 Speaker 1: the Governing Council of the ECB, and I'm delighted to 372 00:20:33,040 --> 00:20:35,760 Speaker 1: proceed now with reporting on the outcome of our meeting 373 00:20:36,200 --> 00:20:40,639 Speaker 1: together with my friend the Vice President. The Governing Council 374 00:20:40,760 --> 00:20:44,560 Speaker 1: meeting was also attended by the Commission Executive Vice President, 375 00:20:44,880 --> 00:20:51,120 Speaker 1: Mr Valdis Dombrowski. Based on our regular economic and monetary analysis, 376 00:20:52,040 --> 00:20:57,600 Speaker 1: we decided to keep the key ECB interest rates unchanged. 377 00:20:59,080 --> 00:21:02,960 Speaker 1: We expect them to remain at their present or lower 378 00:21:03,119 --> 00:21:08,320 Speaker 1: levels until we have seen the inflation outlook robustly converge 379 00:21:08,800 --> 00:21:12,600 Speaker 1: to a level sufficiently closed to or below two percent 380 00:21:13,320 --> 00:21:18,480 Speaker 1: within our projection horizon, and such convergence has been consistently 381 00:21:18,640 --> 00:21:27,480 Speaker 1: reflected in underlying inflation dynamics. On November one, we restarted 382 00:21:27,560 --> 00:21:31,760 Speaker 1: net purchases under our asset purchase program at a monthly 383 00:21:31,840 --> 00:21:36,760 Speaker 1: base of twenty billion euros. We expect them to run 384 00:21:36,880 --> 00:21:40,480 Speaker 1: for as long as necessary to reinforce the accommodative impact 385 00:21:40,560 --> 00:21:44,159 Speaker 1: of our policy rates, and to end shortly before we 386 00:21:44,320 --> 00:21:50,200 Speaker 1: start raising the key ECB interest rates. We also intend 387 00:21:50,280 --> 00:21:55,120 Speaker 1: to continue reinvesting in full the principal payments from maturing 388 00:21:55,200 --> 00:21:59,960 Speaker 1: securities purchased under the APP for an extended period of time. 389 00:22:00,040 --> 00:22:03,680 Speaker 1: I passed the date when we start raising the key 390 00:22:03,800 --> 00:22:06,840 Speaker 1: ECB interest rates, and in any case for as long 391 00:22:06,920 --> 00:22:12,159 Speaker 1: as necessary to maintain favorable liquidity conditions and an ample 392 00:22:12,480 --> 00:22:18,960 Speaker 1: degree of monetary accommodation. The incoming data since the last 393 00:22:19,000 --> 00:22:24,040 Speaker 1: Governing Council meeting in late October point to continued muted 394 00:22:24,160 --> 00:22:30,840 Speaker 1: inflation pressures and weak Euro Area growth dynamics, Although there 395 00:22:30,880 --> 00:22:35,120 Speaker 1: are some initial signs of stabilization in the growth slow 396 00:22:35,200 --> 00:22:40,720 Speaker 1: down and of a mild increase in underlying inflation inline 397 00:22:40,920 --> 00:22:48,080 Speaker 1: with our previous expectations, Ongoing employment, work growth and increasing 398 00:22:48,280 --> 00:22:53,320 Speaker 1: wages continue to underpin the resilience of the Euro Area economy. 399 00:22:55,160 --> 00:22:58,560 Speaker 1: The comprehensive package of policy measures that the Governing Council 400 00:22:58,680 --> 00:23:06,040 Speaker 1: decided in September provides substantial monetary stimulus, which ensures favorable 401 00:23:06,160 --> 00:23:11,520 Speaker 1: financing conditions. For all sector of the economy. In particular, 402 00:23:12,080 --> 00:23:17,520 Speaker 1: easier borrowing conditions for firms and households are underpinning consumer 403 00:23:17,600 --> 00:23:24,840 Speaker 1: spending and business investment. This will support the Euro Area expansion, 404 00:23:25,680 --> 00:23:29,960 Speaker 1: the ongoing built up of domestic price pressures, and thus 405 00:23:30,400 --> 00:23:34,480 Speaker 1: the robust convergence of inflation to our medium term aim. 406 00:23:36,960 --> 00:23:39,919 Speaker 1: In the light of the subdued inflation outlook, the Governing 407 00:23:40,000 --> 00:23:44,680 Speaker 1: Council reiterated the need for monetary policy to remain highly 408 00:23:44,720 --> 00:23:49,200 Speaker 1: accommodative for a prolonged period of time to support underlying 409 00:23:49,400 --> 00:23:54,320 Speaker 1: inflation pressures and headline inflation developments over the medium term. 410 00:23:55,720 --> 00:24:00,680 Speaker 1: We will therefore closely monitor inflation developments and the impact 411 00:24:01,040 --> 00:24:06,000 Speaker 1: of the unfolding monetary policy measures on the economy. Our 412 00:24:06,119 --> 00:24:10,399 Speaker 1: forward guidance will ensure that financial conditions are just in 413 00:24:10,480 --> 00:24:15,680 Speaker 1: accordance with changes to the inflation outlook. In any case, 414 00:24:16,119 --> 00:24:20,640 Speaker 1: the Governing Council continues to stand ready to adjust all 415 00:24:21,040 --> 00:24:25,800 Speaker 1: of its instruments as appropriate to ensure that inflation moves 416 00:24:26,160 --> 00:24:30,320 Speaker 1: towards its aim in a sustained manner, in line with 417 00:24:30,520 --> 00:24:36,040 Speaker 1: its commitment to symmetry. Now, let me now explain our 418 00:24:36,080 --> 00:24:42,840 Speaker 1: assessment in greater details, starting with the economic analysis. Euro 419 00:24:43,240 --> 00:24:48,440 Speaker 1: Area real GDP growth was confirmed at zero point two 420 00:24:48,520 --> 00:24:53,119 Speaker 1: percent quarter on quarter in the third quarter of and 421 00:24:53,359 --> 00:24:58,440 Speaker 1: changed from the previous quarter. The ongoing weakness of international 422 00:24:58,520 --> 00:25:03,200 Speaker 1: trade in an environmental persistent global uncertainties continues to weigh 423 00:25:03,280 --> 00:25:08,320 Speaker 1: on the Euro Area manufacturing sector and his dampening investment growth. 424 00:25:09,600 --> 00:25:14,760 Speaker 1: At the same time, incoming economic data and survey information, 425 00:25:15,600 --> 00:25:19,920 Speaker 1: while remaining week overall, point to some stabilization in the 426 00:25:20,080 --> 00:25:25,080 Speaker 1: slowdown of economic growth in the Euro Area. The services 427 00:25:25,600 --> 00:25:32,560 Speaker 1: and construction sectors remain resilient despite some moderation in the 428 00:25:32,680 --> 00:25:39,240 Speaker 1: latter part of Looking ahead, the Euro Area expansion will 429 00:25:39,280 --> 00:25:45,040 Speaker 1: continue to be supported by favorable financing condition, further employment 430 00:25:45,119 --> 00:25:50,640 Speaker 1: gains in conjunction with rising wages, the mildly expansionary euro 431 00:25:50,760 --> 00:25:56,520 Speaker 1: Area fiscal stance, and the ongoing, albeit somewhat slower growth 432 00:25:56,640 --> 00:26:02,600 Speaker 1: in global economy. This assessment is broadly reflected in the 433 00:26:02,720 --> 00:26:08,840 Speaker 1: December twenty nineteen Eurosystem Staff macroeconomic projections for the Euro Area. 434 00:26:09,760 --> 00:26:14,760 Speaker 1: These projections foresee annual real g d P increasing by 435 00:26:14,880 --> 00:26:19,880 Speaker 1: one point two percent in twenty nineteen, one point one 436 00:26:19,920 --> 00:26:24,480 Speaker 1: percent in twenty twenty one point four percent both in 437 00:26:24,640 --> 00:26:29,920 Speaker 1: twenty twenty one and twenty twenty two Compared with the 438 00:26:30,000 --> 00:26:34,960 Speaker 1: September twenty nineteen e c B staff macroeconomic projections. The 439 00:26:35,080 --> 00:26:39,480 Speaker 1: outlook for real GDP growth has been revised down slightly 440 00:26:39,600 --> 00:26:45,480 Speaker 1: for twenty twenty. The risks surrounding the Euro Area growth 441 00:26:45,520 --> 00:26:51,119 Speaker 1: outlook related to geopolitical factors rising protectionism and vulnerabilities in 442 00:26:51,200 --> 00:26:57,359 Speaker 1: emerging markets remain tilted to the downside, but have become 443 00:26:57,520 --> 00:27:04,879 Speaker 1: somewhat less pronounced. According to Eurostat's flash estimate, EU Area 444 00:27:04,920 --> 00:27:09,359 Speaker 1: annual h high CP inflation increased from zero points seven 445 00:27:09,440 --> 00:27:16,679 Speaker 1: percent in October twenty nine to in November, reflecting mainly 446 00:27:17,280 --> 00:27:22,520 Speaker 1: higher services and food price inflation. On the basis of 447 00:27:22,760 --> 00:27:27,080 Speaker 1: current futures prices for oil, headline inflation is likely to 448 00:27:27,200 --> 00:27:32,000 Speaker 1: rise somewhat in the coming months. Indicators of inflation expectations 449 00:27:32,320 --> 00:27:37,400 Speaker 1: stand at low levels. Measures of underlying inflation have remained 450 00:27:37,640 --> 00:27:42,040 Speaker 1: generally muted, although there are some indications of a mild 451 00:27:42,119 --> 00:27:48,960 Speaker 1: increase in line with previous expectations. While labor cost pressures 452 00:27:49,040 --> 00:27:54,119 Speaker 1: have strengthened amid tighter labor market, the weaker growth momentum 453 00:27:54,280 --> 00:27:59,719 Speaker 1: is delaying they pass through to inflation over the medium term. 454 00:28:00,280 --> 00:28:05,840 Speaker 1: Inflation is expected to increase, supported by our monetary policy measures, 455 00:28:06,880 --> 00:28:13,720 Speaker 1: the ongoing economic expansion and solid wage growth. This assessment 456 00:28:13,880 --> 00:28:18,159 Speaker 1: is also broadly reflected in the December twenty nine Eurosystems 457 00:28:18,240 --> 00:28:23,560 Speaker 1: Staff macroeconomic projections for the Euro Area, which foresees annual 458 00:28:23,640 --> 00:28:27,600 Speaker 1: edge high CP inflation at one point two percent in 459 00:28:29,119 --> 00:28:32,720 Speaker 1: one point one percent in twenty twenty, one point four 460 00:28:32,800 --> 00:28:36,679 Speaker 1: percent in twenty twenty one, and one point six percent 461 00:28:36,920 --> 00:28:54,120 Speaker 1: in twenty twenty two. Pastwenior, New York and Time keen 462 00:28:54,160 --> 00:28:57,360 Speaker 1: at Queen Dcoril Street in London. And this is a 463 00:28:57,800 --> 00:29:00,240 Speaker 1: painful now, whether it's our senior executive, it her for 464 00:29:00,320 --> 00:29:03,720 Speaker 1: Economic Stephanie Flanders. And I say so because the Evening 465 00:29:03,800 --> 00:29:06,320 Speaker 1: of Rex said she had real leadership for this nation 466 00:29:06,880 --> 00:29:09,720 Speaker 1: in describing what was going on the night of that 467 00:29:09,880 --> 00:29:12,280 Speaker 1: referendum at the time, I believe I saw her in 468 00:29:12,360 --> 00:29:15,000 Speaker 1: I t V. And it's painful, Paul, because we can't 469 00:29:15,040 --> 00:29:17,680 Speaker 1: talk about the election today. There's some very strict rules here, 470 00:29:18,200 --> 00:29:23,239 Speaker 1: so tomorrow we'll talk to painful for me, I can 471 00:29:23,360 --> 00:29:25,080 Speaker 1: show it, and I'd even like to talk about the 472 00:29:25,160 --> 00:29:27,600 Speaker 1: thinking behind it, but I don't even think that's appropriate 473 00:29:27,680 --> 00:29:30,240 Speaker 1: to do. So Instead, good news there's a many other 474 00:29:30,320 --> 00:29:33,120 Speaker 1: things to talk about. Let's talk about the president's tweet 475 00:29:33,680 --> 00:29:36,680 Speaker 1: in the idea of an exploding stock market SPX otter 476 00:29:36,720 --> 00:29:39,680 Speaker 1: record highs DAL up a hundred fifty points, very butter 477 00:29:39,760 --> 00:29:42,600 Speaker 1: stuff against record High's getting very close to a big 478 00:29:42,680 --> 00:29:45,480 Speaker 1: deal with China. They want it, and so do we. 479 00:29:46,120 --> 00:29:48,680 Speaker 1: I think the President is the only one who thinks 480 00:29:48,720 --> 00:29:51,840 Speaker 1: it's a big deal. Am I wrong? Well, he has 481 00:29:52,080 --> 00:29:54,000 Speaker 1: waxed and waned about whether or not it was a 482 00:29:54,040 --> 00:29:56,479 Speaker 1: big deal or it was a phase one deal. I mean, 483 00:29:56,520 --> 00:29:58,520 Speaker 1: remember back in September he said he was going to 484 00:29:58,600 --> 00:30:01,840 Speaker 1: be a comprehensive deal. Then a few weeks later he 485 00:30:02,080 --> 00:30:05,160 Speaker 1: kind of backtracked and said it was a phase one deal. 486 00:30:05,320 --> 00:30:07,240 Speaker 1: But we know that whatever gets announced, it will be 487 00:30:07,280 --> 00:30:09,600 Speaker 1: the biggest Phase one or the biggest intermediate deal that 488 00:30:09,680 --> 00:30:12,640 Speaker 1: one has ever seen. Um. I think it's the big 489 00:30:12,720 --> 00:30:15,880 Speaker 1: reminder from the impact of this tweet is that so 490 00:30:16,160 --> 00:30:19,320 Speaker 1: many markets and so many asset prices around the world 491 00:30:19,400 --> 00:30:23,640 Speaker 1: are now resting on this narrative, this twisting narrative around 492 00:30:24,680 --> 00:30:27,320 Speaker 1: the trade war, and specifically, we have this kind of 493 00:30:27,440 --> 00:30:31,280 Speaker 1: mini deadline coming up of whether or not the December fifteenth, 494 00:30:31,320 --> 00:30:35,800 Speaker 1: of whether we will have um those new tariffs imposed 495 00:30:36,040 --> 00:30:41,160 Speaker 1: on China after so many delays years ago. I had 496 00:30:41,240 --> 00:30:43,520 Speaker 1: to read a lot on Bretton Woods, very I can 497 00:30:44,040 --> 00:30:48,200 Speaker 1: kids me about it. And there was an ancient Maynard Keynes, 498 00:30:48,440 --> 00:30:49,920 Speaker 1: knowing he was at the end of his time in 499 00:30:50,000 --> 00:30:56,080 Speaker 1: Bretton Woods in New Hampshire, providing wisdom, resilience and theory. 500 00:30:56,760 --> 00:30:59,840 Speaker 1: And then you move forward to our multilateral trade experiment 501 00:31:00,040 --> 00:31:02,080 Speaker 1: out of World War Two and there are others like 502 00:31:02,240 --> 00:31:07,240 Speaker 1: Maynard Keynes providing wisdom and theory. The w t O 503 00:31:07,440 --> 00:31:10,400 Speaker 1: is going down in flames. Where is the wisdom and 504 00:31:10,480 --> 00:31:12,640 Speaker 1: theory right now? Well, I think it's a it's a 505 00:31:12,760 --> 00:31:15,640 Speaker 1: very good question. I mean, you have UM. There was 506 00:31:16,120 --> 00:31:19,040 Speaker 1: Domino Kines analysis, you know, at that Breton Woods conference, 507 00:31:19,040 --> 00:31:20,600 Speaker 1: as you know, the big battle. One of the big 508 00:31:21,480 --> 00:31:25,680 Speaker 1: was about whether or not trade surplus countries like China 509 00:31:25,800 --> 00:31:29,840 Speaker 1: has been for so many years, should be punished or 510 00:31:29,960 --> 00:31:33,440 Speaker 1: pushed to to adjust in the same way that deficit 511 00:31:33,520 --> 00:31:35,800 Speaker 1: countries often are. And I guess you could argue this 512 00:31:36,000 --> 00:31:37,560 Speaker 1: is pretty I would say this is a bit of 513 00:31:37,640 --> 00:31:39,160 Speaker 1: a reach. But you could say if Keynes had had 514 00:31:39,200 --> 00:31:42,040 Speaker 1: his way, maybe Donald Trump would not have had quite 515 00:31:42,080 --> 00:31:44,120 Speaker 1: so much mileage over the last few years of the 516 00:31:44,160 --> 00:31:46,600 Speaker 1: imbalances in trade between China and the US. But we're 517 00:31:46,640 --> 00:31:49,640 Speaker 1: not there. We are here. We have seen a big 518 00:31:49,760 --> 00:31:51,480 Speaker 1: change in the position of the w t O this week, 519 00:31:51,600 --> 00:31:54,960 Speaker 1: written about extensively on Bloomberg by particularly our w t 520 00:31:55,080 --> 00:31:58,680 Speaker 1: O reporter Bryce Brashuk, who has shown in chapter and 521 00:31:58,880 --> 00:32:01,000 Speaker 1: verse how of the w c O is going to 522 00:32:01,080 --> 00:32:04,560 Speaker 1: be stymied now by this US decision not to approve 523 00:32:04,800 --> 00:32:08,120 Speaker 1: any new judges for the appeals process. So the w 524 00:32:08,240 --> 00:32:09,720 Speaker 1: t O as we know it is certainly is not 525 00:32:09,840 --> 00:32:11,200 Speaker 1: even going to be able to play the kind of 526 00:32:11,240 --> 00:32:14,120 Speaker 1: policeman role that it has played. And we are still 527 00:32:14,160 --> 00:32:16,680 Speaker 1: in certain we do not have a kind of comprehensive approach. 528 00:32:16,760 --> 00:32:18,200 Speaker 1: We have lots of tweets and we have lots of 529 00:32:18,280 --> 00:32:22,040 Speaker 1: expectation around the negotiations underway with you go to the 530 00:32:22,120 --> 00:32:24,640 Speaker 1: heart of the matter. You mentioned the police patrol of it, 531 00:32:24,760 --> 00:32:28,720 Speaker 1: the policing, the enforcing. I see no discussion forget about 532 00:32:28,720 --> 00:32:33,560 Speaker 1: phase one, phase two, three, four, five of affecting enforcement 533 00:32:33,800 --> 00:32:37,600 Speaker 1: that leads to mutual trust. It's like Thomas Shelling one 534 00:32:37,640 --> 00:32:40,720 Speaker 1: O one, It's not there, is it? And I think 535 00:32:40,760 --> 00:32:42,840 Speaker 1: that was one of the shifts that we saw and 536 00:32:43,120 --> 00:32:45,520 Speaker 1: have been able to report on from the beginning of 537 00:32:45,600 --> 00:32:50,080 Speaker 1: this year. The way that Donald Trump presents approaches these negotiations, 538 00:32:50,200 --> 00:32:52,440 Speaker 1: and of course the very different noises coming out of 539 00:32:52,520 --> 00:32:56,240 Speaker 1: different members of his negotiating team at different times, has 540 00:32:56,320 --> 00:32:59,200 Speaker 1: led to this situation where there is very little mutual trust. 541 00:32:59,440 --> 00:33:01,840 Speaker 1: Where you look cut these two sides and say, whatever 542 00:33:01,920 --> 00:33:04,040 Speaker 1: deal they come up with, if it is remotely hard 543 00:33:04,120 --> 00:33:07,880 Speaker 1: to enforce or involves remotely any kind of mutual trust 544 00:33:07,960 --> 00:33:10,000 Speaker 1: between the two sides, that is going to be lacking. 545 00:33:10,080 --> 00:33:12,480 Speaker 1: So I think some of the biggest discussions less certainly 546 00:33:12,560 --> 00:33:15,880 Speaker 1: earlier in the process, have been precisely around enforcement mechanisms. 547 00:33:15,920 --> 00:33:18,320 Speaker 1: And there's a good reason why we haven't seen we 548 00:33:18,400 --> 00:33:21,040 Speaker 1: haven't seen serious people sign off on a deal. The 549 00:33:21,200 --> 00:33:26,360 Speaker 1: market UH seventeen minutes ago, make it eighteen minutes ago, flat, quiet, 550 00:33:26,480 --> 00:33:29,840 Speaker 1: a bit listless. The guard may be moving European rates 551 00:33:29,920 --> 00:33:33,840 Speaker 1: with a higher yield UH and now exploding higher SPX 552 00:33:33,880 --> 00:33:37,800 Speaker 1: through the record highs. Nasdaq one hundred surges fifty points, 553 00:33:37,880 --> 00:33:42,360 Speaker 1: a Dow UPO touching a new inter day highs and 554 00:33:42,560 --> 00:33:45,560 Speaker 1: really buttressed up against record highs on the Dow twenty 555 00:33:45,640 --> 00:33:49,080 Speaker 1: eight thousand ninety two on the dow or Stephanie Flanders, 556 00:33:49,480 --> 00:33:53,720 Speaker 1: Senior Executive editor h here on the topics of trade 557 00:33:54,160 --> 00:33:57,760 Speaker 1: after the president's tweet which forced this huge move higher, 558 00:33:58,480 --> 00:34:03,720 Speaker 1: and now on really the interesting moment of Christine Leguard 559 00:34:04,360 --> 00:34:06,640 Speaker 1: at the European Central Bank. Let me just start with 560 00:34:06,720 --> 00:34:09,759 Speaker 1: a general media question, Stephanie Flanders, how did she do? 561 00:34:10,239 --> 00:34:11,719 Speaker 1: I think she did pretty well. But would we have 562 00:34:11,880 --> 00:34:14,200 Speaker 1: having seen her in these other roles as Finance Minister 563 00:34:14,320 --> 00:34:15,759 Speaker 1: for France and then ahead of the I m F 564 00:34:15,800 --> 00:34:18,200 Speaker 1: I'm not sure we would have expected anything different. She 565 00:34:20,640 --> 00:34:26,400 Speaker 1: measured she also did she had. She started her questions 566 00:34:26,680 --> 00:34:29,440 Speaker 1: session after having read the very traditional kind of statement, 567 00:34:29,520 --> 00:34:32,080 Speaker 1: which we as we know didn't really go away from 568 00:34:32,120 --> 00:34:35,719 Speaker 1: anything the markets had expected, to say something about how 569 00:34:35,800 --> 00:34:39,000 Speaker 1: people should expect her to deal with them, how people 570 00:34:39,000 --> 00:34:41,719 Speaker 1: shouldn't be hanging on every word here, so good luck 571 00:34:41,800 --> 00:34:44,160 Speaker 1: with that, but also that she was going to be 572 00:34:44,239 --> 00:34:46,480 Speaker 1: her own person, and she took it. She took the 573 00:34:46,520 --> 00:34:48,399 Speaker 1: initiative to talk about the thing that we were most 574 00:34:48,480 --> 00:34:52,239 Speaker 1: interested in, which is this strategic review of ECB policies, 575 00:34:52,600 --> 00:34:54,800 Speaker 1: and I would say shifted a little bit, decided, you know, 576 00:34:54,880 --> 00:34:57,200 Speaker 1: stamped her own mark on it by saying it was 577 00:34:57,239 --> 00:35:00,919 Speaker 1: going to be extremely broad, not as perhaps Marrow Drug 578 00:35:01,160 --> 00:35:04,440 Speaker 1: has positioned, had positioned it implicitly as just a way 579 00:35:04,560 --> 00:35:08,480 Speaker 1: to kind of fix the approach to inflation, to handle 580 00:35:08,560 --> 00:35:11,960 Speaker 1: the fact that inflation was just persistently too low. She said, 581 00:35:12,320 --> 00:35:15,680 Speaker 1: we would be there'd be addressing inflation, the approach to inflation, 582 00:35:15,760 --> 00:35:19,480 Speaker 1: but also the environment, also the need for social inclusion 583 00:35:19,520 --> 00:35:21,960 Speaker 1: and inequality and all these things. So I think, um, 584 00:35:22,560 --> 00:35:25,680 Speaker 1: that was helpful for her. Maybe some of those people 585 00:35:25,760 --> 00:35:29,560 Speaker 1: who really wanted this to to force a change in 586 00:35:29,800 --> 00:35:33,320 Speaker 1: the ECBs approach, a douvish change in the ECB's approach, 587 00:35:33,719 --> 00:35:36,520 Speaker 1: Well she's she's not giving that to them. And what's 588 00:35:36,600 --> 00:35:40,280 Speaker 1: fascinating about this in Fox I would suggest that Christine 589 00:35:40,360 --> 00:35:44,560 Speaker 1: Leguard possibly would say, forget about the French ministry, forget 590 00:35:44,600 --> 00:35:47,160 Speaker 1: about the I MR for the ECB herding cats at 591 00:35:47,200 --> 00:35:50,360 Speaker 1: Baker and Mackenzie and Chicago years ago. It was probably 592 00:35:50,440 --> 00:35:53,479 Speaker 1: the toughest thing just in the two minutes one minute 593 00:35:53,520 --> 00:35:56,200 Speaker 1: and a half I've got left with you, Stephanie Flanders. 594 00:35:56,800 --> 00:35:59,120 Speaker 1: Are we at a point yet where I happen to 595 00:35:59,160 --> 00:36:01,239 Speaker 1: be with the I M F the degu Gopinath was 596 00:36:01,760 --> 00:36:04,840 Speaker 1: was announced as the Director of Economic Research or reguard 597 00:36:04,880 --> 00:36:07,719 Speaker 1: at the ECB, where we stopped worrying about women and 598 00:36:07,840 --> 00:36:13,200 Speaker 1: men because these women are of such immense ginormous competence. 599 00:36:13,800 --> 00:36:17,360 Speaker 1: Where we are we getting in economics at least to 600 00:36:17,440 --> 00:36:20,520 Speaker 1: where we really don't care about the debate of more 601 00:36:20,600 --> 00:36:24,200 Speaker 1: women involved, you know. I mean, maybe it's certainly becoming 602 00:36:24,440 --> 00:36:27,920 Speaker 1: normalized and just having her there for several years is 603 00:36:27,920 --> 00:36:29,880 Speaker 1: going to make a difference. But I remember, even in 604 00:36:29,960 --> 00:36:32,520 Speaker 1: Britain not to talk about this election, but the past 605 00:36:32,600 --> 00:36:35,360 Speaker 1: elections we had Margaret Thatcher and there was a feeling 606 00:36:35,400 --> 00:36:39,120 Speaker 1: that that had ended the discussion around a minister, and 607 00:36:39,200 --> 00:36:42,080 Speaker 1: then there was another generation went by before we had 608 00:36:42,080 --> 00:36:44,200 Speaker 1: another one. So I think if you have to look 609 00:36:44,239 --> 00:36:46,040 Speaker 1: at the next level, and I think the fact that 610 00:36:46,320 --> 00:36:50,239 Speaker 1: Christine Lagarde was the only viable female choice arguably UM 611 00:36:50,760 --> 00:36:52,360 Speaker 1: and we have had ahead of the I m F 612 00:36:52,440 --> 00:36:53,640 Speaker 1: and we had of the head of the CB, but 613 00:36:53,760 --> 00:36:56,600 Speaker 1: she's the same person, I think, tells you you still 614 00:36:56,680 --> 00:36:59,200 Speaker 1: have to be concerned about it. Quickly. The director of 615 00:36:59,239 --> 00:37:02,120 Speaker 1: the London School will of Economics most qualified to be 616 00:37:02,280 --> 00:37:04,279 Speaker 1: the Bank of England has at another name to look 617 00:37:04,320 --> 00:37:06,680 Speaker 1: forward to. I think Manu Chafik, who is also known 618 00:37:06,719 --> 00:37:08,800 Speaker 1: to any people in Washington for her time at the 619 00:37:08,880 --> 00:37:11,120 Speaker 1: i m F is certainly the best thing is on 620 00:37:11,280 --> 00:37:14,759 Speaker 1: her if you have um the kind of result that 621 00:37:14,840 --> 00:37:17,400 Speaker 1: many of the polls before the polling day were suggesting, 622 00:37:18,040 --> 00:37:20,680 Speaker 1: but there were plenty of There were actually several women 623 00:37:21,040 --> 00:37:23,480 Speaker 1: who would have been extremely The chair of the Santander 624 00:37:23,560 --> 00:37:25,640 Speaker 1: Street Badera would also been very good. So that's a 625 00:37:25,640 --> 00:37:28,320 Speaker 1: good song. We're gonna finish up here. Stephanie Flanders with 626 00:37:28,360 --> 00:37:32,440 Speaker 1: Bloomberg Surveillance. Thanks for listening to the Bloomberg Surveillance podcast. 627 00:37:32,840 --> 00:37:37,719 Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or 628 00:37:37,920 --> 00:37:42,160 Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom 629 00:37:42,320 --> 00:37:46,160 Speaker 1: Keane before the podcast. You can always catch us worldwide. 630 00:37:46,640 --> 00:37:47,720 Speaker 1: I'm Bloomberg Radio