WEBVTT - Surveillance: Lagarde's Optimistic Note For The Economy 0:00:09.840 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.160 Bloomberg dot Com, and of course on the Bloomberg. I 0:00:27.200 --> 0:00:29.400 would say, equally as important as the three rate cuts 0:00:29.440 --> 0:00:32.519 we've had through, just as big a change in the 0:00:32.600 --> 0:00:35.559 last twelve months, the shift in the FEDS reaction function, 0:00:35.800 --> 0:00:38.239 and I think Pow went some way yesterday to completing 0:00:38.240 --> 0:00:41.280 that pivot in the last year. Did Steve Major do okay? 0:00:41.320 --> 0:00:43.800 I'm like getting out front of what I think Steve 0:00:43.880 --> 0:00:46.280 Major is always doing better than okay the last couple 0:00:46.320 --> 0:00:47.960 of years. Pleased to say, it's with us in the 0:00:48.040 --> 0:00:51.120 studios here in London, Steve Major, HSBC club willhead of 0:00:51.159 --> 0:00:53.520 Fixed Income Research. Good morning, Good day to you, Steve. 0:00:53.800 --> 0:00:57.240 Good morning. Your thoughts as you reflect on Shairman Powell 0:00:57.640 --> 0:00:59.840 in the last twenty four hours, What does it take 0:01:00.120 --> 0:01:02.200 through next year and beyond? How do you know when 0:01:02.200 --> 0:01:05.440 a central banker is lying? How do you know his 0:01:05.520 --> 0:01:09.800 lips move so so the the the point of that 0:01:10.319 --> 0:01:12.800 is that we're not going to take too much from 0:01:12.800 --> 0:01:16.040 what we're told. So for me, building an investment strategy 0:01:16.240 --> 0:01:19.000 around a central bank head who tells me that they're 0:01:19.040 --> 0:01:22.080 on hold isn't going to take me very far. And 0:01:22.400 --> 0:01:24.400 if I had built my strategy around what he told 0:01:24.440 --> 0:01:26.920 me this time last year, I would have been short 0:01:27.120 --> 0:01:30.520 the market when it was rallying. Right. So I'm not 0:01:30.600 --> 0:01:32.840 saying that that's the only way that we do things, 0:01:32.880 --> 0:01:35.679 because it's easy to be contrarian. It's very easy to 0:01:35.720 --> 0:01:37.920 just do the opposite. It's just that I don't get 0:01:37.920 --> 0:01:40.360 a lot of guidance. I mean, he doesn't know what's 0:01:40.400 --> 0:01:43.440 going to happen. Your point about the reaction function is 0:01:43.480 --> 0:01:48.640 well made because rather than waiting for this grand announcement 0:01:48.760 --> 0:01:52.400 in Q two two thousand and twenty on the on 0:01:52.560 --> 0:01:56.520 the Fed's framework review, which they've already delayed once, it 0:01:56.680 --> 0:02:00.360 is instead seeping into the reaction function in real time. 0:02:00.840 --> 0:02:03.240 So we now know that when you get an upside 0:02:03.240 --> 0:02:06.320 surprise as we've just seen, let's do nothing. They might 0:02:06.400 --> 0:02:10.200 even cut challenge for me is how do you communicate 0:02:10.240 --> 0:02:14.400 that to spot traders and bond traders and others, because 0:02:14.400 --> 0:02:18.160 it's frankly quite patronizing to explain to them that those 0:02:18.240 --> 0:02:20.920 kind of things, because they're all educated to respond in 0:02:20.960 --> 0:02:25.079 different ways. So so so my best interpretation of all 0:02:25.080 --> 0:02:29.880 of this is yields probably go up before they fall dramatically. 0:02:30.480 --> 0:02:33.040 I'm going to take any increase in yield from here 0:02:33.080 --> 0:02:35.840 as a buying opportunity because I think will end the 0:02:35.960 --> 0:02:38.600 end of the year with lower yields. I need some 0:02:38.680 --> 0:02:42.280 tips in the portfolio. Inflation protection makes a lot of 0:02:42.320 --> 0:02:45.120 sense here, a very good diversification. Let's talk about that, 0:02:45.160 --> 0:02:48.480 a cool option on the inflation store. Why, Steve, is 0:02:48.520 --> 0:02:51.079 that market positioning or is that just you think things 0:02:51.120 --> 0:02:53.120 are going to materialize a certain way of coming year. 0:02:53.400 --> 0:02:56.000 I'll tell you why it's a cool option because if 0:02:56.080 --> 0:02:59.000 things continue like they are, which is a good possibility, 0:02:59.480 --> 0:03:04.280 then each yield, each basis point yield shift in the 0:03:04.320 --> 0:03:07.880 treasury is mimicked by the tips. So the tips and 0:03:07.960 --> 0:03:12.679 the treasuries are trading tick for tick um. If the 0:03:12.760 --> 0:03:15.720 yields keep sinking, the tips are going to keep up 0:03:15.760 --> 0:03:19.120 with the treasuries. But if something happens, like inflation was 0:03:19.160 --> 0:03:21.080 to surge, you're gonna get paid on the infliction side. 0:03:21.080 --> 0:03:23.000 There's a risk of this view. It could be hugely 0:03:23.040 --> 0:03:26.079 wrong if the SMP goes down because then you weren't 0:03:26.120 --> 0:03:29.079 better sell your tips. Steve Major longer going far away. 0:03:29.560 --> 0:03:32.360 Um at Credit Suite's had that beautiful algorithm where they 0:03:32.400 --> 0:03:35.440 would show a time series of interest rates and they 0:03:35.520 --> 0:03:39.160 show along the way how everybody got wrong. The move 0:03:39.280 --> 0:03:41.120 was going to be the higher rates. That were whispers 0:03:41.160 --> 0:03:44.520 up of highers, wrong, wrong, wrong, wrong, wrong. Do you 0:03:44.560 --> 0:03:46.640 feel like it's the same way and this call for 0:03:46.760 --> 0:03:49.960 higher inflation, is it just another redux of a tenure 0:03:50.280 --> 0:03:53.440 twelve year path. Yeah, that that that that is right, 0:03:53.840 --> 0:03:57.840 and everyone's thinking inflation has to go up because it's low. 0:03:58.200 --> 0:04:00.440 Central banks are trying to talk it up, but they're 0:04:00.480 --> 0:04:04.320 not doing anything. There's no there's no action. Is there really? 0:04:04.520 --> 0:04:08.280 In the honor of Paul Valker, this is really important. 0:04:08.760 --> 0:04:13.840 Is there evidence a central bank can reflate? Mr? Volker 0:04:14.040 --> 0:04:18.640 proved we could disinflate, but is there any evidence they 0:04:18.680 --> 0:04:23.360 can lead to some level of inflation? It's appropriate. Central 0:04:23.360 --> 0:04:26.880 bankers know they can create inflation. They know it. They 0:04:26.920 --> 0:04:30.479 have to print money. Now that printing of money hasn't 0:04:30.520 --> 0:04:35.640 actually happened so far, because again mainstream thinking will confuse 0:04:35.880 --> 0:04:39.200 quee with money print When you know it's never been 0:04:39.240 --> 0:04:42.159 anything like it, so we're not there yet. But central 0:04:42.200 --> 0:04:46.000 banks know that they can create inflation um and some 0:04:46.000 --> 0:04:49.840 some kind of step towards a radical government that that 0:04:50.120 --> 0:04:53.400 puts more of a constraint on the reaction function that 0:04:53.440 --> 0:04:55.600 could that could drive inflation. Steve, You're gonna stick with 0:04:55.680 --> 0:04:56.800 us and we're going to talk about the e c 0:04:56.839 --> 0:04:58.240 p A at a moment. I don't want to reflect 0:04:58.279 --> 0:05:00.480 on the year we've had in the year ahead. It's 0:05:00.560 --> 0:05:02.440 that time of the year when Steve Major goes out 0:05:02.520 --> 0:05:05.440 visiting clients and Steve Major says rates are going to 0:05:05.520 --> 0:05:07.279 go lower, and typically you get a ton of push 0:05:07.320 --> 0:05:09.520 back and then rates go lower as the year grows older. 0:05:10.040 --> 0:05:12.240 Are you finding that the world is coming around to 0:05:12.320 --> 0:05:14.680 your perspective, your point of view just a little bit 0:05:14.680 --> 0:05:17.080 more in the last twelve months, And how does that 0:05:17.120 --> 0:05:20.200 make you reflect on your own framework for looking at 0:05:20.240 --> 0:05:22.839 this bond market. When you've been the outlie, the contrarian 0:05:22.960 --> 0:05:25.359 voice for so long and then the world starts coming 0:05:25.400 --> 0:05:27.920 towards you, does it make you feel uncomfortable? Yes? And 0:05:28.040 --> 0:05:31.880 the current presentation is called straw Man, which for the 0:05:31.920 --> 0:05:35.760 American listeners, the straw Man is a fallacy that you 0:05:35.839 --> 0:05:38.839 construct so you can tear it down. And the straw 0:05:38.920 --> 0:05:42.600 man for me is higher yields and bear steepening. So 0:05:42.720 --> 0:05:46.360 I want to play with that scenario because that scenario 0:05:46.440 --> 0:05:50.840 has to be fully constructed, because it offsets the Japan scenario, 0:05:50.920 --> 0:05:52.599 which is we go to zero and we stay there 0:05:52.680 --> 0:05:57.560 for a long time. So these two polar opposites are 0:05:57.680 --> 0:06:02.320 informing the current year. The yield level today of one 0:06:02.320 --> 0:06:05.840 point eight that it's and and it's been a bit 0:06:05.880 --> 0:06:08.640 inconvenient for me because I'm a bit too close to 0:06:08.680 --> 0:06:11.160 my forecast level. So I'm having to be patient. I 0:06:11.200 --> 0:06:13.000 want youels to go up so I can buy again. 0:06:14.040 --> 0:06:16.240 It was an exciting week here in London. Of course 0:06:16.279 --> 0:06:18.000 I've done a lot. You know. We were going to 0:06:18.040 --> 0:06:20.200 go to the National Art Gallery and see the goga 0:06:21.040 --> 0:06:23.840 and then there was Arsenal west Ham. You're gonna wind up, 0:06:23.839 --> 0:06:25.839 Steve nature and can you do this at the end 0:06:25.880 --> 0:06:28.480 of the next It was like a balanced fair match. 0:06:28.560 --> 0:06:32.039 It was like you know when ECB press conference, Well 0:06:32.240 --> 0:06:35.599 it was I had Steve. What was that Arsenal was 0:06:35.640 --> 0:06:39.520 good or west Tom was challenged? Both teams are poor 0:06:40.320 --> 0:06:42.599 and west Ham we're in front for sixty old minutes 0:06:42.640 --> 0:06:45.640 and then they collapsed and there's no single point I 0:06:45.640 --> 0:06:48.480 can focus on. It's like markets. Stuff happens, you get 0:06:48.560 --> 0:06:53.280 inflection points and and stuff happens. How did they turn 0:06:53.279 --> 0:06:55.640 it around? In the sprawl of London football, I mean, 0:06:55.640 --> 0:06:57.880 what is the I mean the tina and build a stadium, 0:06:57.880 --> 0:06:59.719 but they can't put a decent team in it. We've 0:06:59.720 --> 0:07:01.880 proved and that yeah, well with west Ham we have 0:07:01.920 --> 0:07:04.960 to be patient. The difference between west Ham, Chelsea, Tottenham 0:07:04.960 --> 0:07:07.960 and Arsenal is that we don't have that high expectations. 0:07:08.040 --> 0:07:10.760 The problem that they have, just the problem for Arsenal 0:07:10.920 --> 0:07:13.760 is that they expect to win things that they feel entitled, 0:07:13.760 --> 0:07:15.240 whereas we have a bit of fund really and you 0:07:15.280 --> 0:07:17.320 also have an atmosphere in the stadium, which is something 0:07:17.360 --> 0:07:20.240 these other London clubs. They're like libraries if you ever 0:07:20.320 --> 0:07:24.400 make it. It's absolutely fantastic to go and watch west deadly. 0:07:24.560 --> 0:07:27.480 I watched them last season west Ham versus Chelsea a 0:07:27.480 --> 0:07:30.240 bit of a London Derby. Fantastic gang, great atmosphere, just 0:07:30.240 --> 0:07:34.000 phenomenal atmosphere. This has been wonderful, great, Thank you, thank 0:07:34.040 --> 0:07:36.920 you so much, greatly appreciate you. David Bloom and the 0:07:36.920 --> 0:07:39.480 rest of your team's work this year. It just we 0:07:39.520 --> 0:07:43.600 skip the CP. Did we skip the CP? Yeah? You know, Okay, 0:07:44.040 --> 0:07:47.200 did you want to know what I mean? We've got 0:07:47.200 --> 0:07:51.760 like thirty seconds left and Steve Major, thank you so much. 0:07:52.680 --> 0:08:10.440 HC looking forward to catching up with Frederick du Crozette. 0:08:10.440 --> 0:08:12.160 He joins us now. He joins us from pick Set 0:08:12.200 --> 0:08:15.240 Wealth Management. He joins us ahead of an ECB news 0:08:15.280 --> 0:08:18.480 conference that begins in a round about twenty seven minutes time. Fred, 0:08:18.520 --> 0:08:20.080 great to have you with us on the program. Walk 0:08:20.120 --> 0:08:22.480 me through what you expect to hear and what you 0:08:22.560 --> 0:08:25.320 expect not to hear from President of the Guard instead. 0:08:25.400 --> 0:08:29.360 Hmout's time. Well, I think it's always interesting for the 0:08:29.440 --> 0:08:31.880 first best conference. We know a lot about her, to 0:08:31.880 --> 0:08:33.600 be honest. We know a lot about her style, we 0:08:33.640 --> 0:08:37.360 know a lot about her tweets about how she tends 0:08:37.400 --> 0:08:41.199 to possibly change the CBS communication reaching out to the 0:08:41.240 --> 0:08:44.000 broader public. We we know all that. So what makes 0:08:44.000 --> 0:08:46.800 it even more interesting, I think is that most people 0:08:46.920 --> 0:08:49.920 just make me expect nothing new today, and yet we 0:08:50.040 --> 0:08:53.280 might still have a few surprises, or at least we'll 0:08:53.320 --> 0:08:56.920 be focusing on what Mrs la Goud announces in terms 0:08:56.960 --> 0:08:59.440 of the strategy review, which is a very I mean 0:08:59.520 --> 0:09:04.000 strategy objective of the e c B under a new management, 0:09:04.240 --> 0:09:06.920 and there might be a few surprises here or there, Fred, 0:09:06.920 --> 0:09:10.040 Before the monetary policy review has even finished. At the FED, 0:09:10.200 --> 0:09:12.559 it feels like they've already adapted to what they're about 0:09:12.559 --> 0:09:14.520 to produce at some point in the future. It sounds bizarre, 0:09:14.520 --> 0:09:16.280 but that seems to be what is happening. The way 0:09:16.280 --> 0:09:18.560 they view the data has changed. They believe there's more 0:09:18.600 --> 0:09:21.200 slack in the economy in the United States. The way 0:09:21.200 --> 0:09:24.520 they will respond to the data has also shifted. They're 0:09:24.559 --> 0:09:27.559 telling us now, the chairman is telling us that inflation, 0:09:27.800 --> 0:09:31.400 when it picks up, if it's not significant, even then, 0:09:31.559 --> 0:09:34.719 even a significant move up, we're not necessarily going to 0:09:34.800 --> 0:09:38.160 hike rate even then, it's a real dovish shift. So Fred, 0:09:38.200 --> 0:09:39.839 I'm wondering what that means for the e c B. 0:09:40.200 --> 0:09:42.240 We don't have to wait for these monastery policy reviews 0:09:42.280 --> 0:09:44.240 to start to finish. We can have a feel for 0:09:44.360 --> 0:09:46.360 what it's about to happen. That's already happening at the FED, 0:09:46.520 --> 0:09:49.080 what's about to happen at the e c B. I 0:09:49.120 --> 0:09:52.520 couldn't agree more and we knew that President drag you 0:09:52.559 --> 0:09:56.120 actually was being criticized for that being, you know, this 0:09:56.240 --> 0:10:00.680 kind of very strong leader sometimes making in fact or 0:10:01.480 --> 0:10:03.960 choices and emposing them on the rest of the Council, 0:10:04.280 --> 0:10:07.240 and the one you just mentioned are clearly the same 0:10:07.280 --> 0:10:09.760 for the ECB. By the way, sometimes I'm talking about this, 0:10:09.800 --> 0:10:11.520 but the set is just healing a little bit from 0:10:11.520 --> 0:10:15.000 the ECB playbooks talking about the system significant increasing in 0:10:15.120 --> 0:10:19.520 station even though you are very closer to employment full 0:10:19.600 --> 0:10:22.599 employment in the US obviously, but I fully agree, I 0:10:22.679 --> 0:10:25.240 think a lot is already de factored and changed in 0:10:25.520 --> 0:10:28.240 the your area as well. You know that the ECB 0:10:28.400 --> 0:10:31.600 is only a single mandate on the headline inflation closer 0:10:31.640 --> 0:10:35.520 to two This might be amended, but in practice we 0:10:35.760 --> 0:10:38.040 know already that the CB is looking at core inflation 0:10:38.520 --> 0:10:40.920 a bit like obviously in the US. That a few 0:10:41.040 --> 0:10:44.000 changes could be made, but essentially the same idea prevails 0:10:44.120 --> 0:10:48.240 that you need to see a sustained, robust convergence of 0:10:48.600 --> 0:10:51.560 inflation and underlying inflation closer to the two percent targets 0:10:51.640 --> 0:10:53.440 over the medium term. How do you think that would 0:10:53.440 --> 0:10:55.959 officially manifest itself? Reread Because at the moment, as you know, 0:10:56.360 --> 0:10:58.360 back in our three was the last monitor policy review 0:10:58.400 --> 0:11:01.199 at the u c B. They interpret a mandata prostability 0:11:01.320 --> 0:11:04.319 with inflation close to but below two percent. Is it 0:11:04.360 --> 0:11:06.559 gonna be as boring as saying the new inflation targets 0:11:06.600 --> 0:11:08.760 two percent or they're going to do something more than that? 0:11:10.640 --> 0:11:12.839 I think that's one is. It's interesting because I do 0:11:12.960 --> 0:11:16.920 expect a change to two percent full stuff, and anything 0:11:16.960 --> 0:11:21.240 more complicated than that is. Yeah, it's use less. Yet, well, 0:11:21.360 --> 0:11:26.640 we would say a symmetric or asymmetric. There's an asymmetric debate. 0:11:26.720 --> 0:11:29.359 I had Charles Evans at the Council on Foreign Relations 0:11:29.960 --> 0:11:33.360 four weeks ago. That was the thunderous topic from Mr 0:11:33.440 --> 0:11:38.440 Evans of Chicago. Wonderful. Is there a symmetric study at 0:11:38.480 --> 0:11:41.240 the ECB and within Europe? Or is it as you 0:11:41.360 --> 0:11:45.719 say as Vanilla is two. It's true that when I 0:11:45.880 --> 0:11:49.040 ask people in Thankfort or in Paris, the definition of 0:11:49.120 --> 0:11:53.520 price stability can difference. So sixteen years ago the definition 0:11:53.600 --> 0:11:56.480 and the clarification was close to but below two percent, 0:11:56.600 --> 0:11:59.480 and there is an asymmetric dimension in that. You're right 0:12:00.240 --> 0:12:05.240 is to be removed and interesting with That's really part 0:12:05.280 --> 0:12:08.199 of the story because how you get their obviously, man, 0:12:09.880 --> 0:12:14.480 explain to our audience, particularly in America, Explain the constraints 0:12:14.800 --> 0:12:18.520 Madame Legarde and all of the ECB have because of 0:12:18.600 --> 0:12:22.439 the odd fiscal structure of Europe. I mean, this is 0:12:22.480 --> 0:12:24.679 not about having lunch and going on and I retreat 0:12:24.679 --> 0:12:26.800 to the castle. John, were you invited to the castle? 0:12:27.280 --> 0:12:30.360 To the retreat? I get, I asked Madame mcguard this morning, 0:12:32.040 --> 0:12:34.599 lost in the mail. But but but freend this is 0:12:34.679 --> 0:12:40.720 really important. I mean, they have huge institutional constraints because 0:12:40.760 --> 0:12:44.199 of the odd structure, don't they. Yes, they do. We 0:12:44.320 --> 0:12:46.880 know all the flows. We know. It's not only about 0:12:46.920 --> 0:12:49.160 fiscal policy, by the way, that's something she made clear 0:12:49.320 --> 0:12:52.400 and when doing her hearings at the European Parliament, it's 0:12:52.400 --> 0:12:56.480 also about everything that is incomplete in the European Monetary Union. 0:12:56.880 --> 0:13:00.240 To him, thinking about the Capital Market Union, the banking Union. 0:13:00.720 --> 0:13:03.559 It's starting to move, lines of starting to shift, including 0:13:03.559 --> 0:13:05.880 in Germany, but it's going too slow. And if you 0:13:05.960 --> 0:13:09.880 add that to the fact that we had austerity everywhere 0:13:09.880 --> 0:13:12.640 at the same time in the your area after the 0:13:12.960 --> 0:13:16.880 double deprecession, it's a recipe for disaster. She's been clear, 0:13:17.080 --> 0:13:19.520 just like to argue that we need more support from 0:13:19.600 --> 0:13:23.839 ciscal slash institutional reform. The risk, as you said, is 0:13:23.920 --> 0:13:26.720 that we're getting there too slow. In that next year, 0:13:27.160 --> 0:13:29.280 the first thing the CD has to do is to 0:13:29.440 --> 0:13:32.880 ease before we get there. Fred, just a final question. 0:13:33.000 --> 0:13:35.599 As we approached this news conference, even the best of 0:13:35.679 --> 0:13:39.080 the best have come up against difficulties when they take 0:13:39.160 --> 0:13:41.920 on the role as the governor of a central bank. 0:13:42.040 --> 0:13:44.679 The president, the chairman saw it from BANANKI, we sent 0:13:44.760 --> 0:13:46.400 it from Yell and we saw it from Pal. Then 0:13:46.440 --> 0:13:48.200 things settle down. They find out that the best thing 0:13:48.280 --> 0:13:51.000 to do is to make it boring. It's that challenge, 0:13:51.080 --> 0:13:53.480 the same challenge for Christine the guard or can she 0:13:53.720 --> 0:13:58.400 change the rules of how to execute these news conferences? Yes, 0:13:58.480 --> 0:14:01.640 I think the same as applies, except that she's very 0:14:01.760 --> 0:14:04.640 experienced in that matter, even if it's not an essential banker, 0:14:04.720 --> 0:14:10.440 and I'm quite convinced that she would avoid the biggest mistakes. Also, 0:14:10.640 --> 0:14:12.480 I think the focus and she's been lucky, but that 0:14:12.559 --> 0:14:17.400 a lucky about the timing the growth projections, inflation projections 0:14:17.480 --> 0:14:20.360 today is likely to men broadly unchanged. She got time 0:14:20.400 --> 0:14:22.360 ahead of her and the time will be spent to 0:14:22.480 --> 0:14:25.280 really reflect on the strategy review to try and bring 0:14:25.400 --> 0:14:29.120 back some cohesion and and you know, unity, credibility, strength 0:14:29.480 --> 0:14:32.440 to the Governing Council for them to act if needed. 0:14:32.560 --> 0:14:35.480 I mean that's the question mark if they do need 0:14:35.560 --> 0:14:38.400 to do something, whether will they caturate again? Will they 0:14:38.480 --> 0:14:41.720 increase we yield, increase the issue limits? And those are 0:14:41.880 --> 0:14:45.200 very difficult questions in a very difficult political environment. And 0:14:45.320 --> 0:14:48.000 for that to be credible, if she needs to do more, 0:14:48.120 --> 0:14:51.440 she first needs to bring everyone back to the table. 0:14:51.760 --> 0:14:54.520 And while we hear those famous words, whatever it takes, 0:14:54.680 --> 0:14:57.000 she's been reluctant so far. Great to catch up with you, 0:14:57.280 --> 0:15:14.400 Frederic Ducros either picked that Wealth Managements just this is 0:15:14.440 --> 0:15:18.000 an exceptionally important, too short interview with Ted Alden the 0:15:18.080 --> 0:15:21.560 Council on Foreign Relations on China. Ted, what are the 0:15:21.680 --> 0:15:26.840 ramifications If the tariffs do not click in for China? 0:15:27.080 --> 0:15:30.200 Is that good news for them? How do you gauge 0:15:30.760 --> 0:15:34.960 what happens if we don't see new tariffs this this 0:15:35.240 --> 0:15:39.080 in three days? Well, I mean, the Chinese clearly want 0:15:39.200 --> 0:15:41.680 the tarra for it to de escalate. So if the 0:15:41.800 --> 0:15:45.240 US doesn't move ahead on December, if k that's good 0:15:45.280 --> 0:15:47.960 news for China. But but China is holding out for 0:15:48.440 --> 0:15:51.920 removal of some of the tariffs that have already been 0:15:52.000 --> 0:15:54.160 put in place. That's a big they want to go 0:15:54.360 --> 0:15:57.240 first point in the current negotiate, they want to go further. Yeah, 0:15:57.240 --> 0:15:59.880 the talk seem to be about some kind of rat 0:16:00.320 --> 0:16:04.480 deal where the Chinese will agree to to make certain 0:16:04.560 --> 0:16:08.360 quantities of agricultural purchases and if they meet those, then 0:16:08.440 --> 0:16:11.160 gradually some of the tariffs that are already in place 0:16:11.240 --> 0:16:14.320 will come off. So so obviously no new terroriffs good 0:16:14.320 --> 0:16:15.880 news for the Chinese. But they want to go farther 0:16:15.960 --> 0:16:18.960 than that. Why is this so difficult? I mean, if 0:16:19.040 --> 0:16:22.360 there's the blunt instrument of Team A wants three things 0:16:22.480 --> 0:16:25.560 and Team B wants three other things, you know, you 0:16:25.680 --> 0:16:29.040 sit down and you come to an agreement. What's the 0:16:29.480 --> 0:16:33.360 reason this time around that chemistry that that discourse is 0:16:33.440 --> 0:16:36.200 not working. I mean, I think part of it is 0:16:36.320 --> 0:16:39.120 that that what they're talking about is a pale shadow 0:16:39.200 --> 0:16:41.040 of what the United States wanted. I mean, the Trump 0:16:41.040 --> 0:16:45.800 administration hope the tariffs would force some real fundamental economic 0:16:45.880 --> 0:16:48.720 changes in China, and now we're talking largely about a 0:16:48.800 --> 0:16:52.320 purchasing deal and maybe a bit of investment. So there's 0:16:52.360 --> 0:16:55.960 frustration on the U S side. Um. The other thing 0:16:56.120 --> 0:16:57.800 is the president. You know, he's been pretty clear about 0:16:57.800 --> 0:17:00.640 he loves tariffs, and so he's really sucked in to 0:17:00.800 --> 0:17:02.960 remove tariff. He thinks it's the best weapon. He thinks 0:17:03.000 --> 0:17:05.159 the US is winning with the tariffs in place. So 0:17:05.240 --> 0:17:07.639 the Chinese, You're gonna have to provide something that he 0:17:07.720 --> 0:17:09.920 can at least brag about before he wants to see 0:17:09.920 --> 0:17:12.080 any of those tarrifts taken off. It said, when you 0:17:12.119 --> 0:17:14.800 look at what's happening outside of this trade negotiation between 0:17:14.800 --> 0:17:16.920 the United States and China, what you see is that 0:17:17.000 --> 0:17:19.720 a heart stance versus China is perhaps one of the 0:17:19.800 --> 0:17:22.359 only things, one of the few things that the Democrats 0:17:22.400 --> 0:17:25.520 and Republicans in Washington actually agree on. That supply chains 0:17:25.600 --> 0:17:29.040 are arguably already decoupling. We've seen that news again this 0:17:29.240 --> 0:17:31.359 week with China. We saw it with Huawe as well, 0:17:31.400 --> 0:17:34.320 when they have their recent phone release. There's an argument 0:17:34.440 --> 0:17:36.119 is likely to get worse before it gets better. And 0:17:36.240 --> 0:17:37.800 from what I'm saying is that there's a habit of 0:17:37.880 --> 0:17:41.200 defining the current state of US China relations by wherever 0:17:41.320 --> 0:17:44.000 we are in the current trade dispute. Is that a 0:17:44.080 --> 0:17:48.600 mistake ted well I I actually think the bigger issue 0:17:48.680 --> 0:17:51.240 is the one you mentioned, which is is the decoupling question, 0:17:51.280 --> 0:17:53.480 and a lot of that's happening in the technology space. 0:17:54.040 --> 0:17:56.120 I mean, you look at the Chinese announcement this week 0:17:56.160 --> 0:17:59.320 that they're going to get all foreign computers and software 0:17:59.440 --> 0:18:02.639 out of their systems over the next several years. Uh, 0:18:02.920 --> 0:18:06.919 the recon executive order from the Trump administration for scrutinizing 0:18:07.000 --> 0:18:11.760 all foreign technology coming into the United States, particularly focused 0:18:11.800 --> 0:18:15.880 on China, the restrictions on Huawei and export control. I think, 0:18:15.920 --> 0:18:18.080 to a lot of extent, that's the real game. I mean, 0:18:18.160 --> 0:18:21.440 the tariffs have almost become a side show at this point. 0:18:21.480 --> 0:18:25.320 What we're talking about the growing technology competition between the 0:18:25.400 --> 0:18:28.639 US and China, and I think increasing isolation between the 0:18:28.720 --> 0:18:30.560 two on that front. When do we see a new 0:18:30.560 --> 0:18:35.320 addition of failure to adjust, Well, I'll probably write write 0:18:35.359 --> 0:18:38.120 a different book. I'm kind of looking at where things 0:18:38.200 --> 0:18:40.400 go in the global trading system, so I probably won't 0:18:40.440 --> 0:18:42.320 be quite so domestically focused. But I know I need 0:18:42.359 --> 0:18:46.080 to get another book out there. Last one, folks. This 0:18:46.240 --> 0:18:48.760 is wonderful to say to Ted Alden because his books 0:18:48.760 --> 0:18:55.040 are constructively and wonderfully incredibly dense, incredibly informed. I'm busting 0:18:55.119 --> 0:18:59.160 his chops there on whipping off another book, Ted Alden's book, 0:18:59.240 --> 0:19:02.080 Failure to a just I can't say enough about it, 0:19:02.160 --> 0:19:06.120 with a broad reach of what happened to our multilateral 0:19:06.240 --> 0:19:10.760 trade of truly forgotten generation? Ted Alden with a Council 0:19:10.880 --> 0:19:26.680 on Foreign Relations. We are in London. We're looking forward 0:19:26.680 --> 0:19:29.080 to this news conference taking place in frank Firt, Germany 0:19:29.160 --> 0:19:31.879 with the new ECB President, Christine Legard. I can tell 0:19:32.000 --> 0:19:34.560 you she has entered the room with the vice President 0:19:34.600 --> 0:19:36.399 of the e c B, Lewis to Gindosi is currently 0:19:36.480 --> 0:19:39.120 standing in front of a whole host of photographers Tom 0:19:39.359 --> 0:19:41.680 having her photo taken. So she hasn't even managed to 0:19:41.720 --> 0:19:43.959 sit down yet and look at her notes and get 0:19:44.000 --> 0:19:47.639 in front of a microphone. Those photos are still snapping away. 0:19:47.840 --> 0:19:51.560 I think it's the smartest press conference, John, I mean 0:19:51.600 --> 0:19:54.800 it's very seriously. I think I think that the press 0:19:55.080 --> 0:19:58.719 is more informed. There. There are more Michael mckeys, there 0:19:58.760 --> 0:20:02.800 are more you know, Steve Policeman and the others that 0:20:02.920 --> 0:20:05.400 ask smart, smart questions, and I think more importantly, Tom, 0:20:05.440 --> 0:20:08.080 you get some follow ups sometimes as well. There's a 0:20:08.160 --> 0:20:10.520 dialogue there with the journalists, and I think that's that's 0:20:10.560 --> 0:20:13.800 evolved over time. With the former ECP President Mario Dragi. 0:20:13.880 --> 0:20:15.960 We can now cross over to catch up with ECB 0:20:16.040 --> 0:20:22.840 President Christine Lagarde. Ladies and gentlemen, welcome to our press conference. 0:20:23.880 --> 0:20:25.800 Today is the first time that I have had the 0:20:25.880 --> 0:20:29.440 privilege and pleasure of sharing the monetary policy meeting of 0:20:29.520 --> 0:20:32.960 the Governing Council of the ECB, and I'm delighted to 0:20:33.040 --> 0:20:35.760 proceed now with reporting on the outcome of our meeting 0:20:36.200 --> 0:20:40.639 together with my friend the Vice President. The Governing Council 0:20:40.760 --> 0:20:44.560 meeting was also attended by the Commission Executive Vice President, 0:20:44.880 --> 0:20:51.120 Mr Valdis Dombrowski. Based on our regular economic and monetary analysis, 0:20:52.040 --> 0:20:57.600 we decided to keep the key ECB interest rates unchanged. 0:20:59.080 --> 0:21:02.960 We expect them to remain at their present or lower 0:21:03.119 --> 0:21:08.320 levels until we have seen the inflation outlook robustly converge 0:21:08.800 --> 0:21:12.600 to a level sufficiently closed to or below two percent 0:21:13.320 --> 0:21:18.480 within our projection horizon, and such convergence has been consistently 0:21:18.640 --> 0:21:27.480 reflected in underlying inflation dynamics. On November one, we restarted 0:21:27.560 --> 0:21:31.760 net purchases under our asset purchase program at a monthly 0:21:31.840 --> 0:21:36.760 base of twenty billion euros. We expect them to run 0:21:36.880 --> 0:21:40.480 for as long as necessary to reinforce the accommodative impact 0:21:40.560 --> 0:21:44.159 of our policy rates, and to end shortly before we 0:21:44.320 --> 0:21:50.200 start raising the key ECB interest rates. We also intend 0:21:50.280 --> 0:21:55.120 to continue reinvesting in full the principal payments from maturing 0:21:55.200 --> 0:21:59.960 securities purchased under the APP for an extended period of time. 0:22:00.040 --> 0:22:03.680 I passed the date when we start raising the key 0:22:03.800 --> 0:22:06.840 ECB interest rates, and in any case for as long 0:22:06.920 --> 0:22:12.159 as necessary to maintain favorable liquidity conditions and an ample 0:22:12.480 --> 0:22:18.960 degree of monetary accommodation. The incoming data since the last 0:22:19.000 --> 0:22:24.040 Governing Council meeting in late October point to continued muted 0:22:24.160 --> 0:22:30.840 inflation pressures and weak Euro Area growth dynamics, Although there 0:22:30.880 --> 0:22:35.120 are some initial signs of stabilization in the growth slow 0:22:35.200 --> 0:22:40.720 down and of a mild increase in underlying inflation inline 0:22:40.920 --> 0:22:48.080 with our previous expectations, Ongoing employment, work growth and increasing 0:22:48.280 --> 0:22:53.320 wages continue to underpin the resilience of the Euro Area economy. 0:22:55.160 --> 0:22:58.560 The comprehensive package of policy measures that the Governing Council 0:22:58.680 --> 0:23:06.040 decided in September provides substantial monetary stimulus, which ensures favorable 0:23:06.160 --> 0:23:11.520