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Speaker 1: Good morning. It's Thursday, the first of February in London.

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Speaker 1: This is the Bloomberg Daybreak Here at podcast, I'm Stephen Carroll.

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Speaker 1: Coming up today, Jerome Powell cements the Federal Reserve's pivot,

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Speaker 1: but downplays talk of a March interest rate cut As

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Speaker 1: the focus shifts to today's Bank of England decision. Mark

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Speaker 1: Zuckerberg apologizes directly to the families of children who were

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Speaker 1: victims of sexual exploitation on social media, and as Italy's

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Speaker 1: death levels continue to grow, Georgia Maloney now looks to

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Speaker 1: the nation's savers to keep the country solvent. Let's start

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Speaker 1: with a roundup of our top stories. The Federal Reserve

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Speaker 1: has held interest rates study for a fourth straight meeting

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Speaker 1: and signaled and openness to cutting them. Fetcher Jerome Poal says,

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Speaker 1: while there has been dramatic progress in bringing down inflation,

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Speaker 1: they need more data before cutting rates.

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Speaker 2: We believe that our policy rate is likely at its

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Speaker 2: peak for this titaning cycle, and that if the economy

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Speaker 2: evolves broadly as expected, it will likely be appropriate to

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Speaker 2: begin dial back policy restraint at some point this year.

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Speaker 1: Despite his Duvish words, though, Jerome Powell, through cold water

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Speaker 1: on investors' hopes that rightcuts would begin in March.

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Speaker 2: I don't think it's likely that the committee will reach

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Speaker 2: a level of confidence by the time of the March

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Speaker 2: meeting to identify March as the time to do that.

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Speaker 2: But that's to be seen. So I wouldn't call you

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Speaker 2: know when you say, when you ask me about in

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Speaker 2: the near term, I'm hearing that as March, I would say,

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Speaker 2: I don't think that's probably not the most likely case,

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Speaker 2: or what we would call the base case.

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Speaker 1: Powell also told reporters that FED officials plan to start

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Speaker 1: in depth talks about the balance sheet at their March meeting.

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Speaker 1: The decision to leave rates unchanged at a twenty two

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Speaker 1: year high of five and a quarter to five and

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Speaker 1: a half percent was unanimous. The Bank of England is

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Speaker 1: likely to deliver a brighter outlook for the UK economy

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Speaker 1: today in what may be good news for the Chancellor.

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Speaker 1: The central Bank is expected to reduce its forecast for

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Speaker 1: inflation this year and potentially open the door to rate cuts.

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Speaker 1: But Alex Brasier, definitely head of the Blackrock Investment Institute

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Speaker 1: and former Executive Director for Financial Stability at the Bank

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Speaker 1: of England, has told Bloomberg he expects policy makers to

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Speaker 1: remain cautious.

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Speaker 3: They've made really good progress on inflation, and I do

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Speaker 3: think it's important not to forget that. I think though,

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Speaker 3: they'll want to inject a sense of caution into how

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Speaker 3: far interest rates could be cut this year. I think

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Speaker 3: there are two things really to try and unpack this year.

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Speaker 3: One is is wage growth going to come down as

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Speaker 3: inflation has come down. Wage growth still, on the face

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Speaker 3: of it a bit too strong to be sure that

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Speaker 3: inflation is going to settle it too. But the other

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Speaker 3: for the UK is that we've seen much growth over

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Speaker 3: the last few years, and yet the economy doesn't have

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Speaker 3: much slack in it because productivity growth has been very weak,

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Speaker 3: the labor force hasn't really grown. So for the bank,

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Speaker 3: it's really got to kind of grapple with the outlook

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Speaker 3: for those supply side issues as much as with the

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Speaker 3: kind of standard ups and downs of spending.

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Speaker 1: Alex Braziers analysis matches that of economists surveyed by Bloomberg

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Speaker 1: unanimously expect the UK Central Bank to leave its key

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Speaker 1: lending rate on hold at a sixteen year high of

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Speaker 1: five and a quarter percent. The latest decision will be

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Speaker 1: announced at twelve pm London time, with live coverage on

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Speaker 1: Bloomberg Radio to some breaking news this hour from the

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Speaker 1: banking sector. Profits of the French lender BNP Paribau have

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Speaker 1: come in well below estimates in the fourth quarter, the

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Speaker 1: bank reporting net income for the last three months of

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Speaker 1: the year one point zero seven billion euros. That's versus

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Speaker 1: estimates of two billion euros. Earnings from fixed income trading

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Speaker 1: also come in well below estimates for the quarter, at

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Speaker 1: eight hundred and sixty one million euros. Turning next to

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Speaker 1: Deutsche Bank, which is also just reported earnings, it announced

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Speaker 1: plans to cut three and a half thousand jobs while

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Speaker 1: planning a share buyback of six hundred and seventy five

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Speaker 1: million euros. Pre tax profits at Deutsche Bank came in

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Speaker 1: below expectations at six hundred and ninety eight million euros

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Speaker 1: for the fourth quarter. Fixed income sales and trading revenue

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Speaker 1: also underperformed there and missed estimates. We've also had no

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Speaker 1: out this morning from IG, the Dutch lender of fourth

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Speaker 1: quarter net interest income, missing estimates, coming in at three

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Speaker 1: point eight eight billion euros. The estimate had been for

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Speaker 1: four billion euros. Now the Chancellor Jeremy Hunt says there's

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Speaker 1: a limited room for tax cuts in the coming budget.

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Speaker 1: Hunt confirmed Bloomberg's reporting that government forecasts are looking increasingly tight.

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Speaker 1: Bloomberg's James Wilcock has more.

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Speaker 4: The IMF, the OBR and even the Treasury itself are

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Speaker 4: all ringing alarm bells about the UK's debt sustainability now.

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Speaker 4: Even the Chancellor is saying it.

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Speaker 5: As things stand at the moment, things can change.

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Speaker 3: It doesn't look like I'll have the kind of room

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Speaker 3: that I had for those very big tax cuts in

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Speaker 3: the autumn, and I did mention that to the cabinet.

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Speaker 4: Jeremy Hunt there in an interview with ITV. Fiscal giveaways

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Speaker 4: have been a key plank of the Conservative's election plans,

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Speaker 4: with the chair of the party saying there would be

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Speaker 4: two more tax cuts coming this year. In London James

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Speaker 4: Wilcock Bloomer Radio.

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Speaker 1: The Labor leader Kiris Damer will today pledged to boost

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Speaker 1: productivity growth and a speech to top executives, the opposition

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Speaker 1: leader will promise to look under the bonnet to lift

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Speaker 1: productivity in the UK. The Party's increasingly seen as the

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Speaker 1: front runner and the next general election due to its

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Speaker 1: more than twenty point lead in opinion polls. The CEO

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Speaker 1: of Swiss private branking group, Julius Behar, is to step

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Speaker 1: down over the firm's exposure to the collapse of the

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Speaker 1: Signa property empire. According to people familiar with the matter,

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Speaker 1: the current deputy will take over the role until a

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Speaker 1: permanent appointment can be made. Bloomberg's tia Atabio has the details.

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Speaker 6: Julius Behar has been under scrutiny since it emerged in

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Speaker 6: November that the bank had run up a seven hundred

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Speaker 6: million dollar exposure to the now insolvent Signat group. The

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Speaker 6: wealth manager's shares have slumped some fifteen percent as regulators

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Speaker 6: investigate its risk control structures. Now, CEO Philip Riegenbaker is

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Speaker 6: said to leave the bank and be replaced by his deputy,

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Speaker 6: Nick Dreckmann. The news comes after the Swiss government signaled

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Speaker 6: that it plans to overhaul financial oversight and is set

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Speaker 6: to make further proposals in the spring in London. To You,

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Speaker 6: added Bayo Bloomberg Radio.

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Speaker 1: Boeing CEO says the Planemaker is responsible for the lapses

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Speaker 1: in quality that culminated in a panel blowout at one

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Speaker 1: of its seven three seven max jets. Last month, speaking

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Speaker 1: on a call discussing their latest earnings, Dave Calhoun outlined

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Speaker 1: how the manufacturer is trying to ensure the Alaska Airlines

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Speaker 1: incident isn't repeated.

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Speaker 7: We caused the problem, and we understand that the instituted

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Speaker 7: additional quality controls and inspections at Boeing and at our supplier.

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Speaker 7: We issue boughtons to suppliers to strengthen the focus on

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Speaker 7: performance and reducing the risks for quality escapes.

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Speaker 1: Calhoun's comments came amidst an investigation into the cause of

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Speaker 1: the accident. Boeing is downplaying its financial results as part

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Speaker 1: of a shift to efforts to resolve the safety issues.

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Speaker 1: In a break from tradition, the company didn't issue in

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Speaker 1: earning's forecast as its jet production plans remain uncertain. And

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Speaker 1: Mark Zuckerberg has apology to families affected by online child

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Speaker 1: sex abuse. During a Senate hearing on the matter, the

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Speaker 1: CEO of Meta offered unexpected acknowledgment of the pain caused.

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Speaker 8: I want should have to go through the things that

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Speaker 8: your families have suffered, and this is why we invest

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Speaker 8: so much and are going to continue doing industry leading

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Speaker 8: efforts to make sure that no one has to go

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Speaker 8: through the types of things that your families have had

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Speaker 8: to suffer.

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Speaker 1: Mark Zuckerberg's comments came after a number of social media

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Speaker 1: industry leaders, including the CEOs of TikTok's, Snapchat and Discord,

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Speaker 1: were also questioned for hours by Congress. Despite sitting alongside

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Speaker 1: fellow executives, the Facebook founder received most of the attention,

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Speaker 1: and in a moment, we'll get more on what we

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Speaker 1: learned from the Federal Reserve in their decision and why

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Speaker 1: Italy's government is turning to retail investors to help fund

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Speaker 1: the economy. Another story that caught my eye this morning

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Speaker 1: though about the phenomenon of doom spending. This is where

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Speaker 1: people spend their savings on luxury or just as like,

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Speaker 1: for example, a Chanelle handbag, because they feel that big

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Speaker 1: financial goals like buying a home or saving for retirement

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Speaker 1: are simply out of reach. It's essentially upending the traditional

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Speaker 1: habit where people who are in an unstable economic situation

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Speaker 1: would pull back on spending. Instead, people under this trend

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Speaker 1: of doom spending or splashing out on things that'll make

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Speaker 1: them happy now because essentially the big things feel impossible.

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Speaker 1: A study from the personal finance company Credit Karma, says

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Speaker 1: that twenty seven percent of Americans have admitted to indulging

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Speaker 1: in doom spending, forty three percent of millennials. The economics

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Speaker 1: professor Stephen Wos, quoted in the piece, is saying that

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Speaker 1: it's a habit that's been growing since the two thousand

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Speaker 1: and eight financial crisis, and of course exacerbated through through

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Speaker 1: the pandemic. As one person quoted in the piece put it,

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Speaker 1: it's a way to cope, although not perhaps the healthiest.

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Speaker 1: One sudden other story that we've been looking at this morning.

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Speaker 1: Let's get more details now on the decision from the

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Speaker 1: Federal Reserve which signaled an openness to cutting interest rates,

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Speaker 1: but not yet. We'll discuss now a Bloomberg opinion Columnst.

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Speaker 1: Daniel Marstein, are great to have you with us. Did

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Speaker 1: in your eyes your own pal, do you enough to

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Speaker 1: convince markets that there won't be a rat coost in March?

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Speaker 5: Yeah, he went out of his way to say that

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Speaker 5: he did not think that was likely. Now, central bankers

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Speaker 5: don't like to be categorical, but that's about as close

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Speaker 5: as you're going to get. What I would emphasize, though,

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Speaker 5: is just because it's not March doesn't mean it's not

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Speaker 5: going to happen. You know, you read some markish commentaries today.

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Speaker 5: They've even described j. Powell as hawkish. I wouldn't say

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Speaker 5: that at all. We are on track to reduce interest

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Speaker 5: rates this year. That story remains. It's just not going

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Speaker 5: to be March. I was always skeptical about March. Why

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Speaker 5: did the markets latch onto March? Because in March you

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Speaker 5: get another issue of the famous dot plot, and you

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Speaker 5: get the summary of economic projections, So people look around

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Speaker 5: for these like big hairy events as a way to

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Speaker 5: benchmark forecasts. March always felt a little optimistic to me.

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Speaker 1: So Jerome Powell says, they're not declaring victory over inflation,

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Speaker 1: but looking at the change in language from the fad

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Speaker 1: and at the data, how difficult or how easy is

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Speaker 1: what's left of that fight against inflation.

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Speaker 5: So I wrote a well received column last week on

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Speaker 5: the famous last mile of inflation. There are a couple

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Speaker 5: of things that central bankers the world over have been

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Speaker 5: talking about in the last month or so. One is

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Speaker 5: we're not declaring victory, and the other is, well, there's

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Speaker 5: this saying about the last mile of inflation. Is the hardest.

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Speaker 5: They both essentially amount to the same thing, which is,

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Speaker 5: you know, don't push us. However, Powell is not saying

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Speaker 5: that we need to see better data. He's saying we

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Speaker 5: need to see more of what we've seen. And let's

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Speaker 5: put this in perspective. PCEE, which is the Fed's favorite

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Speaker 5: inflation indicator, not CPI, is now two point six. You're

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Speaker 5: not that far off from the Fed's target, which is

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Speaker 5: an average of two percent over time. In June of

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Speaker 5: twenty twenty two, it was more than seven percent. That

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Speaker 5: is tremendous progress.

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Speaker 1: Moving to what we're focusing on today, the Bank of

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Speaker 1: England decision. Should we be expecting a dovish telt from

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Speaker 1: Andrew Bailey as well well?

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Speaker 5: A number of commentaries that I have seen talk about

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Speaker 5: an end to English excuse me, to UK exceptionalism. I

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Speaker 5: realize they're not the same thing. You know, the UK

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Speaker 5: was seen as you know, a bit of a Basker

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Speaker 5: case a year eighteen months ago. Inflation was pretty high,

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Speaker 5: growth was pretty sluggish. You know, the boes rehtoric has

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Speaker 5: felt sort of stuck in a third quarter of twenty

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Speaker 5: twenty three mode. You know, a number of people are

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Speaker 5: expecting the stance of the Bank to be a little

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Speaker 5: bit more in line with the ECB and with the Fed,

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Speaker 5: which is we've made progress. Things are looking good. Can't

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Speaker 5: clear victory yet, but you know, if you want to

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Speaker 5: predict interest rate cuts down the road this year, it

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Speaker 5: wouldn't be the worst thing.

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Speaker 1: Okay, Daniel Msspenber compelling economists, Great to get your views

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Speaker 1: as we consider the Fed's decision and look ahead to

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Speaker 1: today's Bank of England decision as well. Let's turn to

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Speaker 1: Italy now, were Prime Minister George Maloney is increasingly counting

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Speaker 1: on the same people who propelled her to power to

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Speaker 1: keep the country solvent attracted by rights that beat those

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Speaker 1: on bank savings. Italian citizens afford one hundred billion euros

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Speaker 1: into retail bonds in the first nine months of last year.

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Speaker 1: Let's discuss this now with our credit reporter Alice Gladhill,

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Speaker 1: who's been reporting on this for Bloomberg. Alice, why is

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Speaker 1: Italy selling these bonds to retail investors?

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Speaker 9: So it pretty much all comes down to the fact

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Speaker 9: that Italy has to sell so much debt to finance

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Speaker 9: its economy, and it's trying to diversify its investigates. So

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Speaker 9: The government has been pretty open about this, and politicians

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Speaker 9: including Prime Minister Georgia Bloni and her finance minister as well,

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Speaker 9: have talked about the benefits of doing so. They're also

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Speaker 9: where Italy has been a major beneficiary of the ECB's

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Speaker 9: bond buying over the past decade, but center backs no

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Speaker 9: longer offering the bad stuff at once well, so that

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Speaker 9: makes it even more important to tap new sources of

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Speaker 9: demand now. And Italy is known for having these kind

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Speaker 9: of massive private savings and so the government's essentially just

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Speaker 9: tapping that pool of cash. There's also evidence that suggests

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Speaker 9: retail bondholders are stickier than professional investors, meaning they're more

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Speaker 9: likely to hold onto the bonds if the markets start

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Speaker 9: getting choppy, and that can help reduce the volativity in

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Speaker 9: bond prices. And actually the bonds that are sold to

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Speaker 9: retail are designed to encourage people to hang on to them,

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Speaker 9: so the coupons so your interest payments steps up in

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Speaker 9: the final years of the bond's life.

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Speaker 1: How difficult is it to sell these sort of bonds

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Speaker 1: to retail investors and are their risks involved? So in

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Speaker 1: terms of.

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Speaker 9: The ease or at least in terms of the appetite.

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Speaker 9: It's been really strong. So it's probably worth mentioning the

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Speaker 9: fact that Italy sells a range of bonds that are

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Speaker 9: available only to retail and it launched a new one

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Speaker 9: last year, the BTP Balaory bond, and the first issue

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Speaker 9: that raised I think it was eighteen billion euros and

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Speaker 9: the second issue was almost the same again and actually

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Speaker 9: the Ministry of Finance and that's recently it's preparing to

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Speaker 9: sell another issue of that bond this month and we'll

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Speaker 9: get a kind of sense of how demand is holding up.

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Speaker 9: But it's probably also a reflection of a kind of

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Speaker 9: carefully contrived marketing campaign in Italy. You know, they've appetized

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Speaker 9: these bonds on TV, on public transport. If he's trying

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Speaker 9: to make these bonds as accessible as possible. So you know,

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Speaker 9: the denominations are very small. You don't have to be

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Speaker 9: a millionaire to buy them.

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Speaker 7: You know.

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Speaker 9: The other thing to note is, you know, the proportion

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Speaker 9: of debt in Italian hand, Sorry, the proportion of debt

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Speaker 9: in the hands of Italians has ridden, but it's still

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Speaker 9: way below where what's sort of twenty or thirty years ago,

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Speaker 9: and that sort of implies there's still plenty of capacity

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Speaker 9: for the more buying.

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Speaker 1: This is Bloomberg Daybreak Europe, your morning brief on the

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Speaker 6: M h m hmm