1 00:00:00,080 --> 00:00:03,240 Speaker 1: The European Central Bank is facing a tough decision and 2 00:00:03,320 --> 00:00:06,240 Speaker 1: its fight to bring down inflation. When do they stop 3 00:00:06,320 --> 00:00:10,440 Speaker 1: raising interest rates? Clear Lambardelli is chief economist that the 4 00:00:10,600 --> 00:00:14,920 Speaker 1: Organization for Economic Cooperation and Development, and she says gauging 5 00:00:14,960 --> 00:00:18,080 Speaker 1: the impact of tightening is getting more difficult. She spoke 6 00:00:18,120 --> 00:00:22,200 Speaker 1: with Bloomberg's Caroline Conan on the sidelines of the excellent 7 00:00:22,239 --> 00:00:23,960 Speaker 1: Ponvance Economic Conference. 8 00:00:24,360 --> 00:00:27,800 Speaker 2: Obviously, you live in France now as the Orisian chief Ecadomies, 9 00:00:27,880 --> 00:00:32,320 Speaker 2: and you've seen all these riots recently, even though the 10 00:00:32,479 --> 00:00:35,800 Speaker 2: economic impact is very limited. Do you think it's actually 11 00:00:35,960 --> 00:00:39,360 Speaker 2: having an impact on the image of France as a 12 00:00:39,360 --> 00:00:42,560 Speaker 2: financial center, as a business center, because everybody's saying France 13 00:00:42,680 --> 00:00:45,800 Speaker 2: is a new place to be post exit. Is this 14 00:00:46,120 --> 00:00:47,240 Speaker 2: changing things? 15 00:00:47,920 --> 00:00:51,080 Speaker 3: I don't think it's changing people's overall image of France, 16 00:00:51,360 --> 00:00:55,960 Speaker 3: and certainly, you know, overall people think about long term 17 00:00:56,000 --> 00:00:58,080 Speaker 3: issues and they're thinking about the image of the country, 18 00:00:58,080 --> 00:01:02,200 Speaker 3: and I don't think it's overall changing the view. What 19 00:01:02,320 --> 00:01:04,399 Speaker 3: I would also say is lots of countries are dealing 20 00:01:04,440 --> 00:01:07,120 Speaker 3: with the same sorts of issues, and actually issues around 21 00:01:07,560 --> 00:01:12,080 Speaker 3: cost of living, around you know, the sense of inequality, 22 00:01:12,160 --> 00:01:14,320 Speaker 3: the sense of is the fact is the economic system 23 00:01:14,400 --> 00:01:16,440 Speaker 3: working for everyone is an issue that lots of countries 24 00:01:16,440 --> 00:01:19,120 Speaker 3: are dealing with at the moment. It's not just in France. 25 00:01:20,200 --> 00:01:24,280 Speaker 2: Let's talk more about the economy now. Obviously we still 26 00:01:24,280 --> 00:01:29,080 Speaker 2: have high inflation, especially in Europe. We still have interest 27 00:01:29,160 --> 00:01:33,240 Speaker 2: rate increases. We spoke earlier over the French finances, so 28 00:01:33,400 --> 00:01:35,800 Speaker 2: we can of telling us well, inflation is now is 29 00:01:35,880 --> 00:01:38,200 Speaker 2: going down, so it's can of time for military policy 30 00:01:38,959 --> 00:01:41,840 Speaker 2: to can of can down. Do you agree with that 31 00:01:42,080 --> 00:01:43,080 Speaker 2: at least for Europe. 32 00:01:43,640 --> 00:01:46,360 Speaker 3: I think Europe's facing a really difficult challenge on inflation. 33 00:01:46,400 --> 00:01:49,120 Speaker 3: And while headline inflation in some countries is coming down, 34 00:01:49,200 --> 00:01:52,320 Speaker 3: actually we're seeing a lot of strength and core inflation 35 00:01:52,400 --> 00:01:55,280 Speaker 3: and that means that does remain a concern about inflation. 36 00:01:55,440 --> 00:01:58,520 Speaker 3: In our recent economicccount that we said that monetary policy 37 00:01:58,560 --> 00:02:00,800 Speaker 3: is going to have to remain tight for a period 38 00:02:00,800 --> 00:02:03,560 Speaker 3: of time until we see those underlying drivers come down. 39 00:02:04,520 --> 00:02:08,160 Speaker 3: It's really it's unpopular, you know, tightening monetary policy, but 40 00:02:08,200 --> 00:02:10,480 Speaker 3: it is necessary to squeeze inflation out of the system 41 00:02:10,520 --> 00:02:13,480 Speaker 3: because it's really hurting. It's really difficult for people to 42 00:02:13,520 --> 00:02:14,280 Speaker 3: deal with inflation. 43 00:02:14,760 --> 00:02:17,720 Speaker 2: So when should we be over in September later by 44 00:02:17,720 --> 00:02:18,399 Speaker 2: the end of the year. 45 00:02:18,720 --> 00:02:20,400 Speaker 3: I don't think you can put a date on when 46 00:02:20,800 --> 00:02:22,880 Speaker 3: when we can expect the monetary tightening to and it 47 00:02:22,880 --> 00:02:24,880 Speaker 3: depends very much on what we see in the data, 48 00:02:25,200 --> 00:02:28,200 Speaker 3: particularly the drivers of core inflation. Like I say, once 49 00:02:28,240 --> 00:02:31,280 Speaker 3: you begin to see a sense that that is sustainably lowering, 50 00:02:31,360 --> 00:02:33,160 Speaker 3: then I think we can move on to think about 51 00:02:33,520 --> 00:02:36,480 Speaker 3: think about, you know, move beyond the monetary titenan period, 52 00:02:36,520 --> 00:02:38,200 Speaker 3: But at the moment, the focus has to be on 53 00:02:38,760 --> 00:02:40,760 Speaker 3: getting that core inflation out of the system. 54 00:02:41,040 --> 00:02:43,320 Speaker 2: Can you actually quantify how much this titan you needs 55 00:02:43,400 --> 00:02:44,120 Speaker 2: hurting growth? 56 00:02:45,560 --> 00:02:47,600 Speaker 3: Yeah, I mean you can see it's having an impact 57 00:02:47,720 --> 00:02:50,760 Speaker 3: on growth, and we're beginning to see the tightening and 58 00:02:50,800 --> 00:02:54,880 Speaker 3: financial conditions affecting businesses and affecting people. I mean, one 59 00:02:54,919 --> 00:02:57,320 Speaker 3: of the challenges at the moment that central Bank's having 60 00:02:57,320 --> 00:02:59,799 Speaker 3: to deal with is assessing quite how much that impact 61 00:02:59,919 --> 00:03:02,840 Speaker 3: is on growth and when that impact is coming. And 62 00:03:02,919 --> 00:03:04,640 Speaker 3: so you have to look at a whole range of 63 00:03:04,639 --> 00:03:07,760 Speaker 3: indicators to try and get us get a view. 64 00:03:07,560 --> 00:03:10,240 Speaker 2: Of what overall is happening. Do you think the markets 65 00:03:10,280 --> 00:03:14,080 Speaker 2: are misunderstanding the delay between military policy and the transmission 66 00:03:14,120 --> 00:03:17,520 Speaker 2: of minetary policy to the real economy, and in that case, 67 00:03:17,520 --> 00:03:20,720 Speaker 2: should we expect a recession later, like into next year. 68 00:03:21,000 --> 00:03:23,639 Speaker 3: I don't think they're misunderstanding it. I think it's very uncertain. 69 00:03:23,880 --> 00:03:24,360 Speaker 2: At the moment. 70 00:03:24,360 --> 00:03:27,240 Speaker 3: The transition of money to the transition of monetary policy 71 00:03:27,919 --> 00:03:31,160 Speaker 3: is very uncertain. It's quite difficult to judge the impact 72 00:03:31,280 --> 00:03:33,799 Speaker 3: and when the maximum point of those impacts is going 73 00:03:33,840 --> 00:03:35,720 Speaker 3: to be. We've seen quite a lot of changes and 74 00:03:35,800 --> 00:03:38,440 Speaker 3: for example, the proportion of people on fixed rate mortgages 75 00:03:38,600 --> 00:03:41,720 Speaker 3: since the last time we had monetary tightening. So really 76 00:03:41,720 --> 00:03:44,280 Speaker 3: it's quite hard to judge this issue, which is why 77 00:03:44,320 --> 00:03:46,520 Speaker 3: it's very difficult for central banks sugge when the certain 78 00:03:46,520 --> 00:03:47,040 Speaker 3: point will be. 79 00:03:47,920 --> 00:03:51,560 Speaker 2: Last month, in your last forecast, you were forecasting sluggish 80 00:03:51,600 --> 00:03:55,760 Speaker 2: global growth with inflation persisting, but both the stor econnoms 81 00:03:55,840 --> 00:03:59,240 Speaker 2: major risks on the down side. Since then, have any 82 00:03:59,240 --> 00:04:01,680 Speaker 2: of the risks either easy or become worse. 83 00:04:02,440 --> 00:04:04,720 Speaker 3: We've not seen it. I mean it's quite recent off forecast, 84 00:04:04,760 --> 00:04:07,120 Speaker 3: it's only a few weeks ago. I mean since then, 85 00:04:07,160 --> 00:04:10,160 Speaker 3: the data has been slightly stronger, by which I mean inflation. 86 00:04:10,480 --> 00:04:12,440 Speaker 3: Some data has shown inflation seems to be a little 87 00:04:12,480 --> 00:04:15,000 Speaker 3: bit more persistent and if we labor markets are a 88 00:04:15,000 --> 00:04:18,200 Speaker 3: little bit stronger than we might have expected, but we 89 00:04:18,240 --> 00:04:21,039 Speaker 3: wouldn't fundamentally change our outlook at this point based on 90 00:04:21,080 --> 00:04:23,240 Speaker 3: that new data, nor would we change our policy advice 91 00:04:23,320 --> 00:04:26,840 Speaker 3: to countries in the importance of keeping monastry policy type. 92 00:04:27,560 --> 00:04:29,960 Speaker 2: Do you think it's seeking longer from a monetary policy 93 00:04:30,120 --> 00:04:32,960 Speaker 2: to take effect then previous cycles. 94 00:04:32,760 --> 00:04:36,920 Speaker 3: Possibly because I saying in again the mortgage market, we've 95 00:04:36,960 --> 00:04:38,800 Speaker 3: seen a shift with more and more people having fixed 96 00:04:38,839 --> 00:04:42,480 Speaker 3: rate mortgagines, which means that the feedbrough has been less 97 00:04:42,560 --> 00:04:45,120 Speaker 3: quick in terms of household balancings. One of the things 98 00:04:45,120 --> 00:04:47,479 Speaker 3: we have seen though, is a tightening of credit conditions 99 00:04:47,520 --> 00:04:50,440 Speaker 3: alongside the tightening of monecy policy. And actually this time 100 00:04:50,480 --> 00:04:53,680 Speaker 3: that's been faster than in other titling cycles. So really 101 00:04:53,680 --> 00:04:55,719 Speaker 3: you've got effects moving in both directions. 102 00:04:55,800 --> 00:05:00,880 Speaker 2: But it's possible. Obviously there's also the discussion about the 103 00:05:00,880 --> 00:05:03,000 Speaker 2: physical equility. What do you think it's going to be 104 00:05:03,080 --> 00:05:05,800 Speaker 2: the impact of fiscal equility in Urson over the next 105 00:05:05,839 --> 00:05:09,640 Speaker 2: twelve months, And do you think this fiscal equolity used 106 00:05:09,680 --> 00:05:12,480 Speaker 2: to fight inflation is also having an impact. 107 00:05:12,880 --> 00:05:15,080 Speaker 3: Yeah, we're going to see fiscal policy tightened a bit 108 00:05:15,160 --> 00:05:18,600 Speaker 3: particularly as countries move beyond the crisis and withdraw some 109 00:05:18,720 --> 00:05:21,080 Speaker 3: of the support that's been put in place to help 110 00:05:21,120 --> 00:05:23,480 Speaker 3: people through the energy the energy crisis. I mean, we 111 00:05:23,560 --> 00:05:25,799 Speaker 3: think that's very much the right thing to do. Countries 112 00:05:25,839 --> 00:05:28,200 Speaker 3: now need to be thinking, you know, the widespread support 113 00:05:28,240 --> 00:05:30,680 Speaker 3: that was put in place isn't needed to support these 114 00:05:30,720 --> 00:05:32,520 Speaker 3: to be much more targeted on those that are struggling 115 00:05:32,560 --> 00:05:36,279 Speaker 3: most with inflation. Obviously, that means that we'll reduce demand 116 00:05:36,320 --> 00:05:40,479 Speaker 3: in the economy a little, but it's important that fiscal 117 00:05:40,520 --> 00:05:42,400 Speaker 3: policy and monetary policy are working care in it. 118 00:05:42,720 --> 00:05:45,000 Speaker 2: Would you think, are there any long term consequences of 119 00:05:45,560 --> 00:05:48,320 Speaker 2: this new use of fiscal policy. 120 00:05:48,600 --> 00:05:50,880 Speaker 3: I mean, countries have got used to using fiscal policy 121 00:05:50,920 --> 00:05:53,720 Speaker 3: a lot more in recent years, and some of that 122 00:05:53,920 --> 00:05:56,599 Speaker 3: was completely necessary, for example, in the pandemic, to prevent 123 00:05:56,720 --> 00:05:59,440 Speaker 3: some of the long term damage that that would have 124 00:05:59,560 --> 00:06:02,440 Speaker 3: caused if people haven't been supported. It's now now is 125 00:06:02,480 --> 00:06:04,360 Speaker 3: the time to withdraw it, and I think if it 126 00:06:04,520 --> 00:06:06,520 Speaker 3: was to stay in place for too long, then you 127 00:06:06,560 --> 00:06:08,920 Speaker 3: would see long term consequences through inflation. 128 00:06:09,520 --> 00:06:14,440 Speaker 1: That's Claire Lombardelli, chief economists st at the OECD, speaking 129 00:06:14,520 --> 00:06:19,200 Speaker 1: with Bloomberg's Caroline Conan at the exe en Ponvent's Economic Conference. 130 00:06:19,600 --> 00:06:23,400 Speaker 1: For more interviews like this, subscribe to the Bloomberg Talks podcast, 131 00:06:23,520 --> 00:06:27,720 Speaker 1: available on Apple, Spotify, and anywhere else you get your podcasts.