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Speaker 1: This is the BlueBag Daybacurt podcast, available every morning on Apples,

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Speaker 1: Spotify or wherever you listen. It's Thursday, the eighteenth of

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Speaker 1: April here in London. I'm Caroline Hepkin and.

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Speaker 2: I'm Stephen Carroll. Coming up today, more Federal Reserve policymakers

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Speaker 2: add their voices to the growing consensus that progress on

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Speaker 2: US inflation has slowed.

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Speaker 1: Bank of England Governor Andrew Bailey says that Britain now

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Speaker 1: faces less of an inflation risk than America.

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Speaker 2: Plus swinging the acts again, UBS gets set to make

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Speaker 2: more job cuts as part of its ongoing Credit Sueese integration.

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Speaker 1: Let's start with a roundup of our top stories.

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Speaker 2: Federal Reserve policymakers are increasingly making the case to hold

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Speaker 2: off on cutting rates. On Tuesday, Charger own pals that

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Speaker 2: he needs to see more evidence that the pace of

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Speaker 2: price rises is cooling. Now he's been joined by Federal

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Speaker 2: Reserve Governor Michelle Bowman, speaking at an event in Washington.

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Speaker 2: She too conceded a lack of recent progress.

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Speaker 3: What we've seen over the past first few months of

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Speaker 3: twenty twenty four, anyway, is that progress on inflation has slowed,

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Speaker 3: and I expect maybe it's even stalled at this point.

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Speaker 2: Michelle Bowman's comments were echoed to by the Bank of

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Speaker 2: Cleveland President Lorettamester, speaking at a separate event, She said

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Speaker 2: the central Bank shouldn't be in a hurry to cut

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Speaker 2: The shift in tone from rate setters comes after three

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Speaker 2: months of surprisingly high inflation readings and jobs data suggesting

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Speaker 2: the US economy remains resilient.

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Speaker 1: The UK and Europe are facing less of an inflation

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Speaker 1: risks than the US. That's according to the Bank of

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Speaker 1: England Governor Andrew Bailey, whose remarks suggests that the UK

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Speaker 1: will cut rates before the FED. UK inflation came in

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Speaker 1: stronger than expected at three point two percent in March,

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Speaker 1: but Bailey says that he expects price rises to be

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Speaker 1: significantly cooler next month.

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Speaker 4: We're in the position where we'ressueing those processes of this inflation.

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Speaker 4: I expect that next month's number will show quite a

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Speaker 4: strong drop because we have a particularly unique energy household

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Speaker 4: energy pricing system in the UK.

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Speaker 1: Andrew Bailey also agreed with the International Monetary Funds analysis

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Speaker 1: suggesting that demand is overheating in the US but is

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Speaker 1: below potential in the UK and the Eurozone selling edged

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Speaker 1: down after Bailey's comments.

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Speaker 2: Savenian central banker Bosta and Vassler says the ECB can't

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Speaker 2: disregard monetary policy and inflation in the US when making

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Speaker 2: its decisions on interest rates. He told Bloomberg that divergence

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Speaker 2: has its limits. This is ECB president Christina Gowd says

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Speaker 2: the Eurozone economy is getting back on track after a

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Speaker 2: year of stagnation.

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Speaker 5: Growth in Europe has been mediocre and has been much

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Speaker 5: slower than growth in the United States. We haven't had

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Speaker 5: a recession, but it's been very slow and meager, and

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Speaker 5: in terms of where we see Europe going forward, it

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Speaker 5: is recovering and we are clearly seeing signs of recovery.

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Speaker 2: Now, its comments Commas. Traders bet the ECB will cut

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Speaker 2: interest rates at its next meeting in June. Officials are

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Speaker 2: very carefully watching euro exchange rates as Federal Reserve policymakers

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Speaker 2: signal they will wait longer to cut US rates. Traders

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Speaker 2: are pricing in eighty basis points of reductions from the

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Speaker 2: ECB across this year.

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Speaker 1: European Union leaders are pushing for a new joint defense

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Speaker 1: and industrial strategy at their Bustle summit a draft seen

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Speaker 1: by Bloomberg calls for a paradigm shift in the face

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Speaker 1: of losing their competitive edge to China and the US,

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Speaker 1: and wars both near and far. The text is yet

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Speaker 1: to be agreed, with both euroskeptic and frugal countries opposing

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Speaker 1: what could amount to the block itself issuing hundreds of

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Speaker 1: billions of euros in debt.

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Speaker 2: UBS is planning another round of job cuts as it

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Speaker 2: continues to trip headcount following its rescue of Credit Swee.

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Speaker 2: Bloomberg's team at Abayo has the details.

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Speaker 6: The emergency takeover of Credit Sweee by UBS added around

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Speaker 6: forty five thousand people to the combined bank's workforce. The

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Speaker 6: bank is aiming to save six billion dollars a year

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Speaker 6: in staff costs over the coming years, but hasn't said

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Speaker 6: how many jobs overall will be affected in this latest

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Speaker 6: round of job cuts. Sources have told Bloomberg that more

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Speaker 6: than one hundred employees at the firm's global investment bank

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Speaker 6: will go. Whilst exact timings aren't final, it's thought the

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Speaker 6: changes could take place in the coming weeks. In London.

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Speaker 6: Tewa Ada Bio Bloomberg Radio.

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Speaker 1: Here in the UK, Chancer Jeremy Hunter says that consumers

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Speaker 1: shouldn't be made to pay for Thameswater's mistakes. It's the

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Speaker 1: most direct public comment from the top of government so

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Speaker 1: far on the fate of Britain's largest utility. James Wilcock

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Speaker 1: has more Now, the question.

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Speaker 7: Hasn't changed since Thames Water's owner first went into default.

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Speaker 7: Who is going to pay for its debts? The chance

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Speaker 7: that gave a clear answer overnight. It shouldn't be customers,

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Speaker 7: but its shareholders called Thames uninvestible and they refuse to

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Speaker 7: put in more money too. As the standoff continues, Bloomberg

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Speaker 7: has learned hedge funds have started shortening other UK water

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Speaker 7: utilities and their debt. It's assigned something Britain's water problem

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Speaker 7: could get far worse before it gets better in London.

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Speaker 7: James Wilcock Bloomberg Radio.

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Speaker 1: Now, in a moment, we'll bring you the latest on

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Speaker 1: what central bankers have been saying about inflation and interest rates.

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Speaker 1: Plus we'll look ahead to today's EU leaders summit. But

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Speaker 1: another story that caught it arrived this morning. If you're

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Speaker 1: in the market for a luxury purchase, well who's not

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Speaker 1: in the market for that? Apparently Japan is the place

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Speaker 1: to go.

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Speaker 2: And I've just been, as I said, dripping in Chanel

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Speaker 2: here in the radio student this morning. No, not quite.

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Speaker 2: But this is to do with the sharp fall in

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Speaker 2: the en combined with the number of premium brands that

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Speaker 2: haven't yet adjusted their prices to reflect the change, which

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Speaker 2: means that there's an opportunity to get these luxury goods

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Speaker 2: at a discount. A Tagua Carrera chronograph watch in Tokyo

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Speaker 2: sells the equivalent of just over five thousand US dollars

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Speaker 2: after the ten percent duty free discount, which is around

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Speaker 2: thirteen hundred dollars cheaper than it would cost if you

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Speaker 2: buy it in New York. So our colleagues Claire Valentine

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Speaker 2: and Lisa who have been reporting that the savings are

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Speaker 2: bringing buyers from around the world to Japan, with some

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Speaker 2: eager to resell their luxury goods then for a profit

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Speaker 2: when they get home. Now, the experts in this field

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Speaker 2: say that essentially luxury brands will catch up, so it's

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Speaker 2: a closing window because they don't want price arbitrage between

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Speaker 2: different countries as well. So there's a whole list of

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Speaker 2: the things that you can buy in Japan at the

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Speaker 2: moment at a disc und versus where you'd buy them.

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Speaker 1: I almost that you've skipped over the whole fantastic pitchannel. Well,

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Speaker 1: the fantastic trip to Japan. Highlight of Japan. I know

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Speaker 1: you've read the food.

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Speaker 2: Really yeah, everything I ate was fantastic, amazing.

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Speaker 1: There you go, So giving you some inspiration for your

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Speaker 1: travel set. And let's think about central banking though, shall

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Speaker 1: we next? A divergence has emerged among the world's top

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Speaker 1: central bankers over their view of where inflation is going

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Speaker 1: and they might be able and when they might be

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Speaker 1: able to cut interest rates. We've been hearing from the FED,

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Speaker 1: the ECB, the Bank of England policymakers during events linked

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Speaker 1: to the IMF and the World Bank Spring meetings at Washington,

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Speaker 1: a whole plethora of voices. Really Tony's this morning, but

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Speaker 1: by tv Anka pretty good to fall more on this. Firstly,

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Speaker 1: on the FED, we've seen other FMC members like Mesta

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Speaker 1: starting to echo your own powers signals on inflation, so

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Speaker 1: a bit of catch up by other speakers. Interest rate

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Speaker 1: cuts might basically come later. How a market seeing these messages.

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Speaker 8: They're running with it, really and if you look kind

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Speaker 8: of market pricing you have no cuts priced now officially

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Speaker 8: for twenty twenty five at least those or sees me

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Speaker 8: twenty twenty four until twenty twenty five. That seems to

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Speaker 8: be where the markets are pricing in simply because you

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Speaker 8: have this massive, kind of almost dark period in the

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Speaker 8: back half of the year where because of the election

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Speaker 8: risk on both sides.

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Speaker 9: Of the Atlantic.

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Speaker 8: By the way, you are going to see a little

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Speaker 8: bit of pushback in terms of whether or not you

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Speaker 8: can use ratecuts or imply ratecuts as late as September

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Speaker 8: as what people are saying. But again, it's not just

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Speaker 8: about that opening ratecut. You have to kind of follow

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Speaker 8: them up with consecutive ones. So that's why it's being

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Speaker 8: pushed back not only to December, but even further out,

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Speaker 8: given that they're waiting for those inflationary dynamics and because

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Speaker 8: the data has come in hot three data points, I

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Speaker 8: think we can say is they're to make a trend.

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Speaker 8: And that's kind of the argument that a lot of

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Speaker 8: these central bankers are saying. So Lorettamester not really say

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Speaker 8: anything new, but kind of really harping on the fact

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Speaker 8: that there is no hurry and there is no rush,

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Speaker 8: and therefore she does ultimately still see that an interest

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Speaker 8: rate cut could be on the docket.

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Speaker 2: Just not yet, not yet. Indeed, how difficult has Jerome

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Speaker 2: Powell and colleagues made it for other central bankers though,

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Speaker 2: because although they love to say that they don't watch

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Speaker 2: the Fed, they do in some ways they do.

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Speaker 8: And it's tricky because traditionally the Federal Reserve has kind

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Speaker 8: of been the central banker to the world naturally, and

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Speaker 8: they were a little bit late to hiking rates relative

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Speaker 8: to some of their peers, even their G ten peers.

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Speaker 8: For example, you saw the BOE of course front run

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Speaker 8: on the Federal Reserve on that front. You saw the

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Speaker 8: Royal Bank Reserve Bank of New Zealands use meet the

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Speaker 8: RBA as well, all front running the FEN terms of hikes.

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Speaker 8: But they all may potentially not do that in terms

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Speaker 8: of cuts, although you are seeing that in say the

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Speaker 8: Swiss National Bank, for example, already a cut there, and

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Speaker 8: that already had caused so much ripple effects in the

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Speaker 8: fact that the Swiss front and round the ACB as well.

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Speaker 8: So I think at the crux of the question is

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Speaker 8: do you start to see the same growth dynamics in

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Speaker 8: the entire world, And that's really where the divergence comes

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Speaker 8: from this idea that the United States a lot that grows.

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Speaker 8: A lot of that inflationary push is one of growth,

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Speaker 8: whereas the UK and other parts of the world as well,

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Speaker 8: some of it is more commodity exposed, some of it

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Speaker 8: is more housing exposed, and some of them is kind

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Speaker 8: of still a wage story. There are a lot of

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Speaker 8: places in the world, including the UK, where real wages

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Speaker 8: haven't caught up and affordability is a bigger issue than

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Speaker 8: it is in the States.

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Speaker 4: Yeah.

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Speaker 1: Absolutely, Andrew Bailey making that very point, insisting the inflation

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Speaker 1: dynamics in the UK a very different to the US,

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Speaker 1: which is pretty interesting. There's also optimism to from Christine Legarde.

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Speaker 1: Her key message focusing on the Arizone Economy Act. She

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Speaker 1: looking brighter, saying, you know, we we didn't go into

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Speaker 1: recession and so that you're looking a bit stronger.

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Speaker 8: It is, and look, when you've looked at some of

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Speaker 8: the data points and the economic data as well, look

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Speaker 8: at the periphery because the traditional kind of a weak

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Speaker 8: spots are sore spots of the European economy. I'm thinking

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Speaker 8: of Italy, Spain, Greece, et cetera.

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Speaker 9: Those are your outperformers.

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Speaker 8: This time around, you're really just seeing kind of more

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Speaker 8: weakness in Germany and that's kind of bringing up the question,

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Speaker 8: the age old question, which is as the ECB cater

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Speaker 8: to the entire year zone or just Germany, and if

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Speaker 8: you do actually have over look at the data point,

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Speaker 8: it is much much stronger. This is where fiscal deficits

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Speaker 8: become a bigger issue. And I think France is a

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Speaker 8: really great example of what you're seeing there because the

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Speaker 8: spending is starting to become far more than anticipated and

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Speaker 8: that's where starting to seem you are you're seeing more

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Speaker 8: issues in terms of markets pricing in particular. But Christine

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Speaker 8: le Guard, to her credit, is looking at the periphery,

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Speaker 8: looking at the traditional problem spots and saying, oh, well,

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Speaker 8: things aren't looking that bad there, are we also in

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Speaker 8: a hurry.

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Speaker 2: Interesting to see in her comments as well, this idea

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Speaker 2: that although she points to the single mando to the

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Speaker 2: ECB being price stability, that the exchange rate is something

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Speaker 2: that they take into account in terms of how it

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Speaker 2: will impact inflation as well. So it brings us back

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Speaker 2: to this question of central bankers watching each other in

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Speaker 2: this too. Chriati Gupta thank you very much for talking

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Speaker 2: as through the latest of what we've proad from those

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Speaker 2: central bankers at the IMF and World Bank Spring meetings

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Speaker 2: in Washington.

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Speaker 1: Well, let's stick with europe weak growth, the fallout from

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Speaker 1: Russia's war in Ukraine, and inertia about a capital markets

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Speaker 1: union are some of the key issues on the agenda

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Speaker 1: as EU leaders meet in Brussels today. It comes as

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Speaker 1: a special report from the former Italian Prime Minister Errico

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Speaker 1: Letta recommends integrating the European energy market, consolidating the telecoms industry,

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Speaker 1: and also this idea of joint boring to finance defense spending.

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Speaker 1: Bloomberg's Oliver Kruk joins us now from Brussels for more

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Speaker 1: on the summit. Ollie, thank you so much for being

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Speaker 1: with us. There does seem to be real concern in Europe,

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Speaker 1: you know, about its competitiveness, about its defense spending. Letters

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Speaker 1: report is also quite forceful. What are the key points

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Speaker 1: of his recommendations.

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Speaker 10: Yeah, it's really a single market report. It's one hundred

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Speaker 10: and forty seven pages and it really goes into a

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Speaker 10: lot of detail on a number of issues, and you've

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Speaker 10: enumerated some of them, but really I think that one

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Speaker 10: where you might have the most consensus is this question

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Speaker 10: of defense spending. Everyone knows in Europe you need to

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Speaker 10: get that spending up. The question is how do you

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Speaker 10: pay for it. The question of joint debt is really

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Speaker 10: the main question. I think for many people in Europe.

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Speaker 10: There is potentially there is potentially some room to make

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Speaker 10: progress on this, or of course some of the nations

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Speaker 10: that historically have been a joint debt averse that are

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Speaker 10: still standing in the way of that.

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Speaker 9: But I think that there is a little bit more

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Speaker 9: wiggle room on.

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Speaker 10: This, particularly on this reality of the new defense reality

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Speaker 10: of Europe. There's also this question of the Capital Markets Union.

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Speaker 10: We've heard about it for about a decade. Will there

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Speaker 10: be sort of more uniform financing rules, ability for capital

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Speaker 10: to move across Europe? This is one It's seen as

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Speaker 10: one of the main catalysts not just for defense spending,

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Speaker 10: but for attracting spending across all the spec sectors in Europe.

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Speaker 10: There's also about energy market integration, telecoms consolidation. You know,

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Speaker 10: they're talking about their thirty two carriers at least across Europe.

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Speaker 9: The United States has two.

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Speaker 10: These are all breeding all kinds of inefficiencies within the

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Speaker 10: European market alive.

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Speaker 2: One of the expectations around progress being made at this

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Speaker 2: particular meeting on advancing in any of those issues.

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Speaker 10: So it's interesting about the competitiveness issue, Stephen, is that

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Speaker 10: it's a lot easier to put tariffs on Chinese goods

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Speaker 10: than it is to look in the mirror and say, hey,

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Speaker 10: we have a competition problem. And you know, the other

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Speaker 10: former prime Italian Prime Minister who is also in charge

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Speaker 10: of this is Mario Dragi, who gave a speech this

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Speaker 10: week that was frankly very stark, but he was talking

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Speaker 10: about a reimagining of Europe that has to be on

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Speaker 10: the same scale as when it was founded seventy years

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Speaker 10: ago with the Steel and Coal Accord that really made it,

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Speaker 10: brought it into being. And unfortunately for Europe, this is

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Speaker 10: exactly the kind of thing that they're really bad at, right,

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Speaker 10: A massive issue, very difficult political negotiations, but no immediate urgency.

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Speaker 6: Right.

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Speaker 9: So you have some of the issues.

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Speaker 10: Like the Capital Markets Union, where will that be supervised

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Speaker 10: from this is one of the main contentious issues.

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Speaker 9: You know, will it be in France, will it be

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Speaker 9: in Paris?

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Speaker 10: Perhaps not in the other points Steven, and this is

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Speaker 10: something that I'm sure you're watching very closely. All of

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Speaker 10: these recommendations call for a bigger, more centralized Europe, a

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Speaker 10: Europe that acts more like a nation than an arrangement

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Speaker 10: of nations, and that may not be the most popular view,

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Speaker 10: particularly light of the polls going into the election.

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Speaker 1: Yeah. Also, these European leaders have been discussing, you know,

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Speaker 1: the defense issues and the wars that we're seeing in

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Speaker 1: the world, the Middle East, the concerns around Iran. On defense,

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Speaker 1: what is the new goal for weapons production, for spending

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Speaker 1: in Europe. How quickly is that changing. What's the sense

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Speaker 1: of that at this gathering.

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Speaker 10: Yeah, well, it depends who you ask, Right. We hear

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Speaker 10: a lot of rhetoric from the politicians. But I was

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Speaker 10: at a defense summit yesterday where I spoke to the

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Speaker 10: CEOs of sab and Kongsburg, you know, the two sort

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Speaker 10: of Nordic giants of defense here and in Europe, and

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Speaker 10: really their point was that, listen, we are willing to

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Speaker 10: ramp up capacity, we've already started it, but we need

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Speaker 10: two things. We need one long term stable order flow

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Speaker 10: from the governments. And there's been a lot of talk

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Speaker 10: if they do not have all the orders they need

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Speaker 10: to justify the kind of ramp up that's required. And

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Speaker 10: two they need investment in financing, and they're not waiting

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Speaker 10: for a capital markets union.

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Speaker 9: They say, you need to go for the lower hanging fruit.

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Speaker 10: The European Investment Bank rules need to change so that

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Speaker 10: that institution can invest into defense, and they need those

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Speaker 10: long term commitments so that they can start ramping up

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Speaker 10: production for a historically very low volume industry that needs

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Speaker 10: to suddenly turn out extremely high volume.

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