1
00:00:05,160 --> 00:00:08,480
Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along

2
00:00:08,520 --> 00:00:12,360
Speaker 1: with Jonathan Farrow and Lisa Abramowitz. Join us each day

3
00:00:12,400 --> 00:00:16,840
Speaker 1: for insight from the best an economics, geopolitics, finance and investment.

4
00:00:17,280 --> 00:00:22,119
Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and

5
00:00:22,320 --> 00:00:26,600
Speaker 1: anywhere you get your podcasts, and always on Bloomberg dot Com,

6
00:00:26,640 --> 00:00:29,840
Speaker 1: the Bloomberg Terminal, and the Bloomberg Business App.

7
00:00:30,120 --> 00:00:33,080
Speaker 2: Joining us now is someone that makes you lean forward.

8
00:00:33,120 --> 00:00:35,920
Speaker 1: It is a multi asset strategy, but mostly his senior

9
00:00:36,000 --> 00:00:39,239
Speaker 1: vice president courage to stay in the market at the

10
00:00:39,320 --> 00:00:43,360
Speaker 1: Hong Kong and Shanghai Banking Corporation, Max Kapner darkets the

11
00:00:43,400 --> 00:00:44,880
Speaker 1: London door today.

12
00:00:44,920 --> 00:00:46,879
Speaker 2: What is your new outlook? What is the.

13
00:00:46,920 --> 00:00:49,640
Speaker 1: Nuance of the last few weeks as you look forward

14
00:00:49,680 --> 00:00:50,960
Speaker 1: into twenty twenty four?

15
00:00:51,240 --> 00:00:51,400
Speaker 3: Yeah?

16
00:00:51,479 --> 00:00:53,640
Speaker 4: Thanks, Some of the news is you've gus we'll talk

17
00:00:53,720 --> 00:00:56,680
Speaker 4: about already right as oil prices, energy prices, perhaps that

18
00:00:56,840 --> 00:00:59,960
Speaker 4: changes a little bit of the narrative, right paps Inflation

19
00:01:00,120 --> 00:01:02,440
Speaker 4: does pick up a bit more in the US right

20
00:01:02,840 --> 00:01:06,399
Speaker 4: towards Q four, So that's not particularly great news for

21
00:01:06,440 --> 00:01:09,720
Speaker 4: a Goldilock scenario. I think the nuances is also going

22
00:01:09,720 --> 00:01:13,440
Speaker 4: into Q four, what can destroy that goldilocks picture? Because

23
00:01:13,480 --> 00:01:15,800
Speaker 4: we're all talking about all these horrible things, right, like,

24
00:01:16,440 --> 00:01:19,399
Speaker 4: you know, things like student loan repayments and are we

25
00:01:19,520 --> 00:01:22,360
Speaker 4: hitting you know, are we hitting recession and all these things,

26
00:01:22,600 --> 00:01:24,080
Speaker 4: and then we look at high yield spreads and they

27
00:01:24,200 --> 00:01:27,600
Speaker 4: just going towards three fifty and yeah, it's for everyone, right, great,

28
00:01:28,040 --> 00:01:30,480
Speaker 4: So I think the nuances are sort of trying to

29
00:01:30,520 --> 00:01:33,720
Speaker 4: find out when is what what could potentially break all this?

30
00:01:33,959 --> 00:01:34,080
Speaker 1: Right?

31
00:01:34,120 --> 00:01:37,080
Speaker 4: What could potentially break that that sort of goldilocks?

32
00:01:37,080 --> 00:01:40,200
Speaker 5: And it's ninety five dollar crude. It's you don't think

33
00:01:40,200 --> 00:01:40,880
Speaker 5: that a breakfast.

34
00:01:41,360 --> 00:01:43,840
Speaker 4: I don't think it's one nuance. I think it's one

35
00:01:43,880 --> 00:01:46,560
Speaker 4: of those where to be fair, if I was the fair,

36
00:01:46,600 --> 00:01:48,240
Speaker 4: if I was the SEBIA or the Bank of England,

37
00:01:48,440 --> 00:01:51,800
Speaker 4: which you know, lucky for everyone that I'm not, but

38
00:01:51,920 --> 00:01:54,160
Speaker 4: you know, if I were, I'd be basically saying, well,

39
00:01:54,320 --> 00:01:55,520
Speaker 4: what should I do about that?

40
00:01:55,600 --> 00:01:55,720
Speaker 6: Right?

41
00:01:55,760 --> 00:01:57,120
Speaker 4: What can I do about I mean, I'm not an

42
00:01:57,120 --> 00:01:59,360
Speaker 4: oil producer, so I can't really do anything, and I

43
00:01:59,360 --> 00:02:02,320
Speaker 4: can sort of use it as saying, look, this is

44
00:02:02,440 --> 00:02:06,000
Speaker 4: just energy prices. It's something transitory. It will be going

45
00:02:06,040 --> 00:02:08,160
Speaker 4: away out of the calculation. When a couple of months,

46
00:02:08,200 --> 00:02:10,880
Speaker 4: don't worry, right all the other rests, you know, excluding

47
00:02:10,880 --> 00:02:15,400
Speaker 4: fifteen components from our preferred inflation baskets, then everything looks fine.

48
00:02:15,639 --> 00:02:18,040
Speaker 4: So I think that's the worry that I have, right

49
00:02:18,080 --> 00:02:21,840
Speaker 4: that if we start looking at these inflation baskets that

50
00:02:21,880 --> 00:02:24,519
Speaker 4: sort of exclude everything that we need for the everyday life,

51
00:02:24,720 --> 00:02:27,120
Speaker 4: that they is starting to pack up again. And to

52
00:02:27,160 --> 00:02:30,200
Speaker 4: be fair, if you look at things like super core inflation, right,

53
00:02:30,639 --> 00:02:33,760
Speaker 4: the action components, the broad based nature of it hasn't

54
00:02:33,840 --> 00:02:37,520
Speaker 4: really dramatically changed over the last twelve eighteen months, So

55
00:02:37,560 --> 00:02:40,760
Speaker 4: that is perhaps something towards Q four where perhaps inflation

56
00:02:40,919 --> 00:02:44,160
Speaker 4: does pick up beyond just energy prices, not a new

57
00:02:44,200 --> 00:02:48,880
Speaker 4: inflation wave, but basically an interruption from that. Okay, inflation

58
00:02:48,919 --> 00:02:51,560
Speaker 4: has gone down in one straight line now to actually

59
00:02:51,600 --> 00:02:54,960
Speaker 4: now we're getting sort of this bumpy bumpy road ahead,

60
00:02:55,000 --> 00:02:57,440
Speaker 4: right an inflation Well, we've got to play those turning

61
00:02:57,480 --> 00:02:57,920
Speaker 4: points in it.

62
00:02:58,000 --> 00:02:58,240
Speaker 2: Max.

63
00:02:58,280 --> 00:03:00,400
Speaker 5: The question everyone wants us to ask. Still in a

64
00:03:00,440 --> 00:03:02,880
Speaker 5: window where you think equities can do well, oh yeah,

65
00:03:02,880 --> 00:03:05,200
Speaker 5: one hundred percent, until when how big is that win?

66
00:03:05,800 --> 00:03:09,400
Speaker 4: Look to be perfectly honest, if we think about it,

67
00:03:09,400 --> 00:03:11,959
Speaker 4: and I know it sounds stupid, but imagine if yields

68
00:03:11,960 --> 00:03:14,120
Speaker 4: go up, imagine the tenure goes to four and a half.

69
00:03:14,160 --> 00:03:16,400
Speaker 4: What's the reality of the reality is it's probably going

70
00:03:16,480 --> 00:03:19,360
Speaker 4: to do it because growth is better, right, and because

71
00:03:19,400 --> 00:03:24,440
Speaker 4: once again growth expectations actually turn out to be too pessimistic. Right.

72
00:03:24,480 --> 00:03:27,320
Speaker 4: If you look at Q four US growth expectations, it's

73
00:03:27,320 --> 00:03:29,480
Speaker 4: sort of the Q one next year is also close

74
00:03:29,560 --> 00:03:32,000
Speaker 4: to zero, so the bar to be just relatively low.

75
00:03:32,200 --> 00:03:34,640
Speaker 4: So if you get yields moving higher, that's probably in

76
00:03:34,680 --> 00:03:37,440
Speaker 4: response to growth doing better, So you buy equities. If

77
00:03:37,480 --> 00:03:40,440
Speaker 4: yields go down, right, then probably rates of all goes down,

78
00:03:40,520 --> 00:03:43,600
Speaker 4: and then you buy the nastak so to be fair, Yeah, great,

79
00:03:43,680 --> 00:03:44,640
Speaker 4: I'll just buy equities.

80
00:03:44,640 --> 00:03:46,560
Speaker 7: Can big tech still lead though? And we've seen a

81
00:03:46,600 --> 00:03:49,880
Speaker 7: recent kind of weakening in the tech profile and an

82
00:03:49,920 --> 00:03:52,640
Speaker 7: underperformance there. Some people are saying this is the beginning

83
00:03:52,680 --> 00:03:54,680
Speaker 7: of the end of the tech trade? Are you on

84
00:03:54,720 --> 00:03:55,080
Speaker 7: that train?

85
00:03:55,880 --> 00:03:59,040
Speaker 4: Well, we've heard that for I think sixteen years, fifteen years,

86
00:03:59,240 --> 00:04:00,960
Speaker 4: so you know, it's been a lot of beginnings of

87
00:04:01,040 --> 00:04:04,120
Speaker 4: the end. Now, look, I don't know, I want to

88
00:04:04,160 --> 00:04:05,680
Speaker 4: be too cynical for it, but.

89
00:04:05,800 --> 00:04:07,760
Speaker 5: Last year was pretty brutal for the text, right, just

90
00:04:07,840 --> 00:04:08,280
Speaker 5: be clear.

91
00:04:08,480 --> 00:04:12,520
Speaker 4: So, but to be perfect, you're honest, I think TEX

92
00:04:12,640 --> 00:04:14,200
Speaker 4: still has a bit of a room to go. In

93
00:04:14,240 --> 00:04:16,360
Speaker 4: the next couple of weeks. There is probably a window

94
00:04:16,360 --> 00:04:19,120
Speaker 4: around Q four where I'd been moving more towards really

95
00:04:19,160 --> 00:04:21,880
Speaker 4: the value side of things, right, tactically, right, if we

96
00:04:21,920 --> 00:04:25,080
Speaker 4: get that bump and inflation, particularly in the US, even higher,

97
00:04:25,480 --> 00:04:27,720
Speaker 4: you know, you want to probably prefer then for a

98
00:04:27,760 --> 00:04:30,840
Speaker 4: couple of months, things like bands energy over tech. But

99
00:04:30,880 --> 00:04:33,520
Speaker 4: for now, I think energy still has or text still

100
00:04:33,520 --> 00:04:34,080
Speaker 4: has a way to go.

101
00:04:34,200 --> 00:04:36,960
Speaker 7: You mentioned all of the dark clouds, including people repaying

102
00:04:36,960 --> 00:04:40,920
Speaker 7: their debts, and also this question around a government shutdown,

103
00:04:40,920 --> 00:04:44,200
Speaker 7: which seems like an increasing inevitability in the US amid

104
00:04:44,240 --> 00:04:47,280
Speaker 7: this backdrop of strikes. In a question of just general

105
00:04:48,200 --> 00:04:52,080
Speaker 7: just discsatisfaction, which of those kinds of things do you

106
00:04:52,160 --> 00:04:55,280
Speaker 7: care most about could actually have the most impact on

107
00:04:55,320 --> 00:04:55,760
Speaker 7: your call.

108
00:04:56,279 --> 00:04:58,840
Speaker 4: Look, I think the government shot down not really right,

109
00:04:58,880 --> 00:05:01,200
Speaker 4: because we kind of got used to every other quarter.

110
00:05:01,560 --> 00:05:04,480
Speaker 4: So from an equity perspective, you know, I know it

111
00:05:04,560 --> 00:05:06,760
Speaker 4: sounds depressing, but if for hous right, it was a

112
00:05:06,760 --> 00:05:09,880
Speaker 4: shock twelve years ago, it's not particularly a shock anymore.

113
00:05:09,960 --> 00:05:10,039
Speaker 2: Right.

114
00:05:10,160 --> 00:05:14,240
Speaker 4: So from an equity perspective, from a risk acid perspective,

115
00:05:14,320 --> 00:05:17,599
Speaker 4: that's not the main worry. The student loan repayments also

116
00:05:17,680 --> 00:05:19,760
Speaker 4: not particularly worried about it, because you can also make

117
00:05:19,760 --> 00:05:22,960
Speaker 4: a positive spin out of right. Right. You can also say, look, actually,

118
00:05:23,080 --> 00:05:26,480
Speaker 4: from the end of July up until now, repayments have

119
00:05:26,640 --> 00:05:31,000
Speaker 4: shot higher because actually economic agents I eat, normal people

120
00:05:31,080 --> 00:05:34,840
Speaker 4: like us, they're acting completely rationally, right, They're seeing that, Okay,

121
00:05:34,880 --> 00:05:37,440
Speaker 4: this is starting to kick in. So instead of starting

122
00:05:37,480 --> 00:05:40,640
Speaker 4: to or having to start to actually pay interest on

123
00:05:40,680 --> 00:05:42,840
Speaker 4: it again, I'm going to repay it early and guess what,

124
00:05:42,880 --> 00:05:45,040
Speaker 4: I have the money, so let me repay as much

125
00:05:45,080 --> 00:05:47,159
Speaker 4: as I can. So actually, you can also make a

126
00:05:47,160 --> 00:05:49,600
Speaker 4: positive spin out of it, right and say, look, people

127
00:05:49,640 --> 00:05:51,960
Speaker 4: apparently still have the money to do that, right, They

128
00:05:52,000 --> 00:05:56,080
Speaker 4: still have sufficient money to do these pretty chunky repayments early.

129
00:05:56,400 --> 00:05:59,920
Speaker 4: So all of that doesn't really really keep me that much.

130
00:06:00,120 --> 00:06:02,840
Speaker 1: Quick questionaire, can you figme out SPX five thousand? I

131
00:06:02,920 --> 00:06:04,760
Speaker 1: gotta make some news today. I got to justify the

132
00:06:04,800 --> 00:06:07,640
Speaker 1: trip to London. Can you give me five thousand SPX?

133
00:06:08,040 --> 00:06:10,240
Speaker 4: I think you know, if we think about next year,

134
00:06:10,480 --> 00:06:12,280
Speaker 4: to be fair, it's not an awful lot of weight, right,

135
00:06:12,360 --> 00:06:19,520
Speaker 4: it's twelve twelve percent awaight, Right, but if we're still

136
00:06:19,520 --> 00:06:23,000
Speaker 4: in a fairly high ish inflation environment, right, and earnings

137
00:06:23,000 --> 00:06:24,880
Speaker 4: growth is still relatively fine. Yeah.

138
00:06:24,960 --> 00:06:27,080
Speaker 1: When Old Quinn's all longer today, he's doing something with

139
00:06:27,120 --> 00:06:29,240
Speaker 1: the United Nations. I'm not sure what it is. Nold

140
00:06:29,279 --> 00:06:32,359
Speaker 1: Quinn listens to Max Katner. HSBC is a prism to

141
00:06:32,440 --> 00:06:33,360
Speaker 1: Asia like.

142
00:06:33,560 --> 00:06:34,120
Speaker 2: No one else.

143
00:06:34,160 --> 00:06:37,640
Speaker 1: I personally witnessed it across that little Hong Kong trolley

144
00:06:38,120 --> 00:06:41,839
Speaker 1: in Asia. How do you link China trauma, in particularly

145
00:06:41,839 --> 00:06:44,919
Speaker 1: domestic trauma into all the toxic.

146
00:06:44,520 --> 00:06:46,320
Speaker 2: Brew of gloom in the West.

147
00:06:46,640 --> 00:06:49,920
Speaker 1: How do you link Hong Kong and Shanghai over to

148
00:06:50,000 --> 00:06:51,080
Speaker 1: London in New York.

149
00:06:51,480 --> 00:06:54,920
Speaker 4: Look, I think what's what's very clear with regards to

150
00:06:54,960 --> 00:06:59,240
Speaker 4: Europe and with regards to China and now a little

151
00:06:59,240 --> 00:07:01,680
Speaker 4: bit less in the US is like you've said, there's

152
00:07:01,760 --> 00:07:04,160
Speaker 4: all this doom and gloom, right, there's all these expectations

153
00:07:04,160 --> 00:07:06,159
Speaker 4: around doom and gloom. I don't think you guys have

154
00:07:06,240 --> 00:07:09,000
Speaker 4: had any guests on probably for weeks who are saying, look,

155
00:07:09,080 --> 00:07:11,800
Speaker 4: you know what, twenty twenty three has been better than expected.

156
00:07:11,880 --> 00:07:13,800
Speaker 4: We were a bitter wrong right on Europe and in

157
00:07:13,800 --> 00:07:16,520
Speaker 4: the US. But guess what, twenty twenty four is going

158
00:07:16,600 --> 00:07:19,920
Speaker 4: to be even better? Right, So I can't I just

159
00:07:20,120 --> 00:07:22,960
Speaker 4: genuinely cannot see how we're gonna get, you know, start

160
00:07:23,000 --> 00:07:25,160
Speaker 4: to think about twenty twenty four, how we're actually going

161
00:07:25,240 --> 00:07:27,600
Speaker 4: to see twenty twenty four. It looks where people say, look,

162
00:07:27,600 --> 00:07:30,280
Speaker 4: you know what, China's going to do great, Europe's gonna

163
00:07:30,280 --> 00:07:32,880
Speaker 4: be even better, and US is going to shoot the lighter.

164
00:07:33,240 --> 00:07:35,560
Speaker 4: I just cannot see anyone doing that.

165
00:07:36,080 --> 00:07:37,440
Speaker 5: So do you want to take the other side of that?

166
00:07:38,320 --> 00:07:41,080
Speaker 4: I want to take that side, yeah, because knowing the

167
00:07:41,120 --> 00:07:43,040
Speaker 4: thing is right, So you're giving us a twenty four

168
00:07:43,040 --> 00:07:46,080
Speaker 4: call right now? No, Look, the one thing that I

169
00:07:46,120 --> 00:07:49,200
Speaker 4: am not asked at all about and for months is

170
00:07:49,440 --> 00:07:52,840
Speaker 4: what could actually go right? What can guy right actually

171
00:07:53,200 --> 00:07:56,200
Speaker 4: in the next six twelve months three? What's actually one

172
00:07:56,280 --> 00:07:58,560
Speaker 4: thing where we could be saying, hey, you know what,

173
00:07:59,120 --> 00:08:04,680
Speaker 4: maybe I'm asking So the answer, the answer to me is,

174
00:08:04,680 --> 00:08:07,640
Speaker 4: as long as we still have these really low growth expectations,

175
00:08:07,720 --> 00:08:09,160
Speaker 4: you have a low bar to be and you keep

176
00:08:09,240 --> 00:08:11,520
Speaker 4: rolling goldilocks and goldilocks and goldilocks, and.

177
00:08:11,600 --> 00:08:15,520
Speaker 5: It's great goldilocks forever into twenty four yeah, okay.

178
00:08:15,240 --> 00:08:17,280
Speaker 2: I think it is a lonely car. I mean, we're

179
00:08:18,800 --> 00:08:19,960
Speaker 2: but it's a really I'm.

180
00:08:21,680 --> 00:08:27,200
Speaker 1: Wrong, cool charter to you bank, Max Curtener, HSBC. There's

181
00:08:27,200 --> 00:08:28,360
Speaker 1: a couple others out there.

182
00:08:28,600 --> 00:08:30,360
Speaker 5: You know, Max has been right. I think we should

183
00:08:30,400 --> 00:08:33,160
Speaker 5: put that out there first. You've been right all year.

184
00:08:33,200 --> 00:08:33,440
Speaker 4: Max.

185
00:08:33,440 --> 00:08:35,880
Speaker 5: We'll see about twenty twenty four. That's quite cool. Max

186
00:08:35,920 --> 00:08:49,280
Speaker 5: Kenada of HSBC. Joining us now is Ed j R. Denny,

187
00:08:49,440 --> 00:08:52,040
Speaker 5: President of the Danny Research Ed wonderful to have you

188
00:08:52,080 --> 00:08:53,840
Speaker 5: with us on the show We call it with Max

189
00:08:53,920 --> 00:08:57,400
Speaker 5: Kettener of HSBC in the previous hour, and he said

190
00:08:57,400 --> 00:08:59,520
Speaker 5: we need to focus on what could go right in

191
00:08:59,600 --> 00:09:01,720
Speaker 5: twenty two twenty four? Are you more focused on what

192
00:09:01,760 --> 00:09:03,480
Speaker 5: could go right or what could go wrong?

193
00:09:05,040 --> 00:09:09,960
Speaker 8: My view of twenty twenty four is that that could

194
00:09:10,000 --> 00:09:13,240
Speaker 8: be a better year than certainly twenty twenty two was,

195
00:09:13,600 --> 00:09:15,959
Speaker 8: or even twenty twenty three. Not that twenty twenty three

196
00:09:16,040 --> 00:09:18,760
Speaker 8: is turning out to be a very bad year. As

197
00:09:18,760 --> 00:09:20,520
Speaker 8: we know, the third quarter is turning out to be

198
00:09:21,160 --> 00:09:24,720
Speaker 8: remarkably strong. So all in all, I think that we'll

199
00:09:24,720 --> 00:09:29,000
Speaker 8: get through a lot of these challenges and twenty twenty

200
00:09:29,040 --> 00:09:31,400
Speaker 8: four should be a better year for earnings with the

201
00:09:31,440 --> 00:09:32,880
Speaker 8: market doing better too.

202
00:09:34,679 --> 00:09:36,680
Speaker 1: Danny, you and real Franko for have been way out

203
00:09:36,679 --> 00:09:39,280
Speaker 1: front of this on the October rally, and we've talked

204
00:09:39,320 --> 00:09:41,920
Speaker 1: about a second leg of a bullmarkt As John mentions,

205
00:09:41,960 --> 00:09:47,240
Speaker 1: mister Cuttner of HSBC shares your enthusiasm. The arch pullback

206
00:09:47,280 --> 00:09:51,240
Speaker 1: of this is the great moderation over? Is the great

207
00:09:51,360 --> 00:09:55,280
Speaker 1: moderation over? And does that mean you can't make money

208
00:09:55,320 --> 00:09:56,640
Speaker 1: in stocks?

209
00:09:57,840 --> 00:10:04,559
Speaker 8: Well, I've been really debating in my commentaries about whether

210
00:10:05,080 --> 00:10:07,760
Speaker 8: it's going to be the Great Inflation of the nineteen

211
00:10:07,840 --> 00:10:10,880
Speaker 8: seventies or it might very well turn out to be

212
00:10:11,040 --> 00:10:16,319
Speaker 8: the Roaring twenty twenties. And I've been inclined to believe

213
00:10:16,400 --> 00:10:19,920
Speaker 8: that on a longer term basis, we will see that

214
00:10:19,960 --> 00:10:24,640
Speaker 8: the twenty twenties will be a period of tremendous progress

215
00:10:24,640 --> 00:10:28,720
Speaker 8: and productivity. And I was making that point before the pandemic,

216
00:10:28,720 --> 00:10:32,200
Speaker 8: and the pandemic sort of gotten the way because it

217
00:10:32,280 --> 00:10:35,640
Speaker 8: really messed up the productivity story big time as people

218
00:10:35,720 --> 00:10:38,040
Speaker 8: quit left and right. But I think we're making a comeback.

219
00:10:38,080 --> 00:10:42,520
Speaker 8: I think productivity bottom actually in twenty and twenty fifteen

220
00:10:43,200 --> 00:10:45,120
Speaker 8: in terms of its growth rate, it was only zero

221
00:10:45,160 --> 00:10:48,960
Speaker 8: point five percent on a twenty quarter trailing basis. I

222
00:10:48,960 --> 00:10:50,720
Speaker 8: think it's going up to four percent by the end

223
00:10:50,760 --> 00:10:54,560
Speaker 8: of the decade, which sounds delusional, sounds for our fetched,

224
00:10:54,559 --> 00:10:57,280
Speaker 8: I'll admit, but those are the kind of peaks we've

225
00:10:57,280 --> 00:11:01,120
Speaker 8: had in previous growth cycles in productivity, and I think

226
00:11:01,160 --> 00:11:01,920
Speaker 8: that's where we're heading.

227
00:11:03,559 --> 00:11:07,040
Speaker 1: Does a real rate, and some would say a higher

228
00:11:07,200 --> 00:11:11,199
Speaker 1: real rate and an inflation adjusted rate, does that impinge

229
00:11:11,400 --> 00:11:12,679
Speaker 1: on your enthusiasm?

230
00:11:13,640 --> 00:11:15,800
Speaker 2: Not really. I think we're going back to normal.

231
00:11:16,200 --> 00:11:20,880
Speaker 8: The new abnormal was the period between the Great Financial

232
00:11:20,920 --> 00:11:24,760
Speaker 8: Crisis and the Great Virus Crisis, and back then interest

233
00:11:24,800 --> 00:11:28,160
Speaker 8: rates were at record lows. I think we're going back

234
00:11:28,200 --> 00:11:31,520
Speaker 8: to the environment just prior to the Great Financial Crisis,

235
00:11:31,960 --> 00:11:34,400
Speaker 8: where the tip shield was around two percent for the

236
00:11:34,480 --> 00:11:37,640
Speaker 8: ten uere and the inflation premium was around two to

237
00:11:37,640 --> 00:11:39,760
Speaker 8: two and a half percent. So four to four and

238
00:11:39,800 --> 00:11:42,000
Speaker 8: a half percent is kind of where the bond yield

239
00:11:42,000 --> 00:11:45,600
Speaker 8: should be in a return to the old normal, and

240
00:11:45,640 --> 00:11:48,200
Speaker 8: I think that's what we're doing. I think the economy

241
00:11:48,240 --> 00:11:51,760
Speaker 8: and the stock market have already demonstrated that they can

242
00:11:51,760 --> 00:11:55,160
Speaker 8: both live with these kind of levels of interest rates.

243
00:11:56,160 --> 00:11:57,680
Speaker 7: So you and Max Kettner seemed to be on the

244
00:11:57,679 --> 00:12:00,360
Speaker 7: same page, and Max came on the show early and said,

245
00:12:00,400 --> 00:12:02,120
Speaker 7: you guys all worry too much. No one asks me

246
00:12:02,160 --> 00:12:04,040
Speaker 7: what can go right, how good things can be, and

247
00:12:04,120 --> 00:12:06,600
Speaker 7: as they should be asking. But it is my job

248
00:12:06,679 --> 00:12:07,199
Speaker 7: to worry.

249
00:12:07,559 --> 00:12:09,040
Speaker 4: That is true what I do.

250
00:12:09,120 --> 00:12:12,319
Speaker 7: So I'm curious, from your vantage point, where does oil

251
00:12:12,360 --> 00:12:14,720
Speaker 7: fit into this at a time where it's risen thirty

252
00:12:14,800 --> 00:12:15,959
Speaker 7: percent since June.

253
00:12:17,000 --> 00:12:20,360
Speaker 8: Yeah, well, I didn't expect it. I don't think anybody

254
00:12:20,400 --> 00:12:24,000
Speaker 8: really expected it. I think the widespread perception was, oh, yeah, yeah,

255
00:12:24,040 --> 00:12:26,000
Speaker 8: the Saudi's are going to cut production, and the Russians

256
00:12:26,000 --> 00:12:29,200
Speaker 8: of cut production. But China's week, Europe's week, the US

257
00:12:29,240 --> 00:12:32,280
Speaker 8: is sort of muddling along. And that means that oil

258
00:12:32,400 --> 00:12:34,800
Speaker 8: prices aren't going to go up as the Saudis would like.

259
00:12:34,840 --> 00:12:36,320
Speaker 2: But they've been right so far.

260
00:12:36,960 --> 00:12:39,360
Speaker 8: And so that's a new variable that I've had to

261
00:12:39,360 --> 00:12:43,040
Speaker 8: incorporate into my thinking. And so just recently the past

262
00:12:43,080 --> 00:12:47,439
Speaker 8: few days, I just to demonstrate that I am realistic

263
00:12:47,440 --> 00:12:49,560
Speaker 8: and I'm looking at the world.

264
00:12:49,400 --> 00:12:51,040
Speaker 2: As it is, not as I'd like it to be.

265
00:12:51,720 --> 00:12:56,080
Speaker 8: I did raise my outlook for a recession risk from

266
00:12:56,080 --> 00:12:59,640
Speaker 8: fifteen percent to twenty five percent and unfortunately there is

267
00:12:59,679 --> 00:13:02,080
Speaker 8: a certain the sense of dejav all over again. We

268
00:13:02,160 --> 00:13:06,920
Speaker 8: had two oil spikes back in the nineteen seventies. So far,

269
00:13:07,000 --> 00:13:09,280
Speaker 8: the first oil spike we had last year hasn't caused

270
00:13:09,320 --> 00:13:12,000
Speaker 8: a recession and hasn't been anywhere near but we had

271
00:13:12,040 --> 00:13:13,800
Speaker 8: back in the seventies, and I don't think this one's

272
00:13:13,840 --> 00:13:14,280
Speaker 8: going to be.

273
00:13:15,760 --> 00:13:17,040
Speaker 2: A major oil spike either.

274
00:13:17,120 --> 00:13:21,120
Speaker 8: I think we are going to find that the demand

275
00:13:21,160 --> 00:13:25,520
Speaker 8: responds pretty quickly to these price hikes and it slows

276
00:13:25,559 --> 00:13:29,120
Speaker 8: down and oil prices come back down, not dramatically, but

277
00:13:29,160 --> 00:13:30,320
Speaker 8: at least they stop going up.

278
00:13:31,600 --> 00:13:34,480
Speaker 7: What's the break point in terms of when prices of

279
00:13:34,520 --> 00:13:37,559
Speaker 7: oil really do create a serious headwind and increase the

280
00:13:37,640 --> 00:13:38,400
Speaker 7: chance of recession.

281
00:13:39,120 --> 00:13:42,640
Speaker 8: Well, I think they're already starting to impact demand. You know,

282
00:13:42,679 --> 00:13:46,880
Speaker 8: it's clearly getting a tremendous amount of visibility in the press,

283
00:13:46,880 --> 00:13:49,800
Speaker 8: and of course, the price of gasoline is the most

284
00:13:49,880 --> 00:13:53,880
Speaker 8: visible price of them all. We all go driving around

285
00:13:54,080 --> 00:13:56,800
Speaker 8: filling up our tanks, and everybody's seeing that the price

286
00:13:56,840 --> 00:13:58,960
Speaker 8: of oil gasoline is going up dramatically.

287
00:13:59,000 --> 00:14:01,480
Speaker 2: So I think we're at the point where.

288
00:14:01,240 --> 00:14:05,200
Speaker 8: It doesn't cause a recession, but it causes some demand destruction.

289
00:14:05,360 --> 00:14:09,440
Speaker 8: For gasoline and for other energy products, and that being

290
00:14:09,480 --> 00:14:12,040
Speaker 8: the case, that could bring the price back down. I

291
00:14:12,080 --> 00:14:14,679
Speaker 8: don't think it's going to cause a recession, but I think,

292
00:14:14,920 --> 00:14:17,599
Speaker 8: you know, if we sustainably, if we see at the

293
00:14:17,640 --> 00:14:20,280
Speaker 8: price of oil staates sustainably at one hundred, one hundred

294
00:14:20,320 --> 00:14:23,120
Speaker 8: and ten dollars a barrel, in the price of gasoline

295
00:14:23,280 --> 00:14:26,880
Speaker 8: four and a half to five dollars a gallon, I

296
00:14:26,920 --> 00:14:31,480
Speaker 8: think that could certainly risk a much greater slowdown on

297
00:14:31,520 --> 00:14:33,800
Speaker 8: the economy than I've been thinking.

298
00:14:35,360 --> 00:14:37,840
Speaker 5: Certainly going to case some paine at Danny, thank you

299
00:14:37,640 --> 00:14:38,440
Speaker 5: if any race.

300
00:14:43,080 --> 00:14:46,360
Speaker 1: She is Jane Foley of Robbo Bank, and the heritage

301
00:14:46,400 --> 00:14:50,280
Speaker 1: of Robbo Bank is commodities in the foreign exchange, and

302
00:14:50,360 --> 00:14:52,680
Speaker 1: Jane Foley, I want to look out three years and

303
00:14:52,760 --> 00:14:56,480
Speaker 1: five years to the climate change effect, Sugar to the moon,

304
00:14:56,920 --> 00:14:59,600
Speaker 1: cocoa to the moon, a few other things, even cattles

305
00:15:00,080 --> 00:15:02,600
Speaker 1: up and up here as well. How is the Rabobank

306
00:15:02,640 --> 00:15:06,520
Speaker 1: world going to change with climate change and what appear

307
00:15:06,600 --> 00:15:08,480
Speaker 1: to be surging commodity prices.

308
00:15:08,760 --> 00:15:10,600
Speaker 3: It's going to be tough now. Of course, in the

309
00:15:10,600 --> 00:15:13,440
Speaker 3: short term, we don't necessarily have surging food prices because

310
00:15:13,480 --> 00:15:15,320
Speaker 3: prices were high last year there was lots of planting.

311
00:15:15,360 --> 00:15:17,360
Speaker 3: But I think we can all agree that over the

312
00:15:17,440 --> 00:15:21,600
Speaker 3: longer term, you have climate issues. You have issues that

313
00:15:21,680 --> 00:15:26,640
Speaker 3: could create inflationary surprises in the form of food prices

314
00:15:26,680 --> 00:15:27,920
Speaker 3: over the next few years. And it was at the

315
00:15:27,920 --> 00:15:30,240
Speaker 3: supply so, I mean, look what's happened in the Panama Canal.

316
00:15:30,320 --> 00:15:33,440
Speaker 3: You know, shortages of water, restrictions on shipping that can

317
00:15:33,480 --> 00:15:35,640
Speaker 3: go through impacts to the supply chain. So we know

318
00:15:35,760 --> 00:15:39,760
Speaker 3: that climate change can bring us inflationary shucks. We know

319
00:15:39,840 --> 00:15:41,800
Speaker 3: that it can have a detrimental impact on growth. We

320
00:15:41,840 --> 00:15:44,080
Speaker 3: know that it could potentially make interest rates higher. So

321
00:15:44,200 --> 00:15:47,520
Speaker 3: the environment that that suggests is not particularly.

322
00:15:47,360 --> 00:15:50,000
Speaker 1: This is critical, and that all the focus in the

323
00:15:50,040 --> 00:15:53,600
Speaker 1: financial media is how to make a speculative return on euro,

324
00:15:53,720 --> 00:15:56,040
Speaker 1: yen or whatever. And there's a whole other world out

325
00:15:56,040 --> 00:15:58,680
Speaker 1: there of hedging commodity transactions.

326
00:15:58,680 --> 00:16:02,840
Speaker 5: Okay, so interesting question chain for you. Climate can lead

327
00:16:02,840 --> 00:16:06,120
Speaker 5: to inflationary outcomes. Can the policy changes to address climate

328
00:16:06,200 --> 00:16:09,440
Speaker 5: change also lead to inflationary outcomes? Is this lose lose

329
00:16:09,480 --> 00:16:10,320
Speaker 5: on the front.

330
00:16:10,160 --> 00:16:12,480
Speaker 3: You know, I think this is a really really interesting

331
00:16:12,560 --> 00:16:15,440
Speaker 3: question because we have so many elections next year. So

332
00:16:15,840 --> 00:16:18,400
Speaker 3: next year I saw a statistic recently that said countries

333
00:16:18,440 --> 00:16:20,760
Speaker 3: with a collective population of four billions, that's over half

334
00:16:20,800 --> 00:16:23,440
Speaker 3: the world's population go to the polls next year. So

335
00:16:23,480 --> 00:16:25,920
Speaker 3: we've got the US, we've got the EU, we've got India,

336
00:16:25,920 --> 00:16:29,920
Speaker 3: we've got Russia, we've got Mexico and various other countries. Now,

337
00:16:30,280 --> 00:16:32,440
Speaker 3: amongst those issues that people are going to be talking

338
00:16:32,440 --> 00:16:34,920
Speaker 3: about is of course the impact of climate change, but

339
00:16:34,960 --> 00:16:39,000
Speaker 3: also the green transition. And what we've been seen is people,

340
00:16:39,080 --> 00:16:41,560
Speaker 3: because of the cost of living, because of the energy crisis,

341
00:16:41,600 --> 00:16:45,680
Speaker 3: because of you know, the impact of inflation, are losing

342
00:16:45,760 --> 00:16:49,560
Speaker 3: patients with the politician that the push towards the green transition.

343
00:16:49,560 --> 00:16:52,080
Speaker 3: And we're really seeing this in Europe. Support for so

344
00:16:52,240 --> 00:16:54,920
Speaker 3: the Germany's Green Party really gone down, support for the

345
00:16:54,960 --> 00:16:57,760
Speaker 3: far right really gone out. And this is fairly uniform

346
00:16:57,840 --> 00:17:00,160
Speaker 3: because people are saying, we can't afford to lose our

347
00:17:00,280 --> 00:17:03,400
Speaker 3: jobs because of the green transition, because in Germany, for instance,

348
00:17:03,520 --> 00:17:06,720
Speaker 3: lots of jobs in the supply chain for car manufacturers

349
00:17:06,720 --> 00:17:08,880
Speaker 3: will go and people are saying, you know, we can't

350
00:17:08,920 --> 00:17:11,560
Speaker 3: afford to buy these electric cars. We cannot afford necessarily

351
00:17:11,600 --> 00:17:14,840
Speaker 3: the green transition, and that's a real problem.

352
00:17:15,160 --> 00:17:17,239
Speaker 7: How do you price that into a foreign exchange car.

353
00:17:17,320 --> 00:17:19,080
Speaker 7: I mean, and had to be too base here, but

354
00:17:19,119 --> 00:17:22,120
Speaker 7: there's really a question of who's doing the best job

355
00:17:22,640 --> 00:17:26,800
Speaker 7: in counteracting some of the inflationary forces in this swirling

356
00:17:26,960 --> 00:17:29,720
Speaker 7: brew of uncertainty of how you're going to deal with this.

357
00:17:29,880 --> 00:17:31,880
Speaker 7: I mean, this is what we're dealing with the UAW

358
00:17:31,960 --> 00:17:32,720
Speaker 7: and the US.

359
00:17:32,920 --> 00:17:33,560
Speaker 4: In some respects.

360
00:17:33,560 --> 00:17:35,320
Speaker 3: I think the answer is quite easy, because when you

361
00:17:35,320 --> 00:17:36,800
Speaker 3: are really confused, when you don't know what's going on,

362
00:17:36,800 --> 00:17:38,919
Speaker 3: people tend to buy the dollar. It is that you

363
00:17:38,920 --> 00:17:40,960
Speaker 3: know that the safe haven. And I think for an

364
00:17:41,000 --> 00:17:43,159
Speaker 3: awful lot of these political challenges, they're going to be

365
00:17:43,160 --> 00:17:44,959
Speaker 3: felt on both sides of the Atlantic. But I think

366
00:17:45,000 --> 00:17:47,880
Speaker 3: it's a Euro that will feel the impact of these

367
00:17:47,880 --> 00:17:51,560
Speaker 3: political crisis a lot more relative to the dollar, because

368
00:17:51,560 --> 00:17:53,560
Speaker 3: the dollar, of course is the currency of the global

369
00:17:53,600 --> 00:17:56,320
Speaker 3: payment system, and people need dollars in terms of crisis,

370
00:17:56,480 --> 00:17:59,840
Speaker 3: and therefore the dollar in a way gets protected even

371
00:18:00,040 --> 00:18:01,880
Speaker 3: its own fundamentals look a little bit questionable.

372
00:18:01,920 --> 00:18:03,679
Speaker 7: And we've seen this dollar strength and it really has

373
00:18:03,760 --> 00:18:05,719
Speaker 7: upended a lot of people who thought that the ECB

374
00:18:05,800 --> 00:18:07,760
Speaker 7: would do way more and that the Euro would gain

375
00:18:08,080 --> 00:18:10,880
Speaker 7: against the dollar, possibly even being in a better situation

376
00:18:10,960 --> 00:18:13,400
Speaker 7: next year than the US. How much do you think

377
00:18:13,440 --> 00:18:16,040
Speaker 7: the dollar has to run here if you do see

378
00:18:16,080 --> 00:18:19,560
Speaker 7: this uncertainty pushing people toward the world's currency and you

379
00:18:19,600 --> 00:18:22,520
Speaker 7: also see a stronger than expected outcome in the economy.

380
00:18:22,520 --> 00:18:25,040
Speaker 3: There, yeah, well you have it. You have this much

381
00:18:25,080 --> 00:18:28,800
Speaker 3: more resilience in the US economy. You have Germany in recession.

382
00:18:28,840 --> 00:18:31,000
Speaker 3: You have the ECB bringing down its grawthfuecasts for the

383
00:18:31,000 --> 00:18:35,080
Speaker 3: Eurozone last week, and in fact they still look optimistic

384
00:18:35,080 --> 00:18:37,600
Speaker 3: compared with our forecast for next year. So you have

385
00:18:37,680 --> 00:18:40,080
Speaker 3: all of these issues. You've got the e elections in June.

386
00:18:40,440 --> 00:18:42,879
Speaker 3: You're going to have to see concessions made towards the

387
00:18:42,880 --> 00:18:45,320
Speaker 3: far right. And when I say the far right, there

388
00:18:45,359 --> 00:18:47,240
Speaker 3: is a little bit of a difference here because many

389
00:18:47,240 --> 00:18:49,520
Speaker 3: of these what we would say far right in Europe.

390
00:18:49,560 --> 00:18:51,680
Speaker 3: Yes they might be anti immigration, yes they may be

391
00:18:51,760 --> 00:18:55,119
Speaker 3: really nationalistic when it comes to cultural concerns, but actually

392
00:18:55,200 --> 00:18:58,400
Speaker 3: they have often little left wing tendencies in their fiscal policy.

393
00:18:58,520 --> 00:19:00,720
Speaker 3: So then you get concerns about the debt out. You've

394
00:19:00,720 --> 00:19:05,080
Speaker 3: got German, sorry, Italy and Spain's debt rising already through

395
00:19:05,119 --> 00:19:07,840
Speaker 3: some of the parameters that the EU would prefer. Does

396
00:19:07,840 --> 00:19:09,760
Speaker 3: that mean there's going to be a debt crisis? Well no,

397
00:19:10,320 --> 00:19:11,879
Speaker 3: But does it mean to say that people are going

398
00:19:11,920 --> 00:19:15,800
Speaker 3: to start wondering about the debt and being concerned about

399
00:19:15,840 --> 00:19:16,200
Speaker 3: that debt?

400
00:19:16,440 --> 00:19:16,960
Speaker 4: Well yes.

401
00:19:17,320 --> 00:19:20,399
Speaker 3: So I think there's lots of economic factors really facing

402
00:19:20,520 --> 00:19:22,280
Speaker 3: the Eurozone in the next you know, which are going

403
00:19:22,280 --> 00:19:23,800
Speaker 3: to come to the fore in the next twelve months,

404
00:19:23,800 --> 00:19:25,639
Speaker 3: and I think the euro is going to be in

405
00:19:25,680 --> 00:19:26,399
Speaker 3: the backfoot a.

406
00:19:26,440 --> 00:19:28,919
Speaker 5: Great pace on the Italian budget coming up very soon

407
00:19:28,960 --> 00:19:30,639
Speaker 5: in the Financial Times this morning worth a read if

408
00:19:30,680 --> 00:19:33,359
Speaker 5: you can get hold of a paper or the online edition. Bradmo,

409
00:19:33,400 --> 00:19:35,680
Speaker 5: I think I've said it a million times already over

410
00:19:35,720 --> 00:19:38,040
Speaker 5: the last two days since we've been here. Europe. What

411
00:19:38,119 --> 00:19:40,600
Speaker 5: a tough spot for the Europeans soun pretty much every

412
00:19:40,600 --> 00:19:43,320
Speaker 5: single topic we're talking about right now, including.

413
00:19:42,880 --> 00:19:44,800
Speaker 7: This one, and this to me is really going to

414
00:19:44,800 --> 00:19:47,919
Speaker 7: be a question going forward of how you unify a

415
00:19:48,000 --> 00:19:51,639
Speaker 7: place with all of these very idiosyncratic stories, including in Italy.

416
00:19:52,000 --> 00:19:54,840
Speaker 1: Twenty seconds, what's your ural call? Then let's go from

417
00:19:54,880 --> 00:19:57,920
Speaker 1: high minded climate analysis three years, give me a euro

418
00:19:58,080 --> 00:19:59,080
Speaker 1: call us six months.

419
00:19:59,160 --> 00:20:02,000
Speaker 3: We need to revise it because our forecast for now

420
00:20:02,080 --> 00:20:04,560
Speaker 3: was one of six and we're nearly there. So you know,

421
00:20:04,800 --> 00:20:05,760
Speaker 3: I haven't got around.

422
00:20:05,520 --> 00:20:07,120
Speaker 4: To our last year.

423
00:20:08,000 --> 00:20:11,440
Speaker 3: I would say parity next year will be being talked about.

424
00:20:13,040 --> 00:20:15,960
Speaker 5: Thank you here, Jane Filey back to parents. It's tradable,

425
00:20:16,080 --> 00:20:17,120
Speaker 5: Jane Fully of Rather Bank.

426
00:20:27,520 --> 00:20:28,520
Speaker 2: We follow under.

427
00:20:28,400 --> 00:20:32,360
Speaker 1: Other central bank discussions, Simon French Chief economist Palmer Gordon

428
00:20:33,000 --> 00:20:36,560
Speaker 1: has been just wonderful with his experience in the British

429
00:20:36,600 --> 00:20:39,960
Speaker 1: government of framing out a governor of the Bank of

430
00:20:39,960 --> 00:20:42,840
Speaker 1: England who said, well, we're not going to declare victory.

431
00:20:42,480 --> 00:20:44,560
Speaker 2: And boys the news come down the pipeline.

432
00:20:44,600 --> 00:20:49,199
Speaker 1: Since since Bailey said that what are the ramifications of

433
00:20:49,400 --> 00:20:51,639
Speaker 1: higher interest rates in the United States?

434
00:20:51,840 --> 00:20:54,880
Speaker 6: In the United Kingdom, we think there's about sixty percent

435
00:20:54,960 --> 00:20:57,639
Speaker 6: of the five hundred and fifteen basis points delivered by

436
00:20:57,680 --> 00:21:00,480
Speaker 6: the Bank of England still to crystallize, principally for household

437
00:21:00,520 --> 00:21:03,879
Speaker 6: sector in the UK. And that lagged defect is an

438
00:21:03,880 --> 00:21:07,800
Speaker 6: elongated lag from previous economic cycles where the structure of

439
00:21:07,840 --> 00:21:10,800
Speaker 6: the UK housing market, secured debt market was very different.

440
00:21:11,400 --> 00:21:14,080
Speaker 6: And that is why I think Andrew Bailey has a

441
00:21:14,119 --> 00:21:16,920
Speaker 6: really difficult task on his hands later in the week,

442
00:21:17,040 --> 00:21:20,760
Speaker 6: because all the indicators I'm seeing is with that long

443
00:21:20,840 --> 00:21:23,200
Speaker 6: lead in time and the majority the impulse still to come,

444
00:21:23,400 --> 00:21:27,600
Speaker 6: we're seeing quite a rapid slow down in payroll wage inflation.

445
00:21:27,720 --> 00:21:30,919
Speaker 6: We're seeing a slow down in core inflation. With the

446
00:21:31,119 --> 00:21:34,400
Speaker 6: eighteen month two year lag whatever frame, we think it'll

447
00:21:34,440 --> 00:21:36,760
Speaker 6: peak around Q four, twenty twenty four. In terms of

448
00:21:36,840 --> 00:21:39,760
Speaker 6: the tightening of financial conditions of the households. He knows

449
00:21:39,800 --> 00:21:42,480
Speaker 6: that he sees the inflation picture coming down, and yet

450
00:21:42,520 --> 00:21:46,119
Speaker 6: he's allowed market to guide the policy expectations rather than

451
00:21:46,160 --> 00:21:46,520
Speaker 6: lead them.

452
00:21:46,560 --> 00:21:49,200
Speaker 1: The Durham you were steeped in the economic history of

453
00:21:49,240 --> 00:21:53,000
Speaker 1: all this. How close is the United Kingdom Bailey analog

454
00:21:53,240 --> 00:21:57,880
Speaker 1: to the United States Powell analog? How separate are those discussions?

455
00:21:58,040 --> 00:22:00,600
Speaker 6: I think they're really separate, actually, And I think last

456
00:22:00,600 --> 00:22:02,000
Speaker 6: time I was on the show, I talked about the

457
00:22:02,000 --> 00:22:05,840
Speaker 6: biggest decoupling of the policy environment in Europe from the

458
00:22:05,920 --> 00:22:09,160
Speaker 6: United States. But it's not just the pathway, it's also

459
00:22:09,359 --> 00:22:11,560
Speaker 6: the management of market expectations.

460
00:22:11,600 --> 00:22:11,840
Speaker 4: Here.

461
00:22:12,720 --> 00:22:16,840
Speaker 6: We've had some speeches from the MPC, the Munty Policy Committee,

462
00:22:16,880 --> 00:22:19,600
Speaker 6: from the Chief economist que Pill in South Africa about

463
00:22:19,600 --> 00:22:23,199
Speaker 6: ten days ago talking about a potential plateau, but the

464
00:22:23,240 --> 00:22:26,720
Speaker 6: market basically didn't believe that and sees the likelihod of

465
00:22:26,720 --> 00:22:28,960
Speaker 6: a twenty five base AP pointed eighty percent. As I

466
00:22:29,040 --> 00:22:32,120
Speaker 6: left my terminal earlier. That is not where the Bank

467
00:22:32,119 --> 00:22:33,640
Speaker 6: of England wants to be if it's going to carve

468
00:22:33,640 --> 00:22:36,280
Speaker 6: out a narrative base on the latest data points, which

469
00:22:36,320 --> 00:22:40,520
Speaker 6: is still quite a rapid sharpening of economic momentum and

470
00:22:40,560 --> 00:22:42,040
Speaker 6: also price setting behavior in the UK.

471
00:22:42,119 --> 00:22:44,080
Speaker 5: I won't allow the point you're making to get lost.

472
00:22:44,160 --> 00:22:47,120
Speaker 5: This is so important. I landed here over the weekend.

473
00:22:47,520 --> 00:22:49,719
Speaker 5: I read the recent communication from the Bank of England.

474
00:22:50,040 --> 00:22:53,119
Speaker 5: Then I looked at all the economics economists expectations and

475
00:22:53,119 --> 00:22:55,560
Speaker 5: they were saying hike, and the Bank of England was

476
00:22:55,560 --> 00:22:58,280
Speaker 5: basically saying we're not hiking. And I couldn't make sense

477
00:22:58,320 --> 00:23:00,919
Speaker 5: of it. Are you saying the threat needle straight as

478
00:23:00,920 --> 00:23:03,439
Speaker 5: a massive credibility problem at the moment and basically the

479
00:23:03,440 --> 00:23:04,320
Speaker 5: markets are in charge?

480
00:23:04,440 --> 00:23:06,280
Speaker 6: Yes, I am. I think they're getting the wrong sort

481
00:23:06,320 --> 00:23:09,359
Speaker 6: of criticism. They're getting criticism for being too slow in

482
00:23:09,480 --> 00:23:11,560
Speaker 6: terms of take off from the policy path. But actually

483
00:23:11,560 --> 00:23:13,680
Speaker 6: they moved earlier than the FED, they moved earlier than

484
00:23:13,760 --> 00:23:17,199
Speaker 6: the ECB. Actually it has been the communications through this

485
00:23:17,280 --> 00:23:19,800
Speaker 6: cycle part of it's been quite cumbersome in terms of,

486
00:23:20,320 --> 00:23:23,560
Speaker 6: you know, getting into the wage bard beginning negotiation, the

487
00:23:23,560 --> 00:23:26,520
Speaker 6: profit margin negotiation with corporates, with the household sector. That's

488
00:23:26,560 --> 00:23:28,560
Speaker 6: not the role as I see it, of central banks.

489
00:23:28,840 --> 00:23:31,440
Speaker 6: Central banks, if you see a dislocation between the way

490
00:23:31,480 --> 00:23:35,000
Speaker 6: the market is pricing your optimal path monetary policy for

491
00:23:35,040 --> 00:23:38,359
Speaker 6: financial conditions, you intervene and it can be quite close

492
00:23:38,440 --> 00:23:41,120
Speaker 6: to a policy meeting, which is to Tom's question about

493
00:23:41,160 --> 00:23:44,359
Speaker 6: the decoupling between the Bailey led Bank of England and

494
00:23:44,400 --> 00:23:48,919
Speaker 6: the FED. The Power led Fed, they've been reactive, not

495
00:23:49,000 --> 00:23:51,560
Speaker 6: proactive in terms of managing expectations for this meeting, and

496
00:23:51,600 --> 00:23:53,880
Speaker 6: it's been a regular pattern, unfortunately over the last eighteen months.

497
00:23:54,000 --> 00:23:55,560
Speaker 5: So even though you don't think they should, do you

498
00:23:55,560 --> 00:23:57,280
Speaker 5: think they will hike on Thursday.

499
00:23:58,000 --> 00:24:00,159
Speaker 6: It's difficult, isn't it. I remember very clear that my

500
00:24:00,280 --> 00:24:02,280
Speaker 6: reading of the data, and look, I don't want to

501
00:24:02,280 --> 00:24:03,800
Speaker 6: sit here and pretend that you know, I have a

502
00:24:03,800 --> 00:24:06,560
Speaker 6: better reading than the nine members of the Mounted Policy Committee,

503
00:24:06,600 --> 00:24:08,840
Speaker 6: but I do think that the market has allowed itself

504
00:24:09,240 --> 00:24:12,440
Speaker 6: to get expectations of a RATAG that I think the

505
00:24:12,520 --> 00:24:15,560
Speaker 6: Managing Policy Committee probably look at the latest and the

506
00:24:15,560 --> 00:24:18,760
Speaker 6: most timely indicator of core inflation and wages, which they

507
00:24:18,800 --> 00:24:21,280
Speaker 6: set out their August Manety Policy Report with their key

508
00:24:21,320 --> 00:24:24,320
Speaker 6: data points. Those have slowed in July, those have slowed

509
00:24:24,359 --> 00:24:27,200
Speaker 6: in August. That's the new data that's come into the marketplace.

510
00:24:27,640 --> 00:24:30,200
Speaker 6: Taking account of that, there's time. There's only six weeks

511
00:24:30,280 --> 00:24:32,000
Speaker 6: till the next policy meeting when they'll have a new

512
00:24:32,040 --> 00:24:35,639
Speaker 6: set of economic forecasts. You can pause that one out.

513
00:24:36,040 --> 00:24:38,480
Speaker 6: You can say we're aligning ourselves with the potential pause

514
00:24:38,520 --> 00:24:40,760
Speaker 6: in the US and in the Eurozone and not be

515
00:24:40,800 --> 00:24:42,920
Speaker 6: an outlier. You don't want to be a monetary policy

516
00:24:42,920 --> 00:24:43,720
Speaker 6: outlier in the UK.

517
00:24:44,160 --> 00:24:47,840
Speaker 7: There is a question though, about a reacceleration inflation, especially

518
00:24:47,880 --> 00:24:50,040
Speaker 7: on the heels of oil prices that have been climbing.

519
00:24:50,320 --> 00:24:53,240
Speaker 7: We just got news from Canada that inflation came in

520
00:24:53,280 --> 00:24:56,080
Speaker 7: at four percent year over year in August versus a

521
00:24:56,160 --> 00:24:59,879
Speaker 7: three point eight percent estimate. We have seen this again

522
00:25:00,240 --> 00:25:03,679
Speaker 7: and again. What's to say that there isn't something underpinning

523
00:25:03,720 --> 00:25:06,800
Speaker 7: those inflation figures that will reaccelerate that does warrant what

524
00:25:06,840 --> 00:25:09,000
Speaker 7: we heard from Jennifer McEwan, which is a fifty basis

525
00:25:09,000 --> 00:25:10,960
Speaker 7: point rate hike at Thursday's meeting.

526
00:25:11,280 --> 00:25:14,359
Speaker 6: You speak to exactly why in extra six weeks is

527
00:25:14,440 --> 00:25:17,639
Speaker 6: most valuable, because those oil price assumptions were seeing similar

528
00:25:17,680 --> 00:25:20,840
Speaker 6: turbulence in soft commodity markets are leading indicator of food

529
00:25:20,880 --> 00:25:25,199
Speaker 6: price inflation. The bank having redes its forecasts in the

530
00:25:25,200 --> 00:25:27,240
Speaker 6: first week of November, in fact it does it in

531
00:25:27,320 --> 00:25:30,119
Speaker 6: late October, it will have at its disposal for the

532
00:25:30,240 --> 00:25:33,200
Speaker 6: MPC the type of impulse that will come through from

533
00:25:33,200 --> 00:25:36,199
Speaker 6: those higher prices in terms of headline inflation and the

534
00:25:36,240 --> 00:25:39,000
Speaker 6: potential second order effects in terms of core price setting.

535
00:25:39,520 --> 00:25:43,320
Speaker 6: Why would you not give yourself the optionality of an

536
00:25:43,320 --> 00:25:46,240
Speaker 6: extra six weeks to appraise those leading indicators but also

537
00:25:46,760 --> 00:25:49,040
Speaker 6: model the impact of those core inputs.

538
00:25:49,160 --> 00:25:51,399
Speaker 7: If what you said earlier, though, is true that this

539
00:25:51,520 --> 00:25:53,840
Speaker 7: is a central bank that has lost credibility and lost

540
00:25:53,880 --> 00:25:56,520
Speaker 7: the plot, then wouldn't you see a pound that just

541
00:25:56,560 --> 00:25:58,760
Speaker 7: weakens dramatically if they were to do that, if they

542
00:25:58,760 --> 00:26:01,240
Speaker 7: were to pause, even in the face of people saying

543
00:26:01,359 --> 00:26:03,320
Speaker 7: you need to hike, and you need to hike more aggressively.

544
00:26:03,680 --> 00:26:06,000
Speaker 6: But my reading of the way people are trading sterling,

545
00:26:06,040 --> 00:26:09,800
Speaker 6: it's not based on a spread of central bank policy rates.

546
00:26:09,880 --> 00:26:12,840
Speaker 6: It's spread of credibility. If you do a credible pause,

547
00:26:13,080 --> 00:26:16,159
Speaker 6: you enhance your credibility. I'd expect Sterling to strengthen against

548
00:26:16,600 --> 00:26:19,159
Speaker 6: its major pairs. Against that backdrop, if you deliver a

549
00:26:19,200 --> 00:26:22,040
Speaker 6: message that says, we understand how this economy is evolving.

550
00:26:22,440 --> 00:26:25,199
Speaker 6: We're in front of the data. We're guiding the market

551
00:26:25,560 --> 00:26:28,879
Speaker 6: rather than being reactive to each each bit of pricing

552
00:26:28,880 --> 00:26:29,399
Speaker 6: that they're seeing.

553
00:26:29,400 --> 00:26:31,639
Speaker 1: We've got a bunch of thugs asking questions at your

554
00:26:31,680 --> 00:26:33,200
Speaker 1: own power here tomorrow?

555
00:26:33,240 --> 00:26:35,720
Speaker 2: What question would you ask your own power?

556
00:26:35,840 --> 00:26:40,000
Speaker 6: Well, I'd be fascinated to see what themc come out

557
00:26:40,160 --> 00:26:42,159
Speaker 6: in terms of long term our star. I think for

558
00:26:42,200 --> 00:26:44,159
Speaker 6: me that's the key data point in the summary of

559
00:26:44,200 --> 00:26:47,320
Speaker 6: economic projections we get. Do they believe it's still in

560
00:26:47,320 --> 00:26:48,440
Speaker 6: that two and a half to three and a half

561
00:26:48,440 --> 00:26:51,680
Speaker 6: percent range? Given all the way out to two years

562
00:26:51,720 --> 00:26:55,240
Speaker 6: we're seeing potential FED funds raided north of five. Have

563
00:26:55,280 --> 00:26:58,240
Speaker 6: we reached a situation where actually the FMC have got

564
00:26:58,240 --> 00:27:01,040
Speaker 6: to throw in the towel in terms of long and

565
00:27:01,080 --> 00:27:04,200
Speaker 6: the repricing that that would have across equity markets, fixed

566
00:27:04,200 --> 00:27:05,000
Speaker 6: income markets.

567
00:27:04,760 --> 00:27:07,000
Speaker 4: That's WoT do you think they're ready to do that?

568
00:27:07,720 --> 00:27:09,840
Speaker 6: Ask the question you might get you might be surprised

569
00:27:09,880 --> 00:27:12,199
Speaker 6: by their propensity.

570
00:27:12,760 --> 00:27:15,520
Speaker 5: Just didn't seem wanted to go there in Jackson hole

571
00:27:16,160 --> 00:27:17,040
Speaker 5: in the speech, he's.

572
00:27:17,040 --> 00:27:21,200
Speaker 6: The skill of the Bloomberg team better yes than I am.

573
00:27:21,760 --> 00:27:24,960
Speaker 5: Williams will go there? The New York Fed President. What's

574
00:27:24,960 --> 00:27:26,520
Speaker 5: the guy that you would take from a man like

575
00:27:26,560 --> 00:27:27,840
Speaker 5: that on where this might be going?

576
00:27:28,920 --> 00:27:34,200
Speaker 6: Uh influence. So the degree with which a debate you're

577
00:27:34,280 --> 00:27:36,959
Speaker 6: right almost certainly, you know j Power is far too

578
00:27:37,000 --> 00:27:40,200
Speaker 6: good an operator to to even get tempted into that debate.

579
00:27:40,440 --> 00:27:42,280
Speaker 6: The degree to which other members of the f MC

580
00:27:42,720 --> 00:27:45,560
Speaker 6: can start to frame that debate and say, actually, part

581
00:27:45,720 --> 00:27:48,919
Speaker 6: of and we've seen financial conditions loosened quite appreciably in

582
00:27:48,960 --> 00:27:52,240
Speaker 6: the US economy. Part of keeper yeah, part of keeping

583
00:27:52,280 --> 00:27:55,160
Speaker 6: those elevated actually is to have that debate in public

584
00:27:55,720 --> 00:27:58,520
Speaker 6: such the markets can understand what that pathway is for

585
00:27:58,560 --> 00:28:00,720
Speaker 6: long term master in the economy, because at the moment,

586
00:28:00,760 --> 00:28:02,800
Speaker 6: the summary of economic projections do not tell you that story.

587
00:28:02,920 --> 00:28:06,240
Speaker 1: Lazayne Sanders was brilliant on this yesterday, John looking at

588
00:28:06,280 --> 00:28:11,040
Speaker 1: the Bloomberg financial conditions as next it's screaming accommodation right now.

589
00:28:11,080 --> 00:28:14,159
Speaker 5: This speaks to a phrase that Lisa used reacceleration, and

590
00:28:14,200 --> 00:28:16,320
Speaker 5: I think we're talking about the UK at the time

591
00:28:16,720 --> 00:28:19,199
Speaker 5: in that conversation, and that part of this conversation the

592
00:28:19,280 --> 00:28:21,919
Speaker 5: prospect of reacceleration in the US. Something that we've heard

593
00:28:21,920 --> 00:28:24,639
Speaker 5: a few times from various guests is this current disinflationary

594
00:28:24,640 --> 00:28:28,080
Speaker 5: trend is transitory? Would you go that far?

595
00:28:29,000 --> 00:28:33,399
Speaker 6: All the dangers of using that word. Look, there is

596
00:28:33,480 --> 00:28:35,400
Speaker 6: no doubt. I mean, if we're talking in the context

597
00:28:35,400 --> 00:28:37,760
Speaker 6: of the US economy, the oil price is more significant.

598
00:28:38,160 --> 00:28:41,080
Speaker 6: Actually domestically in the UK, the gas price is more significant,

599
00:28:41,080 --> 00:28:44,400
Speaker 6: which hasn't taken place and hasn't moved up in the

600
00:28:44,440 --> 00:28:49,080
Speaker 6: same way. Would I Look, central banks have carved out

601
00:28:49,080 --> 00:28:50,960
Speaker 6: in the last six to nine months of focus on

602
00:28:51,120 --> 00:28:54,280
Speaker 6: core inflation, and therefore are we now going to sort

603
00:28:54,280 --> 00:28:56,760
Speaker 6: of pivot back to focusing on headline inflation and give

604
00:28:56,760 --> 00:28:58,680
Speaker 6: them the impulse seems to be through the oil and

605
00:28:58,680 --> 00:29:01,200
Speaker 6: commodity markets. It's going to be the first order impact

606
00:29:01,200 --> 00:29:03,240
Speaker 6: and pushing headline it means like you it feels like

607
00:29:03,280 --> 00:29:07,120
Speaker 6: you're moving the target every single time the data doesn't

608
00:29:07,200 --> 00:29:09,520
Speaker 6: conform to your narrative. That's a very we're talking about

609
00:29:09,520 --> 00:29:12,600
Speaker 6: credibility to about the credibility of central banks. You've got

610
00:29:12,640 --> 00:29:14,760
Speaker 6: to be consistent through the cycle, not just to fit

611
00:29:14,760 --> 00:29:15,280
Speaker 6: your narrative.

612
00:29:15,320 --> 00:29:16,800
Speaker 5: If I could put you in a press conference right

613
00:29:16,800 --> 00:29:18,160
Speaker 5: and now, it wouldn't be the FEDS, it would be

614
00:29:18,960 --> 00:29:21,840
Speaker 5: the next Bank of England. Yeah, decision in a couple

615
00:29:21,880 --> 00:29:24,840
Speaker 5: of months time. That decision is it November? The November

616
00:29:24,840 --> 00:29:26,520
Speaker 5: one with the news conference that is going to be

617
00:29:26,840 --> 00:29:28,760
Speaker 5: what are those forecasts going to look like for inflation?

618
00:29:28,800 --> 00:29:29,240
Speaker 4: Do you think?

619
00:29:29,400 --> 00:29:29,720
Speaker 1: Well?

620
00:29:29,840 --> 00:29:31,880
Speaker 6: In terms of that, this is why it's the opportunity

621
00:29:31,880 --> 00:29:34,440
Speaker 6: to talk about how the relevance of gas, wholesale gas

622
00:29:34,480 --> 00:29:37,360
Speaker 6: in the UK economy being the more relevant one. Actually,

623
00:29:37,720 --> 00:29:43,440
Speaker 6: I suspect the expectations for inflation will actually be lower

624
00:29:43,480 --> 00:29:45,440
Speaker 6: for twenty twenty four that we saw last week from

625
00:29:45,440 --> 00:29:48,600
Speaker 6: the ECB. Remember what spooked the markets in terms of

626
00:29:48,960 --> 00:29:51,640
Speaker 6: a north of three percent inflation print in the Eurozone

627
00:29:51,640 --> 00:29:54,440
Speaker 6: in twenty twenty four we go from the OECD to

628
00:29:54,480 --> 00:29:56,360
Speaker 6: day two point nine percent in the UK. I think

629
00:29:56,400 --> 00:29:58,560
Speaker 6: the bank will back into that forecast, a sub three

630
00:29:58,600 --> 00:30:02,360
Speaker 6: percent forecast for CPI because of the relevance of gas,

631
00:30:02,360 --> 00:30:05,760
Speaker 6: which on the two year curve is about eighty percent

632
00:30:05,880 --> 00:30:08,200
Speaker 6: lower than it was in the summer of twenty twenty two,

633
00:30:08,200 --> 00:30:11,280
Speaker 6: when UK macro became the front page story. We had

634
00:30:11,800 --> 00:30:14,240
Speaker 6: Yellen talking about it. We told Larry Summers talking about

635
00:30:14,240 --> 00:30:16,200
Speaker 6: it because the mini budget. But it was not just

636
00:30:16,240 --> 00:30:18,640
Speaker 6: the mini budget. It was the dislocation of gas prices

637
00:30:18,640 --> 00:30:21,000
Speaker 6: and how impact that is on reel incomes in the UK.

638
00:30:21,080 --> 00:30:24,000
Speaker 1: You're talking natural gas, natural gas. In America we would

639
00:30:24,040 --> 00:30:25,120
Speaker 1: say petrol.

640
00:30:25,320 --> 00:30:26,080
Speaker 2: I mean petrol.

641
00:30:26,200 --> 00:30:28,480
Speaker 5: We confuse that we see gasoline.

642
00:30:28,240 --> 00:30:31,880
Speaker 6: And I allow you to translate my narrative, Tom and

643
00:30:32,000 --> 00:30:33,840
Speaker 6: keep up with In London, I did the.

644
00:30:36,320 --> 00:30:37,920
Speaker 2: Leader of Gas two hours ago.

645
00:30:37,920 --> 00:30:40,040
Speaker 1: We were talking about where does it hurt in the

646
00:30:40,120 --> 00:30:43,040
Speaker 1: United Kingdom, like where will it actually affect Bank of

647
00:30:43,600 --> 00:30:47,600
Speaker 1: England There it is John seven fifty two dollars per lease.

648
00:30:47,880 --> 00:30:50,280
Speaker 5: So I also company, I spell leader. It's the one

649
00:30:50,360 --> 00:30:53,680
Speaker 5: year anniversary of the mini budget, isn't it? It's Saturday?

650
00:30:53,800 --> 00:30:56,440
Speaker 5: It is Simon, thank you. Always a pleasure. I always

651
00:30:56,520 --> 00:30:58,840
Speaker 5: learned something Simon French. There of panroa Ordan.

652
00:30:59,360 --> 00:31:03,240
Speaker 1: Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify and

653
00:31:03,360 --> 00:31:07,520
Speaker 1: anywhere else you get your podcasts. Listen live every weekday

654
00:31:07,800 --> 00:31:11,320
Speaker 1: starting at seven am Easter. I'm Bloomberg dot Com, the

655
00:31:11,440 --> 00:31:13,800
Speaker 1: iHeartRadio app tune In.

656
00:31:13,960 --> 00:31:15,400
Speaker 2: And the Bloomberg Business app.

657
00:31:15,840 --> 00:31:19,520
Speaker 1: You can watch us live on Bloomberg Television and always

658
00:31:19,920 --> 00:31:21,120
Speaker 1: I'm the Bloomberg Terminal.

659
00:31:21,520 --> 00:31:22,440
Speaker 2: Thanks for listening.

660
00:31:22,920 --> 00:31:25,680
Speaker 1: I'm Tom Keen, and this is Bloomberg