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Speaker 1: Good morning.

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Speaker 2: It's Thursday, the twenty first of September here in London.

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Speaker 2: This is the Bloomberg Daybreak podcast.

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Speaker 3: I'm Caroline Hepka.

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Speaker 4: And I'm Stephen Carroll. Coming up today, the Fed tells

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Speaker 4: markets borrowing costs must remain higher for longer as policymakers

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Speaker 4: opt for a hawkish hold.

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Speaker 2: The prospect of a Bank of England rate hike later

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Speaker 2: today remains on a knife edge as inflation unexpectedly cools.

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Speaker 4: And we take a closer look at one of Europe's

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Speaker 4: hottest housing markets. And no it's not London or Paris.

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Speaker 2: Let's start with a round up of our top stories.

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Speaker 4: JP Morgan boss Jamie Diamonds says the Fed may have

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Speaker 4: to keep increasing interest rates in the months ahead to

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Speaker 4: combat persistent inflation. The warning from the head of America's

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Speaker 4: biggest bank comes after FED policymakers left rates unchanged and

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Speaker 4: indicated the possibility of one more hike this year. Federal

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Speaker 4: Reserve charge your own pals as renewed US economic strength

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Speaker 4: means borrowing costs must remain higher for longer.

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Speaker 3: Prepared to raise rates further if appropriate, and we intend

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Speaker 3: to hold policy at a restrictive level until We're confident

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Speaker 3: that inflation is moving down sustainably toward our objective.

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Speaker 4: Jerome Powell went on to tele reporters that an economic

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Speaker 4: soft landing is a primary objective for the central Bank.

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Speaker 4: Those comments were echoed in the FADS projections for inflation

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Speaker 4: to fall below three percent next year and return to

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Speaker 4: the two percent target by twenty twenty six.

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Speaker 2: The Bank of England's rate setters decide how much further

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Speaker 2: Britain's fastest hiking cycle in decades goes later today. Yesterday's

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Speaker 2: surprise drop in inflation has made it a close run

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Speaker 2: event for Bloomberg's senior UK economist Dan Hanson.

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Speaker 3: You've got services inflation surprising to the downside, you've got

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Speaker 3: the economy weakening, and you've got the unemployment rate rising

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Speaker 3: for lost than they expect. So there's a lot of

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Speaker 3: dubbish news on the data front, other than the pay

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Speaker 3: growth data. But I think on balance the bank is

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Speaker 3: going to lean towards probably just doing one more just

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Speaker 3: on inch, essentially on inch.

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Speaker 5: Hearance grounds well.

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Speaker 2: Like Dan Hanson, Goldman and the MURA reacted to the

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Speaker 2: inflation data. They have swapped their calls from a twenty

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Speaker 2: five basis point rate hike to no change. Bets are

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Speaker 2: now split fifty to fifty across the markets between the

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Speaker 2: two outcomes, paving the way for a volatile market on

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Speaker 2: the decision.

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Speaker 4: General Electric and Saffran say thousands of fake aircraft parts

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Speaker 4: have been sold under the Marcus Bloomberg's Ewan Parts has

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Speaker 4: the story.

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Speaker 6: This iepopping saga all started when Bloomberg first reported an

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Speaker 6: obscure UK based company had been forging documentation on jet

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Speaker 6: engine repair parts. Now a London corters ordered AOG Techniques

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Speaker 6: to hand over documentation relating to every single sale it's made.

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Speaker 6: Lawyers for engine makers, Saffran and General Electrics say there

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Speaker 6: is documentary evidence that thousands of bogus jets engine parts

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Speaker 6: were sold by AOG their destination airlines and maintenance companies

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Speaker 6: all around the world. AOG hasn't responded to requests for comments.

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Speaker 6: The London trial can continues in London. I'm YOUU and

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Speaker 6: pots Bloomberger Radio.

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Speaker 2: Saudi Arabia is getting closer every day to a landmark

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Speaker 2: deal normalizing diplomatic relations with Israel. That's according to the

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Speaker 2: Crown Prince Muhammed bin Salman. He also warns that If

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Speaker 2: Iran gets a nuclear weapon, the Kingdom will follow.

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Speaker 1: For us, the Pertestinian issue is very important. We need

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Speaker 1: to solve that part and we have good negotiations continue

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Speaker 1: till now. We got to see where it will go.

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Speaker 1: We hope that it will bleach a place, that it

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Speaker 1: will ease the life of the Pedestinians and get Israel

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Speaker 1: as a player middle East. Every day we get closer.

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Speaker 1: It seems it's for the first time a real one serious.

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Speaker 1: We got to see how it goes.

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Speaker 2: That was Muhammad bin Salman speaking in a rare television

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Speaker 2: interview with the US's Fox News.

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Speaker 4: Ukraine's present vlage Mazelenski is met with US financial leaders,

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Speaker 4: including Ken Griffin and Bill Ackman, to discuss using private

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Speaker 4: sector funds to help rebuild his country. The gathering at

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Speaker 4: Ukraine's mission to the United Nations comes after Zelenski warned

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Speaker 4: Moscow's invasion undermined international norms.

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Speaker 7: Most of the world recognizes the truth about this war.

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Speaker 7: It's a criminal and unprovoked aggression by Russia against our nation,

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Speaker 7: aimed at seizing Ukraine's territory and resources. And I'm grateful

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Speaker 7: to all those who have recognized the Russian aggression as

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Speaker 7: the violation of the UN Charter.

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Speaker 4: The words of Vladimir Zelensky, they're spoken by a translator.

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Speaker 4: The Ukrainian leader's trip to the United Nations comes as

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Speaker 4: Poland announced that it stopped supplying weapons to the country.

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Speaker 4: The decision threatens a key alliance in Kiev's fight against Russia,

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Speaker 4: and follows a growing dispute over warsaw's decision to ban

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Speaker 4: Ukrainian grain imports.

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Speaker 2: Okay, those are a few of our top stories for

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Speaker 2: you this morning. On the markets, the MSCI Asia Pacific

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Speaker 2: index is one point six percent, Your stocks fifty futures

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Speaker 2: are also down one point one percent, and the ten

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Speaker 2: year treasury yield trades up two basis points at four

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Speaker 2: point four to three percent.

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Speaker 4: Karl and I've been fascinated by the details of the

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Speaker 4: state dinner in France for King Charles in the Shutow

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Speaker 4: Versailles yesterday evening. Stunning guest list. Obviously, as you might expect,

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Speaker 4: a few well known names Hugh Grant mc jagger, Charlotte

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Speaker 4: Gainsboor was there as well.

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Speaker 2: Donnie Outfitz too.

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Speaker 4: Well indeed, and some big business names to Bell. I'll know, Delphine,

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Speaker 4: I'll know as well, and her partner is Zavignelle, also

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Speaker 4: very well known in the business world.

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Speaker 3: Two.

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Speaker 4: King Charles speaking in French, talking of bringing new life

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Speaker 4: to the friendship between France and Britain, the manual of Macron,

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Speaker 4: talking about intertwined destinies and the food, which is really

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Speaker 4: what interests me, if I'm completely honest. That's that's that's

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Speaker 4: kind of the headline things that you might need to know. However,

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Speaker 4: I was interested in what they were eating. So there

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Speaker 4: was a breast chicken that was being served, and there

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Speaker 4: was blue lobster as well. There was French and British

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Speaker 4: cheese as served too, and macarons from Pierre Elmey, which

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Speaker 4: Caroline you have tried because I brought them back for

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Speaker 4: you from Parasite.

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Speaker 2: I know, I feel very honored, you know, fit for

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Speaker 2: kings and queens. These macaroons extremely delicious. Yeah, and I

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Speaker 2: think also I think it's taken people by surprise that

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Speaker 2: this state visit has had such an impact. You know,

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Speaker 2: that King Charles and Queen Camilla were given such a

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Speaker 2: warm welcome, and that Charles has been sort of the

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Speaker 2: face of soft power for Britain. I think in some

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Speaker 2: ways that was a little bit unexpected, but he did

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Speaker 2: something quite similar in Germany now in France, and this

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Speaker 2: of course after the groundwork being laid by Rishi Sunac

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Speaker 2: trying to kind of revive ties between the UK and

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Speaker 2: France after difficult years under Boris Johnson. So yeah, I

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Speaker 2: think it's really significant. I think it's taken the British

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Speaker 2: media a bit by surprise how much attention it got

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Speaker 2: in France.

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Speaker 4: I mean, for given francis history with royals, their coverage

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Speaker 4: of the British royal family is always very interesting to

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Speaker 4: watch as well. Did you seem quite fascinated by the

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Speaker 4: events of what happens in the royal family Here? Let's

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Speaker 4: turn back two matters perhaps more sensible now and talk

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Speaker 4: about the Central Bank decisions. Jerome pal saying the Fed

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Speaker 4: will proceed carefully, delivering the message that rates will stay.

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Speaker 6: Higher for longer.

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Speaker 4: The markets, meanwhile, are split over whether or not the

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Speaker 4: Bank of England will raise rates again. Today our chief

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Speaker 4: rights correspond at Garfield Reynolds is with us. Now for

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Speaker 4: more Garfields, let's start with the Fed. Then, Jamie Diamond

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Speaker 4: thinks that the policymakers will have to raise rates further.

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Speaker 4: What did we learn from the new dot plot about

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Speaker 4: where the FOMC ces rates going next.

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Speaker 8: Well, I mean, there's a couple of things that are

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Speaker 8: pretty clear.

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Speaker 2: YEA.

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Speaker 8: One is the FED remains more hawkishly biased than the

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Speaker 8: market is willing to give it credit. For we've only

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Speaker 8: got two meetings left in the year. There was a

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Speaker 8: reasonably strong consensus that they're amongst policy members that they

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Speaker 8: likely to raise twenty five basis points by the end

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Speaker 8: of this year, So it's one of those two meetings,

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Speaker 8: and yet we still only have a little bit less

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Speaker 8: than a sixty percent chance seen in rates markets for

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Speaker 8: a move higher. So that helps to explain the extension

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Speaker 8: of the increase in yields and the potential that that

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Speaker 8: could go further because the market continues to lag behind

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Speaker 8: where the Fed says it's going to go. And the

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Speaker 8: interesting thing there is that, of course, the FED has

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Speaker 8: also been wrong on the downside with a lot of

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Speaker 8: its forecasts when it comes to the rates path over

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Speaker 8: the last few years. So the very real danger is there,

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Speaker 8: both for bond markets and for equity markets, that the

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Speaker 8: FED will indeed go up by one more hike this year,

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Speaker 8: and then that it will hold for it least as

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Speaker 8: long as it seems to be countenancing, maybe even more.

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Speaker 8: You know, during Power was pretty uncertain about the idea

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Speaker 8: that they would actually end up cutting rates next year.

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Speaker 2: Yes, very interesting. So then what is the outlook for

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Speaker 2: the US economy actually the prospects of a soft landing

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Speaker 2: that that sounds more difficult.

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Speaker 8: Yeah, it does sound more difficult. And I think part

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Speaker 8: of the difficulty that the fair is running into, along

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Speaker 8: with investors and economists is they just can't believe that

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Speaker 8: the economy hasn't crashed yet. They've been slamming on the

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Speaker 8: brakes like crazy, and yes, inflation has slowed down somewhat,

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Speaker 8: but the economy hasn't really slowed down. They, on the

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Speaker 8: one hand, they feel like they have to keep going

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Speaker 8: with rate rises. On the other hand, the nagging worry

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Speaker 8: is there that when they finally start to get some traction,

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Speaker 8: they will really get some traction and will end up

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Speaker 8: with a very nasty outcome. So that underscores why Power

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Speaker 8: is saying, we want to get a soft landing, but

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Speaker 8: we can't see a soft landing at the moment as

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Speaker 8: our base case because there are just too many variables

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Speaker 8: in there.

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Speaker 4: And that's turned to the Bank of England, then Garfield

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Speaker 4: yesterday's softer inflation reading, leaving today's decision really on an ipair.

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Speaker 4: A soft landing, I think is something that Throe must

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Speaker 4: still wishful thinking at the Bank of England.

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Speaker 8: Yeah, I think the Bank of England is still trying

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Speaker 8: to work out whether it's going to get any sort

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Speaker 8: of a landing, and if so, just just how hard

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Speaker 8: or soft it might be. But that inflation report this

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Speaker 8: week was so extraordinary and that has to raise the

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Speaker 8: concerns amongst polancy makers and others that precisely they are

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Speaker 8: about to get some real traction. So can they actually decide, hey,

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Speaker 8: we should stop. And the market has gone from being

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Speaker 8: pretty certain of a rate hike too about a coin toss.

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Speaker 8: So that's a big shift, short amount of time for

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Speaker 8: rates markets and pretty much guarantees plenty of volatility whatever

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Speaker 8: they decide. The one your concern about the thing that

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Speaker 8: might push the BOE towards a hike and also towards

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Speaker 8: you know, not wanting to be too certain that allah

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Speaker 8: the ECB they're they're thinking this is it is that

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Speaker 8: the UK inflation got higher than elsewhere. It's now come

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Speaker 8: down rapidly it's yet to really have the kind of

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Speaker 8: tick back up that we've seen elsewhere. So the concern

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Speaker 8: would be that, especially with oil prices rising, some other

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Speaker 8: things going on, you know, with supply shocks around the globe,

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Speaker 8: that if they take, if they decide to hold off

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Speaker 8: on rate hikes order signal that they're done, they might

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Speaker 8: end up regretting that because inflation, even at that much

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Speaker 8: slower than expected rate is still at historically high levels.

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Speaker 2: Yeah, so the Bank of England rate decision will be

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Speaker 2: closely watched. There's a press conference, but still our chief

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Speaker 2: chief rates correspondent Garfield Reynolds with us then, explaining, well,

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Speaker 2: the Fed moves and the Bank of England decision today, I.

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Speaker 4: Want to take you to Zorich for our next story.

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Speaker 4: It's proving to be one of Europe's hottest housing markets

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Speaker 4: as high salaries and the beautiful surroundings draw in expat

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Speaker 4: workers from around the world to the Swiss financial hub.

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Speaker 4: Are European Economy editor, I know, Ahayn Etche is with

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Speaker 4: us for more on this story. I know, great to

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Speaker 4: have you with us on the program. Talk us through

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Speaker 4: what's happening. Then in the Zurich property markets.

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Speaker 3: Hi, good, morning.

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Speaker 5: So yes, what we've been seeing is that prices have

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Speaker 5: been storing in the Curric district. In prices per square

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Speaker 5: meter are currently twice as much as the Greater London area.

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Speaker 5: For example, average asking prices have prisen by almost twelve

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Speaker 5: percent in August from a year earlier. And it will

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Speaker 5: look the Urric Canton area, which sort of represents more

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Speaker 5: where people commute from and live. We've seen very strong growth,

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Speaker 5: almost the highest in sixteen months. What we're seeing in

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Speaker 5: Zurich at the moment, as an example is for example

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Speaker 5: a small loft studio with mezzanine selling for about a million.

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Speaker 5: So it is an important financial hub that attracts exposs

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Speaker 5: a very high salary jobs and important corporation. But it's

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Speaker 5: also a very small town compared to other cities in Europe,

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Speaker 5: put between the lake and the mountains, and the supply

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Speaker 5: side is also space for construction is limited due to

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Speaker 5: this geographic situation.

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Speaker 2: Yeah, I was just processing a million dollars for that

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Speaker 2: sort of space, almost speechless on that is there fallout

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Speaker 2: then from zero soaring prices When we think about it,

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Speaker 2: as you say, as an important financial hub.

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Speaker 5: Well, rising living costs and immigration have been amongst some

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Speaker 5: of the biggest concerns and recent posts ahead of the

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Speaker 5: next month's national election. The Social Democratic Party has been

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Speaker 5: flaming that maybe the policies that we know that have

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Speaker 5: been attracting important corporate settlements have been helping to rise

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Speaker 5: housing prices and inevitably driving locals and workers outside the city,

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Speaker 5: like the average worker cannot support to rent buy. Just yesterday, UBS,

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Speaker 5: which is based in Surrich, published a report showing that

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Speaker 5: Syrich is the city at the highest risk in the

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Speaker 5: world to enter a real estate Bob.

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Speaker 4: Yeah, wow, I mean you're thinking about eighteen thousand euros

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Speaker 4: a square meter, it's pretty huge. It's all coming from

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Speaker 4: our housing index with Zurich, though very much an outline.

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Speaker 4: What are the broader trends in this index.

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Speaker 5: Well, as I say, it's a very small town comparatively

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Speaker 5: other cities. It has less than five hundred thousand people,

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Speaker 5: one out of which they're foreigners. So this has very

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Speaker 5: high salaries. The minimum salary in Syriac is around four

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Speaker 5: thousand francs per month, which is eighty percent more than

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Speaker 5: the minimum salary in the city of London, for example.

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Speaker 5: So it is an outlier because it's a bit different

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Speaker 5: the broader trends. What we're seeing in the Bloomberg City Tracker,

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Speaker 5: which tracks nine European cities, is showing that other cities

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Speaker 5: are adjusting to rate hikes and we're still seeing price increases,

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Speaker 5: but they tend to be slowing or even starting to fall.

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Speaker 5: Some of the stronger markets like Milan Madrid, they're still

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Speaker 5: increasing but slower around three percent. We're seeing less mortgages

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Speaker 5: or deals closed, and tensions in the supply side with

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Speaker 5: shortages in housing and making prices for a bit slower

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Speaker 5: than expected.

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Speaker 2: Yeah, it's a really interesting piece that we've done on

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Speaker 2: this and the Housing Tracker. Our European Economy editor, I

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Speaker 2: know Heianutche. Thank you so much for being with us

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Speaker 2: talking us through this europe property market and staggering prices.

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Speaker 4: This is Bloomberg Daybreak Europe, your morning brief on the

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Speaker 4: stories making news from London to Wall Street and beyond.

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