WEBVTT - Bloomberg Surveillance TV: November 22, 2024 0:00:00.120 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.920 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:38.360 Terminal and the Bloomberg Business App. Muhammad al Aerona Queen's College, Cambridge, 0:00:38.360 --> 0:00:41.360 saying this on one of the picks, Kevin Wassh's professional 0:00:41.400 --> 0:00:44.680 career and writings would make him a strong presidential choice 0:00:44.720 --> 0:00:47.920 for Treasury and for the Federal Reserve. Muhammed joins us. 0:00:47.960 --> 0:00:50.680 Now for more, Muhammed, are you endorsing a candidate then? 0:00:50.840 --> 0:00:51.919 In this race for Treasury? 0:00:52.960 --> 0:00:53.920 What I'm seeing John? 0:00:54.240 --> 0:00:57.240 Of the four, the one that I have followed most 0:00:57.240 --> 0:01:00.680 closely is Kevin Walsh. I've done that for almost two decades. 0:01:01.360 --> 0:01:04.000 And if you look at what he would bring to 0:01:05.080 --> 0:01:10.040 either or both jobs. First, a good understanding and knowledge 0:01:10.080 --> 0:01:14.240 of economics, you're talking about Stanford, Harvard MIT. He would 0:01:14.240 --> 0:01:19.000 bring policy making experience the NEEC and the FED. He 0:01:19.080 --> 0:01:24.520 would bring private sector experience. He understands the functioning of 0:01:24.560 --> 0:01:27.480 the capital markets. It's not often that you find someone 0:01:27.520 --> 0:01:32.000 who can operate at this intersection of economics, finance, and policy, 0:01:32.440 --> 0:01:34.640 and it's not often that you find someone who not 0:01:34.720 --> 0:01:38.360 only can operate there, but can communicate well. And we 0:01:38.440 --> 0:01:40.839 do need much better economic communication. 0:01:41.080 --> 0:01:42.760 Mohammed, I've said this a few times, and I'm sure 0:01:42.760 --> 0:01:44.840 you agree. It's good news that the caliber of all 0:01:44.840 --> 0:01:47.800 the candidates is so high given the challenges they'll have 0:01:47.840 --> 0:01:50.040 to confront in the next several years. As we look 0:01:50.040 --> 0:01:51.800 ahead to twenty twenty five. Could we go through a 0:01:51.800 --> 0:01:53.760 few of those challenges right now? What do you think 0:01:53.800 --> 0:01:56.600 the biggest for the incoming Treasury secretary. 0:01:58.000 --> 0:02:01.600 I think it's maintained economic growth. John, I can't stress 0:02:01.680 --> 0:02:05.360 how important that is. It is important to deal with 0:02:05.720 --> 0:02:07.440 problems of inequality. 0:02:07.800 --> 0:02:09.760 It's important to deal with the debt issue. 0:02:10.080 --> 0:02:13.280 The best way to address a debt issue is through 0:02:13.400 --> 0:02:17.240 economic growth. And we are looking at a major transition 0:02:17.720 --> 0:02:22.000 which is ongoing from old engine of growth to new 0:02:22.040 --> 0:02:24.680 engines or what economists called the old model of growth 0:02:24.720 --> 0:02:27.519 to the new model of growth, and the Tragedy Secretary 0:02:27.800 --> 0:02:31.320 will be the lead person in figuring out how we 0:02:31.400 --> 0:02:32.120 navigate all this. 0:02:32.480 --> 0:02:34.920 Well, if it is someone like Kevin Walsh and everyone 0:02:34.960 --> 0:02:36.960 knows his endgame is the FED, does that blur the 0:02:37.000 --> 0:02:38.320 line of FED independence? 0:02:39.919 --> 0:02:42.120 I think it's somed that well that that line has 0:02:42.200 --> 0:02:46.280 been blurred before. But I suspect that if Walsh gets 0:02:46.280 --> 0:02:49.120 the job, he's going to be really careful as to 0:02:49.160 --> 0:02:50.600 what he says on monetary policy. 0:02:50.639 --> 0:02:54.320 He will respect that line. It's also not. 0:02:54.400 --> 0:02:59.560 Clear that the President elect will commit to a second 0:02:59.600 --> 0:03:04.200 step for Kevin Walsh. I suspect that he will say 0:03:04.480 --> 0:03:07.239 he will keep his options open, So I don't worry 0:03:07.240 --> 0:03:11.560 about that. And Marie, I just look at Kevin as 0:03:11.639 --> 0:03:15.079 someone who both as Treasury and FETCH Chair I think 0:03:15.080 --> 0:03:16.080 would do a really good job. 0:03:16.400 --> 0:03:19.960 If this drags on, we're supposed to get a pick yesterday. 0:03:20.080 --> 0:03:22.639 If we don't get one today, if this continues to 0:03:22.760 --> 0:03:26.120 drag drag on, Gary Cohne reminded us all yesterday that 0:03:26.480 --> 0:03:30.760 his pick, his nod, and also Minutionin's nod came after Thanksgiving. 0:03:31.320 --> 0:03:34.240 Is that in itself a market negative given the fact 0:03:34.240 --> 0:03:36.440 that we have all these other nominees floating around for 0:03:36.480 --> 0:03:39.000 the incoming administration, but we don't have this one key 0:03:39.440 --> 0:03:40.400 name for the markets. 0:03:41.440 --> 0:03:44.040 Yeah, I thought Gary's interview with you yesterday was really 0:03:44.040 --> 0:03:47.320 good because he said two things. One, as you just mentioned, 0:03:47.360 --> 0:03:49.720 he said, look, I didn't find out a lot of Thanksgiving. 0:03:50.640 --> 0:03:53.280 And then the second thing he said is look at 0:03:53.320 --> 0:03:57.920 what we inherited then, including some unanticipated development, compared to 0:03:58.000 --> 0:04:00.720 what the new team will have been here now. So 0:04:00.960 --> 0:04:04.040 I don't think it's a market negative. I particularly don't 0:04:04.080 --> 0:04:07.240 think it's a market negative because, as John said, the 0:04:07.320 --> 0:04:13.200 are credible candidates being considered. Oh it's so we told so. No, 0:04:13.320 --> 0:04:15.160 I don't think it is a market negative. I think 0:04:15.920 --> 0:04:19.440 it's the right thing to take time to make this decision. 0:04:20.440 --> 0:04:22.240 Mohammed. I thought of you a lot this morning when 0:04:22.240 --> 0:04:24.840 I saw the flows for the past week into bonds 0:04:24.839 --> 0:04:27.120 and stock funds in the US, and I saw the outflows, 0:04:27.160 --> 0:04:30.560 the dramatic outflows from European bond and stock flows, and 0:04:30.600 --> 0:04:33.360 I thought about your comment about that sucking sound of 0:04:33.400 --> 0:04:35.200 capital away from the rest of the world and in 0:04:35.360 --> 0:04:37.920 the United States, and I have to wonder, are there 0:04:37.960 --> 0:04:41.320 limits to this because basically the fact that everybody else 0:04:41.400 --> 0:04:43.440 is paying is leading to the US gain is also 0:04:43.520 --> 0:04:46.279 leading to higher rates that the rest of the world 0:04:46.320 --> 0:04:48.000 is going to pay for. In other words, they're going 0:04:48.040 --> 0:04:50.200 to pay for that debt because of the attraction of 0:04:50.279 --> 0:04:51.000 interest rates. 0:04:51.360 --> 0:04:52.800 When does that kind. 0:04:52.560 --> 0:04:53.279 Of balance out? 0:04:53.320 --> 0:04:54.720 Do people get sick of this story? 0:04:56.000 --> 0:04:56.600 Not for a while? 0:04:56.640 --> 0:04:58.040 And I thought of all three of you because I 0:04:58.080 --> 0:05:01.599 remember when we were together last week and we talked 0:05:01.640 --> 0:05:04.160 about the global economy, and I told you the good, 0:05:04.200 --> 0:05:05.919 the bad, and the ugly, and I put Europe in 0:05:05.920 --> 0:05:09.400 the ugly, saying there really is an issue there that 0:05:09.560 --> 0:05:14.120 as both secular and cyclical headwinds come together, and today's 0:05:14.200 --> 0:05:17.840 PMI numbers are a clear reminder that there is this 0:05:18.040 --> 0:05:22.160 problem and it's getting deeper. We know what the solutions are. 0:05:22.200 --> 0:05:24.960 There is the Drug Report, but there is no political 0:05:25.040 --> 0:05:26.640 will to implement it, so the. 0:05:26.720 --> 0:05:29.040 US will continue to diverge. 0:05:29.640 --> 0:05:33.080 Like you, Lisa, I think divergence is a really important 0:05:33.720 --> 0:05:37.960 theme for the next twelve months. Is there a limit 0:05:38.080 --> 0:05:40.520 short as a limit at some point, but we're not 0:05:40.600 --> 0:05:44.520 there yet, And the worst thing is to sacrifice US 0:05:44.640 --> 0:05:47.120 growth in order to get lower rates. That would be 0:05:47.120 --> 0:05:48.839 the world I mean, the US is the only engine 0:05:48.839 --> 0:05:50.760 of global growth right now, So you do not want 0:05:50.800 --> 0:05:53.640 to sacrifice the only engine of global growth. What you 0:05:53.720 --> 0:05:56.640 do want to happen is both with China and for 0:05:56.760 --> 0:06:00.600 Europe to get the act together and to transition to 0:06:00.839 --> 0:06:02.440 healthier and higher growth. 0:06:03.160 --> 0:06:05.360 I have to wonder also how much this pushes central 0:06:05.360 --> 0:06:08.080 banks around the world to keep investing in gold and 0:06:08.120 --> 0:06:10.919 try to diversify away from the dollar, because at some 0:06:11.040 --> 0:06:13.200 point there has to be some anger or at least 0:06:13.240 --> 0:06:15.800 a feeling of frustration that everybody else is at the 0:06:15.800 --> 0:06:19.440 whims of the United States in terms of whatever kind 0:06:19.480 --> 0:06:23.200 of fiscal situation they want to implement, and that the 0:06:23.200 --> 0:06:26.120 fiscal dominance allows them to do that. How much do 0:06:26.120 --> 0:06:28.560 you see that kind of trend in gold in other 0:06:28.640 --> 0:06:32.320 acid classes really continuing as people look toward a day 0:06:32.360 --> 0:06:35.080 that maybe could be a different regime with respect to 0:06:35.080 --> 0:06:35.520 the dollar. 0:06:36.880 --> 0:06:41.000 So this trend which we have seen now for a 0:06:41.200 --> 0:06:44.880 solid twelve months of trying to diverse away from both 0:06:44.880 --> 0:06:49.880 the dollar as a reserve currency and importantly looking to 0:06:49.960 --> 0:06:53.880 diverse away from the dollar system as a payment system, 0:06:53.920 --> 0:06:57.120 and I worry much more about the second than the first. 0:06:57.400 --> 0:07:02.479 The trend is there reasons you've cited on the currency 0:07:02.480 --> 0:07:04.800 side at the margin, and I want to stress it 0:07:04.839 --> 0:07:07.200 is at the margin people are looking to diverse away 0:07:07.480 --> 0:07:08.160 away from the. 0:07:08.120 --> 0:07:09.600 Dollar into gold. 0:07:10.240 --> 0:07:13.880 The payment system is a reaction to the worry about 0:07:13.920 --> 0:07:17.360 weaponization of investment, sanctions and trade. 0:07:17.760 --> 0:07:20.920 So that is ongoing and we have to keep an 0:07:20.920 --> 0:07:21.360 eye on it. 0:07:21.440 --> 0:07:23.920 Now. We're not anywhere near a critical mass. There is 0:07:24.000 --> 0:07:26.800 nothing to replace the dollar at the center of the system. 0:07:27.240 --> 0:07:31.520 There is nothing to replace the dollar payment system. However, 0:07:31.680 --> 0:07:35.280 you don't want alternatives as clunky and as inefficient as 0:07:35.320 --> 0:07:37.680 they are to gain momentum. 0:07:37.120 --> 0:07:38.800 Which is why we're saying the dollar to pre shed 0:07:38.840 --> 0:07:41.840 against gold, the pre shed against something like bitcoin. But 0:07:41.880 --> 0:07:43.120 I think we have to take a step back and 0:07:43.160 --> 0:07:45.960 recognize what it's not doing against other currencies. We're facing 0:07:46.000 --> 0:07:48.640 the prospect of an eight consecutive week of strength for 0:07:48.680 --> 0:07:51.960 the US dollar for dollar index for DXY mohammed the 0:07:51.960 --> 0:07:54.120 wise because the data in America has been pretty decent, 0:07:54.360 --> 0:07:57.320 and we're rethinking the fence path malas Eliot. Deutsche Bank 0:07:57.360 --> 0:08:00.000 had this to say in its outlook. Growth is too fast, 0:08:00.080 --> 0:08:03.120 inflation is too furious for FED cuts. Our baseline c's 0:08:03.160 --> 0:08:05.680 a twenty five basis point cut in December, calls it 0:08:05.720 --> 0:08:07.880 a close call, goes on to say after that, we 0:08:08.000 --> 0:08:10.840 expect an extended pause which keeps the FED funds right 0:08:10.920 --> 0:08:13.920 above four percent into twenty twenty six. 0:08:14.520 --> 0:08:15.480 Is that your base case? 0:08:15.520 --> 0:08:19.800 Two, So my base case is they cut by twenty five. 0:08:21.040 --> 0:08:24.080 When they come to their next meeting, they'll have clarity 0:08:24.120 --> 0:08:27.160 on three things that will impact how they see. 0:08:27.000 --> 0:08:27.880 The economy going. 0:08:28.560 --> 0:08:34.199 They'll have clarity on tariffs, that have clarity on immigration, 0:08:35.000 --> 0:08:39.160 and that have clarity on where the budget is going. 0:08:40.000 --> 0:08:43.000 And they'll build up that clarity as they go into 0:08:43.040 --> 0:08:46.600 the year, and that is what's going to determine whether they. 0:08:46.800 --> 0:08:49.360 Do more or not. They're to going to see how 0:08:49.360 --> 0:08:50.160 they see things. John. 0:08:50.200 --> 0:08:54.640 These fundamentally impact. First, tariffs will impact price behavior. You 0:08:54.679 --> 0:08:57.320 see this in the UK. Companies now have gotten much 0:08:57.360 --> 0:09:00.560 more use to passing on any incre costs. So in 0:09:00.600 --> 0:09:03.800 the case of the UK, the supermarkets have come out 0:09:03.840 --> 0:09:06.200 and said, you know what, the higher national insurance contributions, 0:09:06.240 --> 0:09:08.640 we're going to pass on that to crisis and demand 0:09:08.679 --> 0:09:10.400 here is not as strong in the US as it 0:09:10.480 --> 0:09:14.040 is in the US, So tariffs will have an impact 0:09:14.080 --> 0:09:17.920 on pricing behavior by companies. Immigration will have impact on 0:09:17.960 --> 0:09:21.800 the labor market, and of course what they decide on 0:09:21.920 --> 0:09:25.240 taxes in particular, which will come ahead of what they 0:09:25.280 --> 0:09:28.160 do on spending where they look into cut spending will 0:09:28.160 --> 0:09:31.160 have an impact on issuance. So they're going to have 0:09:31.360 --> 0:09:33.240 the FED is going to have to step back and 0:09:33.280 --> 0:09:36.040 look at these three things and then decide how. 0:09:35.880 --> 0:09:38.079 They fit into this big puzzle. 0:09:38.200 --> 0:09:41.080 Let's finish on that word clarity. They'll have clarity on tariffs. 0:09:41.120 --> 0:09:43.120 They might have clarity on what the approach might be, 0:09:43.400 --> 0:09:45.720 how big the tariffs will be, they may not have 0:09:45.760 --> 0:09:47.920 clarity on the effects. So this is something you touched 0:09:47.920 --> 0:09:50.320 on earlier this week when you talked about things like 0:09:50.640 --> 0:09:55.200 trade flows, corporate pricing, demand, supply elasticities. How long does 0:09:55.240 --> 0:09:58.120 it take to get clarity on the effect of those tariffs. 0:09:58.800 --> 0:10:01.800 Yeah, and that list goes on on game theoretics, stage craft. 0:10:01.880 --> 0:10:03.920 I mean, it is a very complex issue and the 0:10:04.000 --> 0:10:07.400 media has tended to simplify it over simplified. 0:10:07.920 --> 0:10:09.559 No, they'll need time, but. 0:10:09.600 --> 0:10:13.120 They'll have a clarity on how serious is a direction 0:10:13.200 --> 0:10:16.440 of travel, and that's going to be important in how 0:10:16.480 --> 0:10:19.319 do they think about what interest what policy we should 0:10:19.320 --> 0:10:20.120 do Muhammed. 0:10:20.160 --> 0:10:22.240 We appreciate your time. We're looking to catch up with you, sir. 0:10:22.320 --> 0:10:25.280 Thank you, Muhammed Al, Aaron of Queen's College, Cambridge. On 0:10:25.320 --> 0:10:37.920 the latest in the United States and beyond, Tryler is 0:10:37.960 --> 0:10:40.600 ramping up bets on a jumpbo raakecout in December by 0:10:40.640 --> 0:10:44.400 the ECB as Eurozone PMI is contracted in November, feeling 0:10:44.440 --> 0:10:47.120 concerns about the state of Europe's economy as it faces 0:10:47.160 --> 0:10:50.160 down the prospect of hire terrists from the incoming Trump administration. 0:10:50.520 --> 0:10:52.200 Joining us now is a man who has. 0:10:52.080 --> 0:10:54.600 A say it next month's meeting, the Portuguese Central Bank 0:10:54.640 --> 0:10:58.200 Governor Mario Sentino. Governor Sentino, thank you for being with us. 0:10:58.559 --> 0:11:00.920 We appreciate your time. It's important points out that every 0:11:00.920 --> 0:11:03.560 official on the covernany council, has a different view, and 0:11:03.640 --> 0:11:05.560 at the time this morning, where people are questioning whether 0:11:05.559 --> 0:11:07.720 the ECP is behind the curve, I think it's important 0:11:07.760 --> 0:11:10.040 to highlight your more recent comments suggests you are very 0:11:10.080 --> 0:11:13.520 much ahead of this weekly data, anticipating it and worried 0:11:13.559 --> 0:11:16.240 about it. We'd love your reaction to this morning's economic 0:11:16.360 --> 0:11:19.080 data and what do you believe a fifty basis point 0:11:19.080 --> 0:11:21.880 breakcount should be on the table at next month's meeting. 0:11:23.360 --> 0:11:27.800 Well, thank you for having me, and good morning from London. Well, 0:11:27.960 --> 0:11:32.480 we have to take this data in the context of 0:11:32.559 --> 0:11:37.880 all the information that we now have to take a decision. 0:11:37.960 --> 0:11:41.600 Next month we will have also new forecasts. My first 0:11:41.600 --> 0:11:48.760 reaction is that these data certainly confirms the propertateness of 0:11:49.360 --> 0:11:53.560 the decision we took in October and the profile that 0:11:53.720 --> 0:11:57.880 we now have for the trajectory of interest rates also 0:11:57.960 --> 0:12:02.720 going forward. This is the appropriate message that I'd like 0:12:03.040 --> 0:12:07.960 to send. We know, I mean the challenges had We 0:12:08.080 --> 0:12:12.320 know that the Euro Area economy is struggling to recovery. 0:12:13.360 --> 0:12:16.880 The most important though, is that inflation is on target 0:12:17.520 --> 0:12:22.000 and we need to move. According to all these data, 0:12:23.679 --> 0:12:31.160 today's information goes along the way. Indeed, I've been looking 0:12:31.200 --> 0:12:38.920 at the European economy. It just confirms that we need 0:12:39.160 --> 0:12:40.679 to move with monetary policy. 0:12:41.280 --> 0:12:41.600 Governor. 0:12:41.640 --> 0:12:44.440 How quickly you move is part of the conversation, and 0:12:44.480 --> 0:12:47.240 whether you should be constrained by twenty five basis point 0:12:47.280 --> 0:12:50.600 increments or not. Do you believe larger reductions should be 0:12:50.640 --> 0:12:52.520 considered in a month from now. 0:12:53.960 --> 0:12:58.000 Well, we have been discussing that for a while. I 0:12:58.520 --> 0:13:03.840 rather prefer us to move gradual, and gradual means steady 0:13:04.520 --> 0:13:12.040 and with predictable steps. But of course, if the data 0:13:12.600 --> 0:13:14.200 confirms that. 0:13:16.240 --> 0:13:17.800 The risks to. 0:13:17.800 --> 0:13:24.280 The downside in growth materialize, that the numbers for inflation 0:13:24.400 --> 0:13:28.440 that we still are expecting these months go in the 0:13:28.520 --> 0:13:34.160 same direction, we can certainly discuss and be open to 0:13:34.240 --> 0:13:39.040 discuss different steps. But what is more important is to 0:13:39.080 --> 0:13:44.240 send a message of we are doing our job. We 0:13:44.360 --> 0:13:47.640 are moving interest rates in the right direction, and we 0:13:47.760 --> 0:13:51.360 will continue to do so as long as data requires. 0:13:51.480 --> 0:13:53.600 As you know and from listening to you and your colleagues, 0:13:53.600 --> 0:13:56.560 the focus so far has been on normalizing interest rates, 0:13:56.760 --> 0:13:58.360 which speaks to that gradual approach. 0:13:59.040 --> 0:13:59.360 Governor. 0:13:59.360 --> 0:14:01.040 When I look at the day around Europe, when we 0:14:01.080 --> 0:14:03.800 all do, when we see Germany bally growing and the 0:14:03.880 --> 0:14:07.199 pmising contraction, I think quite rightly the conversation is changing 0:14:07.200 --> 0:14:10.199 in financial markets to whether you need to be accommodative, 0:14:10.720 --> 0:14:13.719 whether we should be constrained by this idea of normalizing 0:14:13.760 --> 0:14:15.959 and moving in gradual steps, or which whether we should 0:14:16.000 --> 0:14:19.760 be open to becoming accommodative and moving much more quickly. 0:14:20.160 --> 0:14:24.760 What's the difference between the two. For you, we do. 0:14:24.800 --> 0:14:29.720 Know that we are still in restrictive territory. The interest 0:14:29.800 --> 0:14:35.240 rate is above the neutral levels, and so this means 0:14:35.240 --> 0:14:40.520 that the past going forward will be to continue to 0:14:41.360 --> 0:14:45.800 reduce the level of interest rates. We also know that 0:14:45.840 --> 0:14:50.560 the biggest problem in Europe is investment, and investment is 0:14:50.600 --> 0:14:54.760 certainly quite sensitive to the interest rates. So it will 0:14:54.800 --> 0:14:59.280 be also of importance for us to have the support 0:14:59.360 --> 0:15:02.440 of the economy so that inflation can remain at two percent. 0:15:02.760 --> 0:15:05.680 We don't want to go below two percent, and for 0:15:05.800 --> 0:15:08.800 that we need a stronger economy. So it's the combination 0:15:08.960 --> 0:15:13.000 of those two that need to be on the table 0:15:13.600 --> 0:15:17.520 so that we take a decision that so far brought 0:15:17.640 --> 0:15:21.480 us in a stable past, which is always important to 0:15:21.480 --> 0:15:24.720 two percent, and now we need to make sure that 0:15:24.760 --> 0:15:25.640 we continue there. 0:15:25.800 --> 0:15:28.120 Governor, if I could put you on the spot appointed question, 0:15:28.280 --> 0:15:30.040 do you believe the biggest risk right now is above 0:15:30.080 --> 0:15:33.760 target inflation or below target inflation? And I'm not talking 0:15:33.760 --> 0:15:37.240 about next month's data. I'm thinking about a medium term view, 0:15:37.720 --> 0:15:40.680 looking out several years. What is the biggest risk above 0:15:40.720 --> 0:15:43.200 target inflation or below target inflation? 0:15:44.600 --> 0:15:48.000 Well, the history of Europe in the ten years prior 0:15:48.080 --> 0:15:54.120 to this inflationary experience was below target inflation. And the 0:15:54.200 --> 0:15:58.720 fundamentals for the European economy didn't change much. So in 0:15:58.760 --> 0:16:04.120 my view, we need to be concerned with below target inflation. 0:16:04.640 --> 0:16:08.400 The risks that we face today, both from the economy 0:16:08.680 --> 0:16:13.840 and from shocks outside Europe take us in that direction. 0:16:14.000 --> 0:16:18.000 So we need to focus on not going below target 0:16:19.840 --> 0:16:23.480 in terms of the medium term, because then we open 0:16:23.600 --> 0:16:27.480 up again the issue of as you are saying, normalizing 0:16:27.600 --> 0:16:34.160 monetary policy. We were successful thus far to bring inflation 0:16:34.240 --> 0:16:37.760 to two percent. Now the job is a little bit different. 0:16:38.320 --> 0:16:43.280 It's like, you know, this last mile not being a 0:16:43.360 --> 0:16:47.680 pass from above the target, but from below the target, 0:16:47.800 --> 0:16:51.880 and it's not easy. It proved not easy for the 0:16:51.920 --> 0:16:56.680 Eurozone to bring inflation close to two percent before twenty nineteen, 0:16:57.080 --> 0:16:59.280 and we need to be very serious about it. 0:17:00.120 --> 0:17:01.920 Do you think that on a broader sense, the easy 0:17:01.920 --> 0:17:04.040 if he needs to consider I don't want to say 0:17:04.040 --> 0:17:06.960 a dual mandate like the federal reserve, where you're looking 0:17:06.960 --> 0:17:10.440 at employment as well as inflation, but the growth backdrop 0:17:10.560 --> 0:17:13.879 as well as maybe there's going to be that bumpiness 0:17:13.880 --> 0:17:16.560 that you talk about in the near term path of inflation, 0:17:17.080 --> 0:17:20.760 but the longer term path, you see that risk significantly 0:17:20.800 --> 0:17:23.920 to the downside when it comes to that is inflation. 0:17:25.800 --> 0:17:28.560 I don't think we need to discuss the dual mandate 0:17:28.720 --> 0:17:31.240 or the single mandate that we have. We just need 0:17:31.280 --> 0:17:36.800 to remind ourselves that inflation is an endogenous variable. It 0:17:36.840 --> 0:17:41.640 is strictly connected with the way the economy goes. By 0:17:41.680 --> 0:17:46.800 targeting inflation, we are somehow looking at a broader set 0:17:46.880 --> 0:17:51.520 of data and see how it interacts with prices, the 0:17:51.640 --> 0:17:57.280 labor market, certainly, unemployment, employment, the dynamism that the European 0:17:57.359 --> 0:18:01.480 economy had recently on the labor market is very important, 0:18:01.520 --> 0:18:05.159 and it's also our job to protect it, to preserve it. 0:18:05.880 --> 0:18:08.400 That's not because of the layman market on its own, 0:18:09.200 --> 0:18:12.520 which is already important, but it's on the impact that 0:18:12.560 --> 0:18:16.120 this may have on inflation. We do know that an 0:18:16.160 --> 0:18:20.800 economy that doesn't grow, that doesn't invest, will not be 0:18:20.960 --> 0:18:25.200 compatible with prices at two percent, so I always look 0:18:25.240 --> 0:18:30.400 at this in a more broad sense. So for me, honestly, 0:18:30.840 --> 0:18:33.399 the thing of the double mandate is not an issue. 0:18:33.520 --> 0:18:36.040 Governor, you brought up shocks from outside of Europe. I'd 0:18:36.040 --> 0:18:38.639 like to talk about those shocks with you. The prospect 0:18:38.720 --> 0:18:41.000 of a change of policy in the United States following 0:18:41.000 --> 0:18:43.280 the US election, and whether that introduces a new risk 0:18:43.320 --> 0:18:45.920 that you have to confront. If the walls go up, 0:18:46.040 --> 0:18:48.520 if the tariffs go up in America, and we were 0:18:48.560 --> 0:18:52.000 all concerned about over capacity in China, there's one place 0:18:52.040 --> 0:18:54.399 that's going to have to eat that over capacity and 0:18:54.480 --> 0:18:56.359 it could be another disinflationary threat. 0:18:56.760 --> 0:18:59.360 That's Europe. Can you walk me through your. 0:18:59.240 --> 0:19:01.760 Understanding the policy changes we might see in the next 0:19:01.840 --> 0:19:05.120 year and it kind of introduces to your Roundlook. 0:19:06.320 --> 0:19:09.359 I totally agree with you on the way you put 0:19:09.840 --> 0:19:13.760 the risks that the tariffs and the spare capacity that 0:19:13.840 --> 0:19:18.640 we see around the globe will imply to inflation. So 0:19:18.840 --> 0:19:24.080 I see these shocks from an economic policy perspective as 0:19:24.119 --> 0:19:28.280 a wake up call for Europe. Europe needs to move 0:19:28.520 --> 0:19:33.400 from the passenger seat that very often we see Europe 0:19:33.920 --> 0:19:39.040 sitting comfortable to a more leading role in the world 0:19:39.520 --> 0:19:44.639 that will call for an increased role for the euro internationally. 0:19:45.119 --> 0:19:48.280 We were discussing that back in twenty nineteen, just prior 0:19:48.400 --> 0:19:53.480 to COVID. We may be facing the same challenges right now, 0:19:54.200 --> 0:19:58.320 so we better focus on the response that Europe needs 0:19:58.680 --> 0:20:03.119 to do an to produce to those challenges instead of 0:20:03.200 --> 0:20:08.120 discussing what is going on elsewhere. We do know that 0:20:08.680 --> 0:20:13.000 we need to move very fast if we are presented 0:20:13.040 --> 0:20:18.639 with these challenges. If I may, I can quote here 0:20:19.200 --> 0:20:23.640 Elvis Presley and say to you that we can't go 0:20:23.720 --> 0:20:31.280 on together if those challenges from the outside present to Europe, 0:20:31.640 --> 0:20:34.800 challenges that Europe cannot cannot go along with. 0:20:35.400 --> 0:20:39.000 So for the past couple of months, the ECB terminal 0:20:39.080 --> 0:20:41.240 rate is expected to be something like two and a 0:20:41.280 --> 0:20:44.920 half percent by the end of next year. Putting Elvis 0:20:44.960 --> 0:20:48.639 Presley aside, given all of the potential external shocks and 0:20:48.680 --> 0:20:50.840 the courage jectory, do you think it ought to be 0:20:50.920 --> 0:20:51.719 much lower than that? 0:20:54.280 --> 0:21:00.240 Well, I don't see reasons for the neutral rating group 0:21:00.480 --> 0:21:05.960 to be much different from before this crisis. The fundamentals 0:21:05.960 --> 0:21:09.520 in Europe are pretty similar. We have a more dynamic 0:21:09.640 --> 0:21:15.000 labor market that will certainly help bringing the natural rate up, 0:21:15.520 --> 0:21:21.400 but probably it will not be enough, given that many 0:21:21.440 --> 0:21:25.880 other factors like demography and productivity that will still wait 0:21:26.520 --> 0:21:31.639 into into into that number. So if we go close 0:21:31.720 --> 0:21:36.560 to two percent, probably below, it will be my best 0:21:37.080 --> 0:21:42.360 guest right now for for the neutral to be so. 0:21:42.440 --> 0:21:47.240 We still have some way, some paths to cover, and 0:21:47.680 --> 0:21:50.440 we need we need to be very much focused on that. 0:21:50.440 --> 0:21:53.760 Interesting, So we appreciate your time with a suspicious mind. 0:21:54.000 --> 0:21:56.240 ECP Comveny Council member Mario Sentein. 0:21:56.320 --> 0:21:56.920 I think is. 0:22:06.960 --> 0:22:09.320 Let's stick with retail one week ount for Black Friday 0:22:09.320 --> 0:22:12.680 and a shortened holiday shopping season. Gap and Walmart seeing 0:22:12.720 --> 0:22:15.600 higher end consumers coming to them for value as Target 0:22:15.640 --> 0:22:19.760 sees weakening sales and inventory piling gup. Joining us now 0:22:19.800 --> 0:22:22.639 is dw To Towsie of TAUSI Advisory Group. Dana, welcome 0:22:22.640 --> 0:22:23.280 to the program. 0:22:23.400 --> 0:22:24.640 Thank you so much for having. 0:22:24.400 --> 0:22:27.119 Me compare Target, so everybody else? What went wrong there? 0:22:27.400 --> 0:22:30.160 Forty eight percent of Target sales are discretionary. They had 0:22:30.200 --> 0:22:34.080 elevated promotions, higher costs didn't work. You look at Walmart, 0:22:34.080 --> 0:22:36.800 which has sixty percent of their sales coming from essentials, 0:22:36.960 --> 0:22:39.840 and when you think about discretionary, Look what you just mentioned. 0:22:40.040 --> 0:22:43.520 The GAP is gaining some momentum right now. Look at TJX, 0:22:43.720 --> 0:22:47.240 same thing. They're gaining some momentum too. So that value 0:22:47.280 --> 0:22:50.600 shopper where there is style and product is working. 0:22:50.840 --> 0:22:52.800 Is there an execution story there as well? What is 0:22:52.840 --> 0:22:53.680 the GAP doing right? 0:22:53.920 --> 0:22:55.000 I think a couple things. 0:22:55.119 --> 0:22:59.200 I mean Richard's Richard's phrase is performed while you transform. 0:22:59.880 --> 0:23:02.880 The things they're doing right is the consistency of looking 0:23:02.960 --> 0:23:06.200 at the product and really elevating it today's times. Look 0:23:06.240 --> 0:23:09.040 at the wide leg denim jeans. They are remodeling some 0:23:09.119 --> 0:23:12.640