Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: A turn to the nation's capital, where world leaders are
Speaker 2: gathering for the IMF and World Bank Spring Meeting. Standing
Speaker 2: byes Lisa from the IMF headquarters with a special guest Coime.
Speaker 2: Morning Lisa, Good morning John.
Speaker 3: I am here at the International Monetary Fund. It is
Speaker 3: a very different series of meetings. There aren't the same
Speaker 3: kinds of banners outside. It's a more subdued kind of feeling.
Speaker 3: And yet there are people collecting in Washington, DC for
Speaker 3: the first time since President Trump was inaugurated from all
Speaker 3: around the world, including the President of the Bundesbeg Jachim Nagel,
Speaker 3: who joins us now. I'm so glad to see you,
Speaker 3: and I want to start with this question of how
Speaker 3: different are these IMF meetings.
Speaker 1: I guess this year. I guess this meeting is a
Speaker 1: very special one. I think the world economy is in
Speaker 1: a very delicate situation, and I will use this time
Speaker 1: here to learn a little bit more of what we
Speaker 1: can do to make it better, to make the economy running,
Speaker 1: have better unders standing what's going on, and there are
Speaker 1: a lot of There are really a lot of uncertainties.
Speaker 3: One of the uncertainties. Is what's coming from the United States,
Speaker 3: in particular when it comes to tariffs, and how much
Speaker 3: that not only is a ramification for the US economy
Speaker 3: but also the global economy. How are you thinking about
Speaker 3: tariffs and how much they could depress growth? Say, in Germany, I.
Speaker 1: Said a couple of months ago, when it comes to tariffs,
Speaker 1: I was of the opinion that this will trigger a
Speaker 1: lot of problems. And now we see how the problems
Speaker 1: evolved over the last couple of weeks and months, and
Speaker 1: so we have to have a better understanding how we
Speaker 1: can find, let me say, a kind of a compromise,
Speaker 1: a kind of a level playing field that brings us
Speaker 1: closer together. Because tariffs, these are so tervists, are not
Speaker 1: a good policy.
Speaker 4: This is for sure. If they stay.
Speaker 3: Is there a sense that it gives you more room
Speaker 3: to cut rates?
Speaker 1: I think, first of all, I guess we have to
Speaker 1: take into account as central bankers also terrorists.
Speaker 4: What does it mean for Europe?
Speaker 1: I guess when we're talking about monetar policy in the eurosystem,
Speaker 1: we are on a good pass. I guess we can
Speaker 1: come close to bride stability over the course of this year.
Speaker 1: And this is good news, But there's a lot of uncertainty,
Speaker 1: and so we said last week because of that, we
Speaker 1: have to be very cautious. We have to wait what
Speaker 1: might come, how this uncertainty might evolve over the next week.
Speaker 1: So we have this meeting to meeting approach, and this,
Speaker 1: I guess is the best way to conduct monitor policy.
Speaker 3: Since the beginning of last year, since a peak rate
Speaker 3: of four and a half percent at the ECB, you've
Speaker 3: cut rate seven times, a deposit rate of two and
Speaker 3: a quarter percent.
Speaker 4: Is that neutral?
Speaker 1: I will not speculate about neutral. I guess only in
Speaker 1: a hindsight we really know where neutral may be war
Speaker 1: or maybe is so I guess I have to look
Speaker 1: what the numbers, the figures are telling me, and there
Speaker 1: I see a lot of let me say good news
Speaker 1: when it comes to the inflation story. When we talk
Speaker 1: about economic crows, there's a lot of more uncertainty because
Speaker 1: tervices are not good for economic crows. So the latest
Speaker 1: news that we got from the IMF here we know
Speaker 1: that this is for Europe not good news.
Speaker 4: We are in a stagnating situation.
Speaker 1: So stagnation is the picture for d year, maybe recession
Speaker 1: for my country, for Germany, I cannot exclude a slide,
Speaker 1: let me say, recession dye. So this is what we
Speaker 1: have to work on, and monetor policy can only give
Speaker 1: us a good indication when it comes to a good
Speaker 1: direction when it comes to when it comes to stable prices.
Speaker 3: The thread of tariffs has had an unexpected effect in
Speaker 3: market of actually weakening the dollar pretty substantially and strengthening
Speaker 3: the euro, which on the margins could actually be a
Speaker 3: disinflationary force, especially if you're important goods from overseas that
Speaker 3: would lead to lower effective prices in euros. Does that
Speaker 3: give you some breathing room to actually cut rates in
Speaker 3: response to potential weakness if that reduces some of the
Speaker 3: inflationary pressure.
Speaker 1: I guess it's much too early to really come to
Speaker 1: the final conclusion. What does this tariff scenario mean for
Speaker 1: both sides of the Atlantic.
Speaker 4: It seems to be, at least for the moment.
Speaker 1: That the price of that tariff decision has to be
Speaker 1: paid in the United States and not in Europe. It
Speaker 1: seems to be that prices might go up much more
Speaker 1: in the United States compared to the European Union. When
Speaker 1: it comes to economic growth, I think the picture is
Speaker 1: pretty much the same. It's also a track on the
Speaker 1: economic growth here in the United States also in Europe.
Speaker 1: But I will not speculate about monitory policy and what
Speaker 1: we will do next in our next meeting.
Speaker 3: How much are you watching what China is doing in
Speaker 3: terms of any trade barriers from the US causing them
Speaker 3: to export more of their productions, say to Germany and
Speaker 3: potentially lower prices. Is with respect to an abundance of exports.
Speaker 3: To the contrary, I.
Speaker 1: Think China is an important player here, This is for sure.
Speaker 1: I guess it's not only for US the Europeans, let
Speaker 1: me say, a very uncomfortable situation, I guess also for China.
Speaker 1: And yes, there might be a scenario that they are
Speaker 1: looking for new markets, additional markets. Europe was already being
Speaker 1: a market for Chinese products, but now maybe they can
Speaker 1: maybe use your more compared to the past, as an
Speaker 1: additional market. But as I alluded to already, I think
Speaker 1: it's a lot of speculating. It's a lot of speculation.
Speaker 1: What does that mean this tarriff discussion? And it's too
Speaker 1: early to really assess what is the detail in really
Speaker 1: any aspect.
Speaker 4: It's much too early.
Speaker 3: Just to add to the confusion and if you really
Speaker 3: are looking for any kind of compass and want to
Speaker 3: just change everything. Germany has been known for the zero
Speaker 3: break and this idea of not raising the deficit any
Speaker 3: capacity that has changed. We've been talking extensively about spending
Speaker 3: not only for defense but also for a whole host
Speaker 3: of different investments. Does that create more inflationary pressure? Does
Speaker 3: that just improve the growth picture? How does that sort
Speaker 3: of influence some of your modeling.
Speaker 1: It is important to say that the role of Germany
Speaker 1: does not change, or that didn't change, because the stabilica
Speaker 1: anchor of.
Speaker 4: Germany is still there.
Speaker 1: So, as I said, I think we're living in a
Speaker 1: very complicated world, so it was necessary from a German
Speaker 1: perspective to do more regarding defense. Standing was also clear
Speaker 1: that we have to do much more when it comes
Speaker 1: to overcoming our infrastructure issue. So I guess this fiscal
Speaker 1: package is an important message to the world that Germany
Speaker 1: is doing its homework and we will improve over time.
Speaker 1: The economy will do much better over the next years, and.
Speaker 4: For me as a center banker, this is at the
Speaker 4: end good news.
Speaker 3: Well, but is it inflationary?
Speaker 1: As fas as I can oversee the crown situation it
Speaker 1: will not be inflationary because we are coming out of
Speaker 1: a situation stagnation d year, maybe a kind of a recession,
Speaker 1: so it's not inflationary over the next course of the years.
Speaker 1: It's helpful to the economy, means more economic growth, and
Speaker 1: this is good news.
Speaker 3: One thing that's happened over the past couple of weeks
Speaker 3: in particular, has been this fear of the United States
Speaker 3: losing its position as the currency of the world, as
Speaker 3: well as treasury is having a special status. And one
Speaker 3: thing that we've seen in the flow is a lot
Speaker 3: of money going into German boots as we're the new haven,
Speaker 3: and we're hearing a lot about diversification away from the
Speaker 3: United States into German assets.
Speaker 2: Do you welcome that?
Speaker 3: Do you think that would be positive?
Speaker 1: Well, I think that it is not good news that
Speaker 1: there's a lot of let me say, now, regarding the
Speaker 1: safe haven of US treasuries. I think this is this
Speaker 1: is not good news. And you're absolutely right some of
Speaker 1: that money went to German bunds.
Speaker 4: But all in all, we need the US.
Speaker 1: Treasuring market is a good, stable market that gives a
Speaker 1: lot of let me say, certainty, and we should overcome
Speaker 1: this turbulent situation, and we should give back the US
Speaker 1: Treasury it is safe haven status because it is not
Speaker 1: helpful to all of us. If there are some doubts
Speaker 1: uncertainty around you, as here about the US treasuring market, it.
Speaker 3: Wouldn't necessarily provide a support the same kind of privilege
Speaker 3: of spending I don't want to say recklessly, but with
Speaker 3: abundance in Germany, if Germany were to have that safe
Speaker 3: heaven status, I.
Speaker 1: Think Germany and I alluded to that is the stability
Speaker 1: anchor of Europe. In Europe, German boons is a perfect
Speaker 1: example for or this and this will not go away.
Speaker 1: But we need a good US treasurer market. This is
Speaker 1: so important for the financial markets worldwide.
Speaker 3: Speaking of which, you're going to be meeting with Jerome Powell,
Speaker 3: the FED chair at these meetings this week. What are
Speaker 3: you going to ask him?
Speaker 4: I think Jarum Paul he is a great guy.
Speaker 1: I really admire him what he did over his career
Speaker 1: in center banking.
Speaker 4: And so we talk about the current situation.
Speaker 3: Is so the current situation is potentially some sort of
Speaker 3: threat to central bank independence. I was taken off the
Speaker 3: table to some degree when President Trump yesterday in response
Speaker 3: to reporters, said that he has no intention of firing
Speaker 3: Veeder J. Powell and that this was media speculation that
Speaker 3: was Ronamock, not necessarily any real indication that he was
Speaker 3: planning to remove him before his term was up early
Speaker 3: next year. How concerned are you about threats to central
Speaker 3: bank independence?
Speaker 1: So what is important to me is that independence of
Speaker 1: center banks. This is the DNA of center banking, of
Speaker 1: good center banking. So we shouldn't let me say question
Speaker 1: to a certain extent that this is maybe something that
Speaker 1: we could see in danger. So independence of central bank
Speaker 1: is of utmost importance.
Speaker 4: And J.
Speaker 1: Paul, he is a great center banker. He did a
Speaker 1: marvelous good job. And I guess this is also seen
Speaker 1: here in the United States.
Speaker 3: Do you worry about some sort of financial instability if
Speaker 3: that continues to be called into question.
Speaker 1: I will not speculate here, but in a scenario that
Speaker 1: you just mentioned, I cannot exclude such a scenario that
Speaker 1: there is then maybe a lot of globulence coming to
Speaker 1: the market if this is in question, and we should
Speaker 1: avoid that that shouldn't come as a realistic scenario, should
Speaker 1: avoid that this is of such a danger for the
Speaker 1: world economy, and so I really hope that there's enough
Speaker 1: understanding how dangerous this could be.
Speaker 3: There's a question about what Europe can do to insulate
Speaker 3: itself and to draw itself closer, and that maybe some
Speaker 3: of the finance ministers and central banking chiefs can form
Speaker 3: something of a closer union to try to fortify themselves
Speaker 3: away from that type of volatility. Have you seen material
Speaker 3: steps toward that to try to establish that type of
Speaker 3: stability in the continent.
Speaker 1: Absolutely, I think Europe has, I guess now better understanding
Speaker 1: that we have to do our homework becoming more resilient.
Speaker 4: We have to implement all what.
Speaker 1: To be discussed over the years, just allude to the
Speaker 1: captain market union, banking union, maybe a little bit more
Speaker 1: physical integration. So Europe has to stand together in these
Speaker 1: complicated times. But on top of that, also these meetings here,
Speaker 1: the IMF Meeting, Development Meeting, these two three days are
Speaker 1: so important to all of us to work on international
Speaker 1: cooperation Module letter. The leteralism of our work is so
Speaker 1: important in these days. So I will use these days
Speaker 1: here in Washington, TC to get a better understanding to
Speaker 1: convince the partners here that the corporation is key in
Speaker 1: these days.
Speaker 3: In the United States, there seems to be a move
Speaker 3: away from financial debt or incurring more debt, and there's
Speaker 3: this concern about the fiscal deficit in a pretty significant way.
Speaker 3: There is a goal to try to retrench some of
Speaker 3: the spending over the past few years. In Europe, it
Speaker 3: seems like there is a move in the opposite direction.
Speaker 3: We talked about that with respect to Germany, that there
Speaker 3: is a greater degree of willingness to spend. Do you
Speaker 3: think that that is appropriate throughout the entirety of the continent,
Speaker 3: given the fact that there is this desire to try
Speaker 3: to rebuild and regenerate a whole host of industries.
Speaker 1: Let me disagree a little bit here because I do
Speaker 1: not see that there is a momentum that we're going
Speaker 1: away from physical discipline. We have still a good understanding
Speaker 1: in Europe that we are currently.
Speaker 4: In this complicated situation.
Speaker 1: So we have to do much more compared to defense
Speaker 1: spending to come compared to the past. But if that
Speaker 1: period is history, then we have to come back to
Speaker 1: physical discipline. And this is a and this is understood
Speaker 1: in Europe, and we will go back to that fiscal.
Speaker 4: Discipline going forward.
Speaker 3: Do you ever see a time when you can see
Speaker 3: zero rates again from the ECB or even negative?
Speaker 1: Well, as I said, I will not speculate here.
Speaker 4: I think we do what we have to do.
Speaker 1: In our next meeting, and this is our mandate, this
Speaker 1: is our huge responsibility, and we did I guess pretty
Speaker 1: well over the past three years, and I'm very optimistic
Speaker 1: when it comes to prise stability that mission will be
Speaker 1: accomplished over the course of this year.
Speaker 3: So do you think that you are going to get
Speaker 3: back down to two percent over the course of this year?
Speaker 4: Absolutely?
Speaker 3: Okay. And you don't think that necessarily there has to
Speaker 3: be any material change whatsoever to policy to get there.
Speaker 1: No, there's no autopilot. I think we are decent center bankers.
Speaker 1: So we'll assess the data and then we will find
Speaker 1: maybe the right decisions.
Speaker 3: Yakham Nagle, thank you so much for being with us.
Speaker 3: Jakhem Nagle, the president of the Bundesbank, and John. It
Speaker 3: is fascinating to see how much people are looking for
Speaker 3: a sensitivity from the United States at a time where
Speaker 3: a lot of their sense has been so much shaken.
Speaker 2: Lisa, thank you great work. Has always appreciate the update
Speaker 2: on Europe. Careful what you're investing in. The Lights is
Speaker 2: from the FUNDUS Bank president there