1 00:00:02,920 --> 00:00:09,760 Speaker 1: Bloomberg Audio Studios, podcasts, radio news, Dutch Central Bank President, 2 00:00:09,840 --> 00:00:13,640 Speaker 1: EASYB Governing Council member Class Canot joins US now and 3 00:00:13,880 --> 00:00:17,120 Speaker 1: governor president. All of the different ways that you weigh 4 00:00:17,160 --> 00:00:21,160 Speaker 1: in on European central bank policy. What a moment, how 5 00:00:21,239 --> 00:00:24,960 Speaker 1: much are you looking to US policy to determine how 6 00:00:25,079 --> 00:00:27,160 Speaker 1: far the EASYB can go on its own? 7 00:00:27,800 --> 00:00:31,520 Speaker 2: Well, obviously, monetary policy always takes place in a global context. 8 00:00:31,760 --> 00:00:34,839 Speaker 2: But at the same time, we're not the thirteenth federal district. 9 00:00:35,040 --> 00:00:37,000 Speaker 2: We have our own monetary policy. We have our own 10 00:00:37,040 --> 00:00:41,839 Speaker 2: set of outlooks, economic outlook, inflation outlook, and as Christine 11 00:00:41,880 --> 00:00:44,919 Speaker 2: already alluded to, as some of the fundamental drivers of 12 00:00:44,920 --> 00:00:48,720 Speaker 2: inflation have developed quite differently in the US than in 13 00:00:48,760 --> 00:00:51,000 Speaker 2: the Euro Area. So we have our own monetary policy 14 00:00:51,000 --> 00:00:55,120 Speaker 2: to do that. Monetary policy, I think is testimony of 15 00:00:55,160 --> 00:00:58,080 Speaker 2: the fact that we're increasingly confident with the this inflation 16 00:00:58,200 --> 00:01:00,800 Speaker 2: process that we have been seeing and that we expect 17 00:01:00,800 --> 00:01:04,120 Speaker 2: to continue. We expect it to become a little bit 18 00:01:04,120 --> 00:01:06,600 Speaker 2: more bumpy also down the road, because of all kinds 19 00:01:06,640 --> 00:01:08,920 Speaker 2: of technical factors that I would want to tire you with, 20 00:01:09,560 --> 00:01:12,320 Speaker 2: but we are confident that the overall picture is one 21 00:01:12,400 --> 00:01:13,720 Speaker 2: of continued disinflation. 22 00:01:13,920 --> 00:01:16,520 Speaker 1: So you mentioned the B word bumps, and this is 23 00:01:16,560 --> 00:01:19,120 Speaker 1: something we hear a lot. What kind of bumps would 24 00:01:19,160 --> 00:01:21,360 Speaker 1: you have to see to not cut rates in June. 25 00:01:21,959 --> 00:01:25,640 Speaker 2: Well, bumps that would lead me to fundamentally change my 26 00:01:25,840 --> 00:01:29,880 Speaker 2: assessment of the ongoing disinflation process. And I think the 27 00:01:29,920 --> 00:01:32,840 Speaker 2: projections that we have are pretty clear that we are 28 00:01:32,880 --> 00:01:36,440 Speaker 2: moving toward reaching our target two percent inflation over the 29 00:01:36,480 --> 00:01:39,440 Speaker 2: medium term in the remainder of this year course of 30 00:01:39,480 --> 00:01:44,000 Speaker 2: twenty twenty five. But there are risks surrounding such projections, 31 00:01:44,040 --> 00:01:48,240 Speaker 2: but increasingly these risks are becoming more balanced. Upside risks, 32 00:01:48,280 --> 00:01:51,760 Speaker 2: I think em andate predominantly from the labor market, and 33 00:01:51,800 --> 00:01:54,320 Speaker 2: then it's not just about wages. It's it about wages 34 00:01:54,640 --> 00:01:58,040 Speaker 2: in combination with very slow productivity growth. That's also a 35 00:01:58,080 --> 00:02:01,560 Speaker 2: major difference with the US, and the question about the 36 00:02:01,560 --> 00:02:05,400 Speaker 2: capacity of firms profit margins to absorb any increase in 37 00:02:05,560 --> 00:02:09,360 Speaker 2: unit labor costs that might come from this combination of wage, 38 00:02:09,720 --> 00:02:13,399 Speaker 2: wages and productivity growth. That's the assessment we need to make. 39 00:02:13,639 --> 00:02:16,520 Speaker 2: That's a risk on the upside. At the same time, 40 00:02:17,040 --> 00:02:20,960 Speaker 2: we also don't want to undershoot our inflation target. We 41 00:02:21,040 --> 00:02:24,000 Speaker 2: have a two percent symmetric target. We are zooming in 42 00:02:24,040 --> 00:02:26,640 Speaker 2: on it, and let's make sure that we continue to 43 00:02:26,639 --> 00:02:27,120 Speaker 2: do so. 44 00:02:27,120 --> 00:02:29,480 Speaker 1: So right now, the market's pricing in twenty five basis 45 00:02:29,480 --> 00:02:31,400 Speaker 1: point cut in June and then two more of the 46 00:02:31,400 --> 00:02:33,440 Speaker 1: reine of the year. You're basically on board with that. 47 00:02:33,480 --> 00:02:34,720 Speaker 1: If everything stays the same. 48 00:02:34,720 --> 00:02:37,800 Speaker 2: Well, I'm not uncomfortable with such market pricing, But at 49 00:02:37,800 --> 00:02:41,200 Speaker 2: the same time, we don't pre commit where data depend 50 00:02:41,240 --> 00:02:44,200 Speaker 2: that we go meeting by meeting. Of course, we have 51 00:02:44,280 --> 00:02:47,440 Speaker 2: a picture of where we think the underlying movement is 52 00:02:47,480 --> 00:02:50,320 Speaker 2: within the data, but we will have new data points 53 00:02:50,639 --> 00:02:54,440 Speaker 2: well every month on inflation, every quarter on the labor market, 54 00:02:54,600 --> 00:02:57,840 Speaker 2: and that will continue to inform our decisions beyond June. 55 00:02:58,040 --> 00:03:01,040 Speaker 3: Well, what would make you rethink you have right now 56 00:03:01,160 --> 00:03:03,760 Speaker 3: in terms of that path? Is it the geopolitical concerns 57 00:03:04,280 --> 00:03:07,680 Speaker 3: trying to understand what would make the easy be changed 58 00:03:07,680 --> 00:03:10,560 Speaker 3: path or how would they respond to, say, an oil 59 00:03:10,600 --> 00:03:11,160 Speaker 3: price shock. 60 00:03:11,480 --> 00:03:14,639 Speaker 2: Yeah, well, an oil price shock obviously will lift inflation, 61 00:03:14,840 --> 00:03:18,560 Speaker 2: that is absolutely true. But the question for us is 62 00:03:18,560 --> 00:03:23,280 Speaker 2: is the oil price shock of enough significance to trigger 63 00:03:23,360 --> 00:03:26,680 Speaker 2: second round efacts? And there's an important difference here Today 64 00:03:26,919 --> 00:03:30,160 Speaker 2: with twenty twenty two. In twenty twenty two, all inflation 65 00:03:30,240 --> 00:03:32,760 Speaker 2: items will go up. We're going up, and we had 66 00:03:32,760 --> 00:03:37,640 Speaker 2: the energy price shock as the consequence of Russia's unjustifiable 67 00:03:37,960 --> 00:03:41,800 Speaker 2: invasion of Ukraine. Now, if we have an oil shock, 68 00:03:42,120 --> 00:03:45,920 Speaker 2: it will be against the backdrop of general disinflation in 69 00:03:45,960 --> 00:03:49,000 Speaker 2: all the other factors. So the likelihood of significant second 70 00:03:49,080 --> 00:03:52,080 Speaker 2: round effects, I would argue, is smaller, But it is 71 00:03:52,120 --> 00:03:55,320 Speaker 2: clearly something to monitor. It's clearly something to keep in mind. 72 00:03:55,360 --> 00:03:57,080 Speaker 3: So you're willing to potentially look through it. 73 00:03:57,960 --> 00:04:03,160 Speaker 2: If it continues to be confined to energy prices only, Yes, 74 00:04:03,680 --> 00:04:06,760 Speaker 2: as soon as I get indication that it broadens into 75 00:04:07,640 --> 00:04:11,920 Speaker 2: the consumer basket into more traditional goods and services inflation, 76 00:04:12,440 --> 00:04:14,400 Speaker 2: then the answer would turn no. 77 00:04:14,680 --> 00:04:17,880 Speaker 1: Something that people have speculated is that the ECB might 78 00:04:17,920 --> 00:04:20,520 Speaker 1: be willing to also look through depreciation of the euro 79 00:04:21,120 --> 00:04:23,400 Speaker 1: in response to reatecuts at a time where the FED 80 00:04:23,520 --> 00:04:26,359 Speaker 1: is not cutting, as long as there isn't an oil 81 00:04:26,400 --> 00:04:29,159 Speaker 1: price shock. So let's say that there isn't an oil 82 00:04:29,200 --> 00:04:31,719 Speaker 1: price shock, would you be willing to accept parody with 83 00:04:31,800 --> 00:04:35,880 Speaker 1: the euro and the dollar? All things being equal, it's fine. 84 00:04:35,960 --> 00:04:37,720 Speaker 2: Well, the exchange right in and of itself is not 85 00:04:37,760 --> 00:04:40,479 Speaker 2: a target of our policy, so I account comment on 86 00:04:40,880 --> 00:04:44,840 Speaker 2: specific levels of the exchange. It's one input into our 87 00:04:44,920 --> 00:04:49,039 Speaker 2: overall assessment of the inflation outlook. It's clearly that a 88 00:04:49,080 --> 00:04:54,320 Speaker 2: depreciating currency would lead to additionally important inflation. At the 89 00:04:54,360 --> 00:04:57,760 Speaker 2: same time, if the reason for that is tighter monency 90 00:04:57,760 --> 00:05:00,920 Speaker 2: policy in the US, higher bond yields in the US, 91 00:05:01,080 --> 00:05:03,680 Speaker 2: that would also spill over to the Euro Area and 92 00:05:03,720 --> 00:05:06,160 Speaker 2: we would have tighter financial conditions in the Euro Area 93 00:05:06,160 --> 00:05:08,719 Speaker 2: as a consequence of that. Which of the two effects 94 00:05:08,720 --> 00:05:11,560 Speaker 2: will dominate It remains to be sy. That's very much 95 00:05:11,600 --> 00:05:15,600 Speaker 2: state contingency, So that's difficult to comment on beforehand. 96 00:05:16,160 --> 00:05:18,840 Speaker 1: A very difficult question. Some people are speculating that high 97 00:05:18,920 --> 00:05:22,839 Speaker 1: rates are actually helping inflation continue because people are earning 98 00:05:22,880 --> 00:05:26,000 Speaker 1: more and then they're able to refuel that into the economy, 99 00:05:26,160 --> 00:05:28,440 Speaker 1: and that low rates actually were depressive of inflation. 100 00:05:28,520 --> 00:05:30,800 Speaker 2: Do you believe that? No, I don't believe that at all. 101 00:05:30,880 --> 00:05:34,680 Speaker 2: I think it runs counter two decades of empirical evidence. 102 00:05:34,800 --> 00:05:37,400 Speaker 2: And if you want to run to see what the 103 00:05:37,400 --> 00:05:40,680 Speaker 2: consequences are of running such an experiment, look at Turkey, right, 104 00:05:40,760 --> 00:05:43,840 Speaker 2: I mean, that's where the experiment was brought to life, 105 00:05:44,080 --> 00:05:46,120 Speaker 2: and I don't think that that's seen as a paragon 106 00:05:46,279 --> 00:05:47,839 Speaker 2: of central banking success. 107 00:05:48,400 --> 00:05:51,320 Speaker 1: Judge Central Bank President ECB, Governing Council Member Class Cannard, 108 00:05:51,400 --> 00:05:53,600 Speaker 1: thank you so much for being with us. Really appreciate it.