1 00:00:02,320 --> 00:00:04,960 Speaker 1: This is Bloomberg Daybreak Weekend, our global look at the 2 00:00:05,000 --> 00:00:08,039 Speaker 1: top stories in the coming week from our Daybreak anchors 3 00:00:08,119 --> 00:00:10,479 Speaker 1: all around the world, and straight ahead on the program 4 00:00:10,480 --> 00:00:13,760 Speaker 1: of peek at what the FED is really thinking about 5 00:00:13,800 --> 00:00:17,080 Speaker 1: interest rates. I'm Tom Busby in New York. I'm callin 6 00:00:17,160 --> 00:00:20,240 Speaker 1: Headker here in London, where we're looking at the consequences 7 00:00:20,280 --> 00:00:23,239 Speaker 1: of all in Ukraine. I'm Joe Matthew in Washington. What's 8 00:00:23,280 --> 00:00:26,600 Speaker 1: at stake as President Biden visits pol I'm Bryan Curtis 9 00:00:26,680 --> 00:00:29,200 Speaker 1: in Hong Kong. We read the tea leaves on where 10 00:00:29,320 --> 00:00:32,959 Speaker 1: the incoming bo j Governor Casual Uda is going with 11 00:00:33,000 --> 00:00:36,800 Speaker 1: the whip in his hand. That's all straight ahead on 12 00:00:36,920 --> 00:00:40,159 Speaker 1: Bloomberg Daybreak Weekend on Bloomberg. He Love on three O 13 00:00:40,280 --> 00:00:44,440 Speaker 1: New York, Bloomberg one, Washington, d C, Bloomberg one oh 14 00:00:44,479 --> 00:00:48,120 Speaker 1: six one, Boston, Bloomberg nine sixties, San Francisco, d A 15 00:00:48,240 --> 00:00:51,680 Speaker 1: B Digital Radio, London, Sirius XM one nine team and 16 00:00:51,760 --> 00:00:54,680 Speaker 1: around the world on Bloomberg Radio dot Com and via 17 00:00:54,720 --> 00:01:00,680 Speaker 1: the Bloomberg Business App. Good day to you, Tom Busby, 18 00:01:00,720 --> 00:01:03,560 Speaker 1: and we begin today's program with the Fed and minutes 19 00:01:03,600 --> 00:01:06,479 Speaker 1: from the Fed's latest policy meeting coming out on Wednesday 20 00:01:06,480 --> 00:01:09,800 Speaker 1: and joining me to talk about it. Bloomberg's Global Economic 21 00:01:09,840 --> 00:01:13,160 Speaker 1: and Policy editor Michael McKee. Michael, thanks for joining us. 22 00:01:13,160 --> 00:01:15,400 Speaker 1: Happy to be here now. These minutes from the f 23 00:01:15,480 --> 00:01:18,120 Speaker 1: O m C from their last meeting. It's wrapped up. 24 00:01:18,160 --> 00:01:21,320 Speaker 1: On February one, the central bankers announced the pretty modest 25 00:01:21,800 --> 00:01:24,880 Speaker 1: basis point hike in benchmark rates. The key, of course, 26 00:01:25,160 --> 00:01:28,319 Speaker 1: is what policymakers see looking ahead. So what are we 27 00:01:28,360 --> 00:01:31,760 Speaker 1: hoping to see this time? Well, ordinarily you'd say you 28 00:01:31,800 --> 00:01:34,120 Speaker 1: don't get that much from the minutes because it's three 29 00:01:34,160 --> 00:01:36,360 Speaker 1: weeks old, and we've had a lot of data since then, 30 00:01:36,640 --> 00:01:38,800 Speaker 1: and we have had a lot of data that may 31 00:01:38,880 --> 00:01:42,520 Speaker 1: have changed their views. And this week we got some 32 00:01:42,640 --> 00:01:45,920 Speaker 1: of those views start to starting to change in public, 33 00:01:46,440 --> 00:01:50,800 Speaker 1: with Cleveland Feds Loretta Mester, for example, saying that she 34 00:01:51,040 --> 00:01:54,720 Speaker 1: thought that they should have done fifty basis points at 35 00:01:54,800 --> 00:01:58,680 Speaker 1: that February first meeting. Uh, that would have been something 36 00:01:58,720 --> 00:02:01,480 Speaker 1: we were looking for. In the minutes. Well, let's hear 37 00:02:01,840 --> 00:02:05,880 Speaker 1: a sound from Loretta Mester right now on why she 38 00:02:06,000 --> 00:02:09,440 Speaker 1: says the case was made for a much bigger basis 39 00:02:09,440 --> 00:02:12,920 Speaker 1: point hike. So at this juncture, the incoming data have 40 00:02:13,000 --> 00:02:15,200 Speaker 1: not changed my view that we will need to bring 41 00:02:15,240 --> 00:02:18,639 Speaker 1: the FED funds rate above five and hold it there 42 00:02:18,680 --> 00:02:21,640 Speaker 1: for some time to be sufficiently restricted to ensure that 43 00:02:21,760 --> 00:02:28,000 Speaker 1: inflation is on a sustainable path back to two. Indeed, 44 00:02:28,040 --> 00:02:31,160 Speaker 1: at our meeting two weeks ago, setting aside what financial 45 00:02:31,200 --> 00:02:34,720 Speaker 1: market participation participants expected us to do, I saw a 46 00:02:34,760 --> 00:02:39,320 Speaker 1: compelling economic case for a fifty basis point increase. We 47 00:02:39,440 --> 00:02:43,040 Speaker 1: should have brought the top of the target range to five. Alright, 48 00:02:43,120 --> 00:02:46,960 Speaker 1: Loretta Mester, there, and now let's go back some of 49 00:02:46,960 --> 00:02:51,640 Speaker 1: the things that you just talked about. These data points 50 00:02:51,680 --> 00:02:54,480 Speaker 1: that really may have been exactly what she was referring 51 00:02:54,520 --> 00:02:58,079 Speaker 1: to about better than forecast jobs report for January, better 52 00:02:58,120 --> 00:03:01,920 Speaker 1: than forecast Q four GDP, better than forecast retail sales 53 00:03:02,000 --> 00:03:04,040 Speaker 1: for the same month, and and how that may have 54 00:03:04,080 --> 00:03:07,080 Speaker 1: influenced the FED in the last three weeks. It's gonna 55 00:03:07,080 --> 00:03:10,520 Speaker 1: be interesting to see how it might have influenced the FED, 56 00:03:11,000 --> 00:03:14,919 Speaker 1: because we've seen inflation come down a lot in November 57 00:03:14,960 --> 00:03:18,040 Speaker 1: and December and then rebound in January in both the 58 00:03:18,080 --> 00:03:21,880 Speaker 1: CPI and the p p I. And maybe it's telling 59 00:03:22,000 --> 00:03:24,440 Speaker 1: us what the FED has been trying to tell us 60 00:03:24,600 --> 00:03:28,480 Speaker 1: that the inflation genie is still not back in the bottle. 61 00:03:28,520 --> 00:03:30,760 Speaker 1: It's going to take a while to bring that down, 62 00:03:30,840 --> 00:03:34,080 Speaker 1: and they need to do more for longer, raised rates 63 00:03:34,160 --> 00:03:37,080 Speaker 1: higher for longer, which is something they've been saying for 64 00:03:37,560 --> 00:03:41,280 Speaker 1: a long time. Uh. The real dichotomy seems to be 65 00:03:41,360 --> 00:03:44,920 Speaker 1: on the growth side, where uh many of these FED officials, 66 00:03:44,960 --> 00:03:51,000 Speaker 1: including Mester, uh, including Tom Barkin earlier um saying that 67 00:03:51,720 --> 00:03:54,480 Speaker 1: we think there's gonna be a recession or darn close 68 00:03:54,560 --> 00:03:57,920 Speaker 1: to it. Uh. Laura Mester said that business contacts in 69 00:03:57,920 --> 00:04:01,160 Speaker 1: her district are preparing for one. And yet, as you mentioned, 70 00:04:01,240 --> 00:04:04,280 Speaker 1: the retail sales numbers and other signs of growth have 71 00:04:04,440 --> 00:04:07,840 Speaker 1: come in fairly strong. So when does that happen? Right? 72 00:04:07,920 --> 00:04:11,000 Speaker 1: And you spoke to Richmond FED President Barkin just this 73 00:04:11,080 --> 00:04:13,800 Speaker 1: past week and got some great insight from him. So 74 00:04:13,880 --> 00:04:17,560 Speaker 1: let's listen to what he told you about FED rate hikes. Well. 75 00:04:17,600 --> 00:04:19,520 Speaker 1: I try not to get to wound up in any 76 00:04:19,520 --> 00:04:23,680 Speaker 1: particular data read, particularly a January data read large, seasonality factors, 77 00:04:23,720 --> 00:04:26,880 Speaker 1: all that sort of stuff, um um, But I do 78 00:04:26,960 --> 00:04:29,760 Speaker 1: think what we're now in a position to do is 79 00:04:29,800 --> 00:04:33,000 Speaker 1: to react to multiple months of data as they come in. 80 00:04:33,720 --> 00:04:36,000 Speaker 1: We may or may not choose to take rates up 81 00:04:36,040 --> 00:04:39,039 Speaker 1: further if inflation continues to persist, We'll have to see 82 00:04:39,080 --> 00:04:42,080 Speaker 1: what happens. All right, there's Richmond FED President Thomas Barkin 83 00:04:42,160 --> 00:04:45,240 Speaker 1: there now, Michael, what other insights could you glean from 84 00:04:45,240 --> 00:04:49,000 Speaker 1: your conversation with him. Well, he's basically saying that the 85 00:04:49,040 --> 00:04:51,560 Speaker 1: FED is going to be data dependent, which of course 86 00:04:51,600 --> 00:04:53,719 Speaker 1: we all know, which means that their horizon is shorter. 87 00:04:53,760 --> 00:04:58,240 Speaker 1: They're looking between meetings what's changed, rather than where we 88 00:04:58,320 --> 00:05:00,920 Speaker 1: think will be at the end of the There they're 89 00:05:00,960 --> 00:05:03,880 Speaker 1: all predicting that we're going to see inflation come down further. 90 00:05:04,000 --> 00:05:07,200 Speaker 1: There are differences in the opinion of opinion in terms 91 00:05:07,200 --> 00:05:10,240 Speaker 1: of how fast that's going to be. The question is, 92 00:05:10,279 --> 00:05:13,520 Speaker 1: in the meantime, what are they going to do? And 93 00:05:13,680 --> 00:05:17,600 Speaker 1: they're looking at each meeting as a decision point based 94 00:05:17,640 --> 00:05:20,440 Speaker 1: on the data that they have brought in, Whereas many 95 00:05:20,480 --> 00:05:23,720 Speaker 1: in the markets had been looking out farther into two 96 00:05:23,800 --> 00:05:26,000 Speaker 1: thousand twenty three and saying we're going to see us 97 00:05:26,000 --> 00:05:28,800 Speaker 1: slow down, or we're gonna see a recession, or we're 98 00:05:28,800 --> 00:05:32,200 Speaker 1: gonna see inflation come down. And so basically markets had 99 00:05:32,240 --> 00:05:34,719 Speaker 1: been rallying on the thought that the Fed wouldn't have 100 00:05:34,760 --> 00:05:36,640 Speaker 1: to do much more and we'd have lower interest rates. 101 00:05:36,960 --> 00:05:39,080 Speaker 1: Now the market seem to be catching up with the 102 00:05:39,080 --> 00:05:40,839 Speaker 1: Fed and the idea that this is going to take 103 00:05:40,880 --> 00:05:44,360 Speaker 1: longer than expected and they're going to raise rates faster 104 00:05:44,720 --> 00:05:48,919 Speaker 1: and farther than expected. Now, the benchmark lending rate is 105 00:05:48,960 --> 00:05:51,640 Speaker 1: not the only arrow in the Fed's quiver. There's also 106 00:05:52,120 --> 00:05:56,440 Speaker 1: other quantitative easing measures they can take their tremendous balance sheet. 107 00:05:57,040 --> 00:05:59,520 Speaker 1: What else can we maybe expect to see from the Fed? 108 00:06:00,040 --> 00:06:03,080 Speaker 1: Maybe not at the March meeting, but later this year, Well, 109 00:06:03,120 --> 00:06:05,960 Speaker 1: that would depend on what happens in Washington. The Fed's 110 00:06:06,000 --> 00:06:10,200 Speaker 1: gonna keep the balance sheet reduction going at the rate 111 00:06:10,320 --> 00:06:14,040 Speaker 1: it has been sixty billion a month and there's no 112 00:06:14,120 --> 00:06:16,040 Speaker 1: reason for them to change it at this point. There 113 00:06:16,040 --> 00:06:17,880 Speaker 1: have been concerns of the markets that it might be 114 00:06:17,920 --> 00:06:20,160 Speaker 1: disruptive to the markets, that it might lead to some 115 00:06:20,240 --> 00:06:23,720 Speaker 1: liquidity issues in various markets, and we're not really seeing 116 00:06:23,760 --> 00:06:28,560 Speaker 1: that yet, so they can keep going. Um, the issue 117 00:06:28,600 --> 00:06:31,880 Speaker 1: becomes if we get a debt ceiling problem, if we 118 00:06:32,600 --> 00:06:36,039 Speaker 1: violate the dead ceiling, then uh, do the market sees 119 00:06:36,120 --> 00:06:38,159 Speaker 1: up and does the FED have to start expanding its 120 00:06:38,160 --> 00:06:40,440 Speaker 1: balance sheet again? To try to get us out of 121 00:06:40,440 --> 00:06:42,919 Speaker 1: the hole. That's gonna be something that's gonna worry the 122 00:06:42,960 --> 00:06:45,599 Speaker 1: markets as we get closer to that X state, which 123 00:06:46,320 --> 00:06:49,800 Speaker 1: the Congressional Budget Office said this week was maybe between 124 00:06:49,960 --> 00:06:54,560 Speaker 1: July and September, and so you'll probably see some repricing 125 00:06:54,800 --> 00:06:56,800 Speaker 1: as we get closer to that date, depending on the 126 00:06:56,800 --> 00:07:00,120 Speaker 1: news out of out of Capitol Hill. Now without the 127 00:07:00,120 --> 00:07:03,600 Speaker 1: thing the markets and the FED are are really focused on, 128 00:07:03,680 --> 00:07:07,919 Speaker 1: and that is housing and its impact on the economy. 129 00:07:08,000 --> 00:07:10,840 Speaker 1: So we're getting a report on existing home sales next week. 130 00:07:10,920 --> 00:07:15,760 Speaker 1: We just had some pretty encouraging data from home builders. 131 00:07:15,800 --> 00:07:19,640 Speaker 1: They see things maybe turning around. We've seen uh interest 132 00:07:19,720 --> 00:07:22,720 Speaker 1: rates fluctuate a little bit, maybe giving a little boost. 133 00:07:23,160 --> 00:07:26,600 Speaker 1: How important is housing right now and could we be 134 00:07:26,800 --> 00:07:29,720 Speaker 1: poised for a turnaround in the spring? Well, housing is 135 00:07:30,000 --> 00:07:33,240 Speaker 1: a an important part of the overall US economy, smaller 136 00:07:33,280 --> 00:07:35,480 Speaker 1: than it used to be, but it is also the 137 00:07:35,520 --> 00:07:38,840 Speaker 1: most interest sensitive. So as the FED raises rates, we've 138 00:07:38,840 --> 00:07:42,240 Speaker 1: seen a real fall off in housing activity. Now, mortgage 139 00:07:42,320 --> 00:07:45,560 Speaker 1: rates are kind of holding in. The question is do 140 00:07:45,640 --> 00:07:48,600 Speaker 1: they start to come down a little bit. They've fluctuated 141 00:07:48,680 --> 00:07:54,720 Speaker 1: some and does pend up demand get people to buy anyway. 142 00:07:54,760 --> 00:07:56,880 Speaker 1: That seems to be happening a little bit. We're not 143 00:07:57,400 --> 00:07:59,920 Speaker 1: at a a an inflection point yet, but we do 144 00:08:00,080 --> 00:08:02,440 Speaker 1: seem to be getting close to the bottom in housing 145 00:08:02,440 --> 00:08:08,120 Speaker 1: and we're starting to see more activity. Home housing starts 146 00:08:08,400 --> 00:08:11,800 Speaker 1: were weaker than expected in the month of January, but 147 00:08:12,560 --> 00:08:16,080 Speaker 1: they may rebound as we get into this spring because 148 00:08:17,160 --> 00:08:20,040 Speaker 1: the builders have a lot of backlogs that they're still 149 00:08:20,240 --> 00:08:22,280 Speaker 1: trying to work off. And one thing we don't know 150 00:08:22,480 --> 00:08:25,920 Speaker 1: is is there a problem building because they can't find 151 00:08:26,000 --> 00:08:29,200 Speaker 1: enough workers. We know there's a shortage of construction workers 152 00:08:29,240 --> 00:08:31,760 Speaker 1: out there, and that just feeds into the whole stronger 153 00:08:31,800 --> 00:08:34,920 Speaker 1: economy thing. So a lot is tied up in the 154 00:08:35,000 --> 00:08:38,959 Speaker 1: housing market. Um, not to mention its contributions to inflation. 155 00:08:39,679 --> 00:08:43,400 Speaker 1: Well boy, and three jobs essentially for every home that 156 00:08:43,480 --> 00:08:45,960 Speaker 1: goes up. But if you can't find qualified workers, those 157 00:08:45,960 --> 00:08:47,880 Speaker 1: homes are not going to go up. Yeah. That's been 158 00:08:48,000 --> 00:08:52,240 Speaker 1: the real problem with new home construction and sales. Alright, 159 00:08:52,240 --> 00:08:55,280 Speaker 1: So let's circle back to the next meeting of the FED. 160 00:08:55,400 --> 00:08:58,440 Speaker 1: It's in March, just a few weeks away, and there's 161 00:08:58,480 --> 00:09:01,480 Speaker 1: a lot of growing talk right now about not a 162 00:09:02,040 --> 00:09:06,560 Speaker 1: basis point hike, but a fifty basis point hike, and 163 00:09:07,160 --> 00:09:09,840 Speaker 1: we heard from Mester just this past week. Are there 164 00:09:09,880 --> 00:09:12,960 Speaker 1: any other Hawks comments you've heard from fits that that 165 00:09:12,960 --> 00:09:15,160 Speaker 1: would indicate that we're looking at a much bigger hike 166 00:09:15,200 --> 00:09:17,800 Speaker 1: here and that would really disrupt things. Well, so far, 167 00:09:17,960 --> 00:09:21,320 Speaker 1: it's only been a little bit of speculation in the 168 00:09:21,400 --> 00:09:24,280 Speaker 1: sense that Mester said she would have raised raids fifty 169 00:09:24,280 --> 00:09:27,240 Speaker 1: basis points at the last meeting. She did not say 170 00:09:27,240 --> 00:09:30,040 Speaker 1: what she would do at the next meeting, and others 171 00:09:30,040 --> 00:09:32,200 Speaker 1: have sort of made the case that yes, we do 172 00:09:32,320 --> 00:09:34,440 Speaker 1: need to do more. But you go back to their 173 00:09:34,559 --> 00:09:38,520 Speaker 1: last but dot plot that came out in December, and 174 00:09:38,679 --> 00:09:40,880 Speaker 1: at that point they said we were going to go 175 00:09:40,960 --> 00:09:44,040 Speaker 1: over five percent to five point one percent, and there 176 00:09:44,120 --> 00:09:48,520 Speaker 1: was almost a majority for going above five point one 177 00:09:48,559 --> 00:09:52,960 Speaker 1: percent to five point five. And so it is very 178 00:09:53,000 --> 00:09:56,880 Speaker 1: possible that the data that are coming in stronger than 179 00:09:56,920 --> 00:10:00,360 Speaker 1: expected will push them in that direction. And if you 180 00:10:00,400 --> 00:10:04,080 Speaker 1: were gonna go higher than we're at four seven five, now, 181 00:10:04,120 --> 00:10:06,160 Speaker 1: if you want to go to five point five, then 182 00:10:06,200 --> 00:10:09,040 Speaker 1: you might as well do a fifty basis point move. Um, 183 00:10:09,120 --> 00:10:12,680 Speaker 1: so it becomes a more realistic possibility. Now we have 184 00:10:13,000 --> 00:10:16,800 Speaker 1: another CPI report, another pp I report, another jobs report, 185 00:10:17,440 --> 00:10:20,040 Speaker 1: all those before the next FED meetings, so a lot 186 00:10:20,080 --> 00:10:23,120 Speaker 1: could change in the way that all these numbers changed 187 00:10:23,200 --> 00:10:26,320 Speaker 1: from December to January. A lot could change between January 188 00:10:26,400 --> 00:10:29,200 Speaker 1: and February. So we'll have to see which gets us 189 00:10:29,200 --> 00:10:31,439 Speaker 1: back to the old FED thing about where data dependent. 190 00:10:31,520 --> 00:10:34,400 Speaker 1: And we're going meeting by meeting, all right, well about 191 00:10:34,440 --> 00:10:37,680 Speaker 1: five weeks away, and Michael McKee, Bloomberg's Global Economic and 192 00:10:37,679 --> 00:10:40,480 Speaker 1: Policy editor, thank you once again for all your insight. 193 00:10:40,640 --> 00:10:43,600 Speaker 1: Coming up on Bloomberg Daybreak weekend, It's almost one year 194 00:10:43,679 --> 00:10:47,160 Speaker 1: since Russia's invasion of Ukraine. The situation there remains tense. 195 00:10:47,440 --> 00:11:03,320 Speaker 1: I'm Tom Busby, this is Bloomberg. This is Bloomberg Daybreak Weekend, 196 00:11:03,320 --> 00:11:05,800 Speaker 1: our global look ahead at the top stories for investors 197 00:11:05,840 --> 00:11:08,240 Speaker 1: in the coming week. I'm Tom Busby in New York. 198 00:11:08,640 --> 00:11:11,400 Speaker 1: Up later in our program, a lot of political changes 199 00:11:11,480 --> 00:11:14,760 Speaker 1: in Washington, all of which could make or break for 200 00:11:14,960 --> 00:11:18,840 Speaker 1: Democrats or Republicans. But first, next week marks one year 201 00:11:18,880 --> 00:11:21,440 Speaker 1: since the start of the full scale invasion of Ukraine. 202 00:11:22,040 --> 00:11:24,320 Speaker 1: For more on what's happening now, let's head to London 203 00:11:24,400 --> 00:11:28,600 Speaker 1: and bring in Bloomberg Daybreak anchor Caroline Hepger, Tom Vladimir 204 00:11:28,640 --> 00:11:31,960 Speaker 1: Putin's war in Ukraine is an energy war against the 205 00:11:31,960 --> 00:11:34,920 Speaker 1: whole of Europe. For more, I'm joined by Bloomberg's oil 206 00:11:34,960 --> 00:11:38,400 Speaker 1: trading team leader in Europe, All Nightingale and Rachel Morrison, 207 00:11:38,440 --> 00:11:41,880 Speaker 1: who is our gas power and renewables reporter. Welcome to 208 00:11:41,960 --> 00:11:44,840 Speaker 1: both of you, um to talk about, you know, an 209 00:11:44,840 --> 00:11:48,720 Speaker 1: immensely difficult subject. Next week we'll see the one year 210 00:11:49,240 --> 00:11:52,680 Speaker 1: commemoration of the start of this invasion of Ukraine. It 211 00:11:52,720 --> 00:11:56,120 Speaker 1: has had such huge implications for the whole of you 212 00:11:56,280 --> 00:11:59,840 Speaker 1: of a hot war, it's really changed everything. Rachel, can 213 00:11:59,840 --> 00:12:03,400 Speaker 1: I start with you though, and just talk about whether 214 00:12:03,559 --> 00:12:08,160 Speaker 1: Europe has stopped using Russian energy now for good? Is 215 00:12:08,240 --> 00:12:12,319 Speaker 1: that one of the big consequences of this conflict. Well, 216 00:12:12,520 --> 00:12:15,960 Speaker 1: gas in particular was a really big week point for 217 00:12:16,080 --> 00:12:19,760 Speaker 1: Europe when it came to dependency on Russia, and that 218 00:12:19,840 --> 00:12:22,680 Speaker 1: was one of the first things that the European Union 219 00:12:23,120 --> 00:12:25,480 Speaker 1: thought to do was to try to reduce that dependence. 220 00:12:25,960 --> 00:12:29,240 Speaker 1: And in a lot of countries it seems to be 221 00:12:29,720 --> 00:12:35,280 Speaker 1: that piped gas from Russia has been almost entirely replaced. 222 00:12:35,600 --> 00:12:39,120 Speaker 1: What it's been replaced with is liquefied natural gas or 223 00:12:39,200 --> 00:12:41,800 Speaker 1: l n G. And a lot of that does actually 224 00:12:41,840 --> 00:12:47,560 Speaker 1: come from Russia, so we're not completely independent from from 225 00:12:47,640 --> 00:12:51,720 Speaker 1: Moscow in getting those supplies, but how we received them 226 00:12:51,840 --> 00:12:56,160 Speaker 1: has completely changed. Alack, how do you think about this 227 00:12:56,400 --> 00:13:00,400 Speaker 1: energy security? You know, has come to the forum like 228 00:13:00,480 --> 00:13:03,240 Speaker 1: it has really done before, not not for many decades 229 00:13:03,280 --> 00:13:06,840 Speaker 1: in Europe. Well, in both oil and gas, there's a 230 00:13:06,920 --> 00:13:10,640 Speaker 1: huge mutual dependency, or there was a huge mutual dependency 231 00:13:10,920 --> 00:13:17,000 Speaker 1: between Russia and Europe, and in the oil market we've 232 00:13:17,040 --> 00:13:24,560 Speaker 1: seen a ban on almost all imports from Russia. How 233 00:13:24,600 --> 00:13:26,720 Speaker 1: that that's clearly going to last in the short term 234 00:13:26,800 --> 00:13:31,040 Speaker 1: and may continue for a period after, because how do 235 00:13:31,040 --> 00:13:33,280 Speaker 1: you walk back from that? You know, there's a lot 236 00:13:33,360 --> 00:13:35,720 Speaker 1: that has to happen, both in the conflict itself and 237 00:13:35,760 --> 00:13:39,400 Speaker 1: then in the repairing of relationships before Europe can never 238 00:13:40,559 --> 00:13:43,680 Speaker 1: resume Russian imports, but it's a huge source of supply 239 00:13:43,920 --> 00:13:48,920 Speaker 1: and something that hasn't been painless for Europe or for Russia. Rachel, 240 00:13:49,280 --> 00:13:52,840 Speaker 1: how did you manage to avoid a sort of energy breakdown? 241 00:13:52,880 --> 00:13:56,360 Speaker 1: That was the doomsday scenario? Wasn't it that when this 242 00:13:56,600 --> 00:14:00,520 Speaker 1: sort of shock attack happened, the idea that might be 243 00:14:00,920 --> 00:14:06,200 Speaker 1: rolling black house on continental Europe yes, that's right. When 244 00:14:06,240 --> 00:14:10,800 Speaker 1: the Nord Stream pipeline was attacked, that did cut off 245 00:14:12,120 --> 00:14:15,959 Speaker 1: a vital supply line to Europe. And ways in which 246 00:14:16,400 --> 00:14:20,400 Speaker 1: we've managed that some have been fortunate, like a really 247 00:14:20,440 --> 00:14:23,960 Speaker 1: mild winter helped us to use less gas, but also 248 00:14:24,280 --> 00:14:26,840 Speaker 1: the message coming from the European Union and from governments 249 00:14:26,840 --> 00:14:32,360 Speaker 1: to use less. The target or consumption cuts were voluntary, 250 00:14:32,760 --> 00:14:35,800 Speaker 1: but we did see countries like France, like Germany taking 251 00:14:35,800 --> 00:14:39,600 Speaker 1: this really seriously, so people across Europe using less. We've 252 00:14:39,600 --> 00:14:43,200 Speaker 1: switched on coal fired power stations as well. That has 253 00:14:43,280 --> 00:14:45,720 Speaker 1: not had you know, that's something great for the environment 254 00:14:45,760 --> 00:14:49,160 Speaker 1: and for emissions, but that has helped reduce the need 255 00:14:49,280 --> 00:14:53,080 Speaker 1: for gas. And yes, this winter has been mild and 256 00:14:53,160 --> 00:14:56,240 Speaker 1: continues to be so, so we've still got much more 257 00:14:56,280 --> 00:14:58,200 Speaker 1: gas and storage than we usually have at this time 258 00:14:58,240 --> 00:15:00,480 Speaker 1: of year, which will help us going into next winter. 259 00:15:00,920 --> 00:15:04,760 Speaker 1: So it's been a kind of combination of action by 260 00:15:04,800 --> 00:15:07,200 Speaker 1: people kind of pulling together to try to save energy 261 00:15:07,440 --> 00:15:12,680 Speaker 1: and also good fortune. What has it meant for gasoline 262 00:15:12,760 --> 00:15:17,040 Speaker 1: and diesel prices for fuel across Europe, Well, I think 263 00:15:17,120 --> 00:15:21,760 Speaker 1: it's been a bullish force. There's been a long period 264 00:15:21,800 --> 00:15:24,120 Speaker 1: of uncertainty about what would happen with the supply of 265 00:15:24,200 --> 00:15:27,240 Speaker 1: the raw crude that goes into world refineries that makes 266 00:15:27,280 --> 00:15:31,640 Speaker 1: the fuels. And Russia itself is the biggest or was 267 00:15:31,720 --> 00:15:36,120 Speaker 1: the biggest single supplier of diesel to the European Union 268 00:15:36,840 --> 00:15:42,600 Speaker 1: until an imports band began on. So are we're still 269 00:15:42,640 --> 00:15:45,560 Speaker 1: in the early phases of understanding how the various bands 270 00:15:45,560 --> 00:15:48,440 Speaker 1: will play out. Um, but it has been a source 271 00:15:48,440 --> 00:15:52,800 Speaker 1: of supply concern. And if we start to see a 272 00:15:52,920 --> 00:15:55,760 Speaker 1: real pick up in Chinese in the Chinese economy, and 273 00:15:55,840 --> 00:15:58,640 Speaker 1: that's always been the big driver of demand growth in 274 00:15:58,680 --> 00:16:00,800 Speaker 1: the old market. But if if that really does come 275 00:16:00,840 --> 00:16:03,440 Speaker 1: into play and we see any kind of loss of 276 00:16:03,520 --> 00:16:06,840 Speaker 1: Russian supply, I think there's a concern that prices could 277 00:16:06,920 --> 00:16:11,240 Speaker 1: could push higher. Rachel has Europe, then you know, to 278 00:16:11,320 --> 00:16:16,720 Speaker 1: continue that the idea around energy independence. Has Europe managed 279 00:16:16,760 --> 00:16:20,880 Speaker 1: to replace Russian energy? Is it kind of rebranded Russian 280 00:16:20,960 --> 00:16:25,040 Speaker 1: energy or what is it being replaced by? Because again, 281 00:16:25,080 --> 00:16:30,520 Speaker 1: the kind of the move towards renewables has been given 282 00:16:30,560 --> 00:16:34,640 Speaker 1: a bit a big shove by by this fact. Yes, 283 00:16:35,040 --> 00:16:37,960 Speaker 1: you could describe it in that way. We've really replaced 284 00:16:38,160 --> 00:16:41,480 Speaker 1: Russian piped gas with l erg a lot of that's 285 00:16:41,520 --> 00:16:47,840 Speaker 1: coming from the US from catar and fundamentally we are 286 00:16:47,960 --> 00:16:53,000 Speaker 1: short of gas in Europe and globally until when more 287 00:16:53,000 --> 00:16:56,560 Speaker 1: exboot capacity comes online in the US. So if there 288 00:16:56,600 --> 00:17:00,800 Speaker 1: are factors that changed the supply balance and that energy 289 00:17:00,920 --> 00:17:04,040 Speaker 1: harder to get hold of or more expensive, then that 290 00:17:04,200 --> 00:17:07,439 Speaker 1: will change things. There were sort of in this quite 291 00:17:07,960 --> 00:17:12,720 Speaker 1: um strange situation where prices have fallen a lot. There's 292 00:17:12,880 --> 00:17:16,120 Speaker 1: lots of supply around China. The economy hasn't banked back 293 00:17:16,119 --> 00:17:18,960 Speaker 1: as quickly as people thought from COVID, and so the 294 00:17:19,000 --> 00:17:22,679 Speaker 1: pictures looking pretty good. But what we hear in the 295 00:17:22,760 --> 00:17:25,960 Speaker 1: market is that can change very quickly. You know, we 296 00:17:26,080 --> 00:17:29,160 Speaker 1: might see demand pick up from somewhere. We might see 297 00:17:29,640 --> 00:17:34,000 Speaker 1: problems like the three Portum which had a huge fire 298 00:17:34,040 --> 00:17:37,240 Speaker 1: in the US and stopped exports from there. You know, 299 00:17:37,320 --> 00:17:40,960 Speaker 1: anything can happen. We might have cold weather next year. 300 00:17:41,280 --> 00:17:44,720 Speaker 1: So although we're looking quite good at the moment for 301 00:17:45,280 --> 00:17:49,760 Speaker 1: this year and restocking gas reserves, there's still quite a 302 00:17:49,760 --> 00:17:52,520 Speaker 1: lot of risk, aren't there in the market. And it 303 00:17:52,720 --> 00:17:54,960 Speaker 1: isn't easy to replace this huge amount of gas that 304 00:17:55,000 --> 00:17:58,200 Speaker 1: we were getting from Russia, and we've managed it so far, 305 00:17:58,440 --> 00:18:01,240 Speaker 1: but it's not. You know, it's not sort of plane 306 00:18:01,280 --> 00:18:04,720 Speaker 1: sailing from here by any stretch. Yeah, that's interesting. The 307 00:18:04,840 --> 00:18:09,040 Speaker 1: energy transition, Rachel, you mentioned, um, you know, what are 308 00:18:09,080 --> 00:18:11,520 Speaker 1: we expecting to see them? There's a real kind of 309 00:18:11,560 --> 00:18:16,159 Speaker 1: division about how quickly Europe is moving in terms of 310 00:18:16,200 --> 00:18:21,399 Speaker 1: the energy transition. Yes, it's one of the sort of 311 00:18:21,440 --> 00:18:25,679 Speaker 1: most straightboard solutions to the volatility in gas is to 312 00:18:25,760 --> 00:18:28,840 Speaker 1: just use less of it, but that's difficult in the 313 00:18:28,880 --> 00:18:32,520 Speaker 1: short term. Renewables projects do take time to build. One 314 00:18:32,560 --> 00:18:35,679 Speaker 1: of the biggest issues that we hear from developers is 315 00:18:36,040 --> 00:18:40,399 Speaker 1: about red tape surrounding kind of planning and actually getting 316 00:18:40,400 --> 00:18:44,600 Speaker 1: projects built so that flows everything done and those can't 317 00:18:44,600 --> 00:18:46,960 Speaker 1: really be sped up anymore than they are at the moment. 318 00:18:47,000 --> 00:18:49,159 Speaker 1: The European Union is looking at ways to try to 319 00:18:49,200 --> 00:18:54,080 Speaker 1: get those projects online quicker, but while that takes time, 320 00:18:55,000 --> 00:18:58,879 Speaker 1: then fossil fuels are the sort of easiest replacement. And 321 00:18:59,320 --> 00:19:05,320 Speaker 1: last year emissions, particularly in Germany, they didn't meet any 322 00:19:05,359 --> 00:19:07,520 Speaker 1: of the reduction targets that they were supposed to do 323 00:19:07,520 --> 00:19:09,560 Speaker 1: because they were using more cold to try to use 324 00:19:09,840 --> 00:19:13,320 Speaker 1: less gas. If that continues, what that means for sort 325 00:19:13,320 --> 00:19:16,399 Speaker 1: of interim climate targets in twenties thirty and whether we 326 00:19:16,440 --> 00:19:20,679 Speaker 1: see a kind of broader backsliding on emissions reductions at 327 00:19:20,680 --> 00:19:23,280 Speaker 1: a time when really we should be pushing forward and 328 00:19:23,400 --> 00:19:27,399 Speaker 1: you know, getting net zero as quickly as possible. Okay, 329 00:19:27,440 --> 00:19:29,520 Speaker 1: thank you so much for being with the Splinberg's All 330 00:19:29,560 --> 00:19:33,159 Speaker 1: Trading team leader here in Uniting and Rachel Morrison, or 331 00:19:33,240 --> 00:19:36,879 Speaker 1: Gas Power and Renewables reporter as we think around the 332 00:19:36,920 --> 00:19:40,679 Speaker 1: consequences of Putin's war in Ukraine. I'm Carline Heber here 333 00:19:40,720 --> 00:19:42,679 Speaker 1: in London. You can catch us every weekday morning for 334 00:19:42,680 --> 00:19:45,240 Speaker 1: Bloomberg Daybreak. You're at beginning at six am in London. 335 00:19:45,320 --> 00:19:48,240 Speaker 1: That's one am on Wall Street. Tom. Thank you, Caroline, 336 00:19:48,280 --> 00:19:51,320 Speaker 1: and coming up on Bloomberg Daybreak weekend more on NATO 337 00:19:51,400 --> 00:19:54,760 Speaker 1: efforts to repel Russia and President Biden's trip to Poland 338 00:19:55,000 --> 00:20:10,119 Speaker 1: and elsewhere. I'm Tom Busby and this is Bloomber broadcasting 339 00:20:10,200 --> 00:20:13,920 Speaker 1: live from the Bloomberg Interactive Broker Studio in New York. 340 00:20:13,960 --> 00:20:18,680 Speaker 1: Bloomberg elmon Frio to Washington, d C, Bloomberg to Boston, 341 00:20:18,760 --> 00:20:22,160 Speaker 1: Bloomberg one O six one to San Francisco, Bloomberg nine 342 00:20:22,760 --> 00:20:26,080 Speaker 1: to the country. Sirius XM Channel one nineteen to London, 343 00:20:26,240 --> 00:20:29,000 Speaker 1: d A B Digital Radio and around the globe the 344 00:20:29,000 --> 00:20:32,919 Speaker 1: Bloomberg Business Act and Bloomberg Radio dot Com. This is 345 00:20:32,960 --> 00:20:42,000 Speaker 1: Bloomberg day Break Weekend I Tom Busby in New York 346 00:20:42,040 --> 00:20:43,919 Speaker 1: with your global look ahead at the top stories for 347 00:20:44,000 --> 00:20:46,919 Speaker 1: investors in the coming week. President Biden heading out on 348 00:20:46,960 --> 00:20:49,440 Speaker 1: a trip to Poland as we approached the one year 349 00:20:49,480 --> 00:20:52,800 Speaker 1: mark of Russia's invasion of Ukraine. It's an important trip 350 00:20:52,840 --> 00:20:56,080 Speaker 1: and for more let's add to our Bloomberg News room 351 00:20:56,080 --> 00:21:00,399 Speaker 1: in Washington and Sound On host Joe Matthew. Joe, thank you, 352 00:21:00,440 --> 00:21:02,280 Speaker 1: Tom and joining us now to talk about this trip. 353 00:21:02,280 --> 00:21:06,119 Speaker 1: Bloomberg's National Security Editor Nick wadhams he runs our national 354 00:21:06,200 --> 00:21:08,680 Speaker 1: security team and it's great to see Nick. White House 355 00:21:08,680 --> 00:21:12,160 Speaker 1: Press Secretary Karine John Pierre says this is a critically 356 00:21:12,200 --> 00:21:15,320 Speaker 1: important opportunity to speak to both the international community and 357 00:21:15,359 --> 00:21:17,560 Speaker 1: Americans back at home. Here's how she put it in 358 00:21:17,560 --> 00:21:19,000 Speaker 1: the briefing room. Look, this is going to be the 359 00:21:19,040 --> 00:21:20,800 Speaker 1: one year. He's going there ahead of the one year 360 00:21:20,800 --> 00:21:25,120 Speaker 1: anniversary and sending a strong message of solidarity and UH 361 00:21:25,160 --> 00:21:28,439 Speaker 1: and the President understanding to reaffirm right our support for 362 00:21:28,480 --> 00:21:31,119 Speaker 1: the Ukrainian people as they're fighting back against the boot 363 00:21:31,200 --> 00:21:34,280 Speaker 1: the rude war that Russia started almost a year ago, 364 00:21:34,359 --> 00:21:36,000 Speaker 1: almost a year nick. There are a lot of themes 365 00:21:36,040 --> 00:21:39,920 Speaker 1: running through this support for Ukrainians, solidarity with NATO, message 366 00:21:39,960 --> 00:21:42,360 Speaker 1: to the Russians that the US isn't giving up here. 367 00:21:43,040 --> 00:21:45,480 Speaker 1: And I suppose a photo up for American voters to 368 00:21:45,560 --> 00:21:48,679 Speaker 1: maintain some domestic support. Although we know that there's already 369 00:21:48,680 --> 00:21:51,320 Speaker 1: a little bit of pushback by some House Republicans when 370 00:21:51,320 --> 00:21:55,479 Speaker 1: it comes to Ukrainian funding. What's the real audience for 371 00:21:55,520 --> 00:21:59,480 Speaker 1: this trip? Well, you know, I think there are multiple audiences. 372 00:21:59,560 --> 00:22:05,200 Speaker 1: One is back home. Obviously Republicans have not the most 373 00:22:05,680 --> 00:22:08,760 Speaker 1: Republicans who actually have power are not calling for an 374 00:22:08,800 --> 00:22:12,760 Speaker 1: actual reduction and funding, but they do want more scrutiny. Uh. 375 00:22:12,880 --> 00:22:17,040 Speaker 1: So he's got to keep um folks together back home 376 00:22:17,080 --> 00:22:20,399 Speaker 1: to keep the money and the weapons flowing to Ukraine. Uh. 377 00:22:20,480 --> 00:22:24,320 Speaker 1: It's also directed at Europe because there is a concern 378 00:22:24,480 --> 00:22:27,480 Speaker 1: that now that we're a year on, you know, Ukraine 379 00:22:27,920 --> 00:22:32,399 Speaker 1: is firing an awful lot of artillery shells, they're losing weaponry, 380 00:22:32,560 --> 00:22:36,119 Speaker 1: they're using up all those uh long range missiles and 381 00:22:36,160 --> 00:22:39,360 Speaker 1: other things. So there really needs to be a continuous 382 00:22:39,440 --> 00:22:44,560 Speaker 1: flow of of financial support, uh and also military support, 383 00:22:44,640 --> 00:22:46,240 Speaker 1: and that's going to have to come from the US, 384 00:22:46,320 --> 00:22:48,280 Speaker 1: but it's also going to have to come from other countries. 385 00:22:48,400 --> 00:22:51,119 Speaker 1: So you know, the US has been the primary backer 386 00:22:51,240 --> 00:22:54,480 Speaker 1: of Ukraine's military as well as its economic lifeline. So 387 00:22:54,600 --> 00:22:56,800 Speaker 1: President Biden's going over there to sort of give a 388 00:22:56,880 --> 00:22:59,439 Speaker 1: shot in the arm to all these efforts and say, okay, listen, 389 00:22:59,440 --> 00:23:02,119 Speaker 1: it has been in a year that's gone so fast, 390 00:23:02,280 --> 00:23:06,080 Speaker 1: but we cannot let up. John Kirby spoke about this 391 00:23:06,119 --> 00:23:08,639 Speaker 1: as well. He speaks for the National Security Apparatus at 392 00:23:08,640 --> 00:23:11,280 Speaker 1: the White House. Wants to talk about the importance of 393 00:23:11,320 --> 00:23:15,480 Speaker 1: the international community's resolve and unity in supporting Ukraine for 394 00:23:15,600 --> 00:23:18,600 Speaker 1: now going on a year. Wouldn't it be great if 395 00:23:18,640 --> 00:23:21,159 Speaker 1: the President didn't have to make a trip around a 396 00:23:21,200 --> 00:23:24,560 Speaker 1: one yearniversary of a war that never should have started. Sadly, 397 00:23:24,720 --> 00:23:26,440 Speaker 1: that's where we are, and he wants to make sure 398 00:23:26,480 --> 00:23:28,399 Speaker 1: that he's sending that strong message not only of the 399 00:23:28,440 --> 00:23:31,000 Speaker 1: United States resolve but the international community resolve. Well, it 400 00:23:31,040 --> 00:23:32,520 Speaker 1: is where we are. We have a sense of what 401 00:23:32,640 --> 00:23:34,600 Speaker 1: this trip is going to be like. Obviously there you know, 402 00:23:34,720 --> 00:23:36,840 Speaker 1: this is a massive photo opportunity is he going to 403 00:23:36,880 --> 00:23:39,439 Speaker 1: speak on the border, will he be seen mingling with 404 00:23:39,480 --> 00:23:41,639 Speaker 1: troops with people who live there, or do we not 405 00:23:42,040 --> 00:23:44,200 Speaker 1: have a sense of that. Well, they have not released 406 00:23:44,240 --> 00:23:46,680 Speaker 1: a lot of that information yet, but you can expect 407 00:23:46,960 --> 00:23:50,520 Speaker 1: um that there will be obviously meetings with Polish leaders, 408 00:23:50,880 --> 00:23:54,160 Speaker 1: there will be meetings with Americans. I'm sure there will 409 00:23:54,200 --> 00:23:56,880 Speaker 1: be an effort to get close to the border, though 410 00:23:56,920 --> 00:24:00,760 Speaker 1: obviously there are security risks around that. So uh, I'm 411 00:24:00,800 --> 00:24:03,280 Speaker 1: sure that the team is is figuring that that out 412 00:24:03,359 --> 00:24:05,520 Speaker 1: right now. I mean, it is so interesting that clip 413 00:24:05,560 --> 00:24:08,960 Speaker 1: you played for me, because it's like, well, uh, the 414 00:24:09,000 --> 00:24:11,760 Speaker 1: message of unity and and they keep repeating this is 415 00:24:11,800 --> 00:24:15,960 Speaker 1: about showing unity, and it's it's both showing unity, but 416 00:24:16,040 --> 00:24:20,280 Speaker 1: it's also reinforcing unity. So you know, trying to make 417 00:24:20,320 --> 00:24:23,840 Speaker 1: sure that he is keeping those allies on board. Poland 418 00:24:23,920 --> 00:24:26,280 Speaker 1: is a great example. They want to push harder, they 419 00:24:26,320 --> 00:24:29,440 Speaker 1: want more. They are very worried, you know, Ukraine is 420 00:24:29,480 --> 00:24:32,560 Speaker 1: on their border. Uh. And then you have other countries 421 00:24:32,640 --> 00:24:36,400 Speaker 1: like France, for example, which is a little bit more 422 00:24:36,480 --> 00:24:39,159 Speaker 1: hesitant about what to supply, though they have supplied a 423 00:24:39,200 --> 00:24:41,879 Speaker 1: fair amount of weaponry and and how fast to do it. 424 00:24:42,000 --> 00:24:44,439 Speaker 1: So it's it's they're they're talking about a message of 425 00:24:44,520 --> 00:24:47,520 Speaker 1: unity that's directed of Vladimir Putin, but it's also directed 426 00:24:47,560 --> 00:24:49,879 Speaker 1: back at the Alliance itself. Let's talk a little bit 427 00:24:49,920 --> 00:24:53,280 Speaker 1: more about that, because the Munich Security Conference that's underway 428 00:24:53,359 --> 00:24:56,720 Speaker 1: ahead of this anniversary has has brought about some tough 429 00:24:56,760 --> 00:25:00,000 Speaker 1: memories for some, particularly at Eastern Europe. It was nine 430 00:25:00,000 --> 00:25:04,480 Speaker 1: teen thirty eight at that very same event, think Neville Chamberlain, 431 00:25:04,720 --> 00:25:08,080 Speaker 1: eight five years ago. The checks know this as the 432 00:25:08,160 --> 00:25:12,040 Speaker 1: Munich betrayal. They know that, Look, there's a window of 433 00:25:12,040 --> 00:25:14,359 Speaker 1: opportunity here in war. Fatigue is a real thing in 434 00:25:14,359 --> 00:25:17,679 Speaker 1: the West. How concerned are they? Well, I mean this 435 00:25:17,480 --> 00:25:20,680 Speaker 1: is this is very much a message directed at Vladimir 436 00:25:20,680 --> 00:25:24,600 Speaker 1: Putin as well. So his forces have launched a counter 437 00:25:24,680 --> 00:25:28,560 Speaker 1: offensive again, a sort of counter to the Ukrainian counter offensive, 438 00:25:28,640 --> 00:25:32,280 Speaker 1: firing off massive missile barrages. They have managed to take 439 00:25:32,600 --> 00:25:35,720 Speaker 1: some more territory, but they have stalled out in other areas, 440 00:25:35,800 --> 00:25:38,480 Speaker 1: and there are real divisions you've seen back and forth 441 00:25:38,520 --> 00:25:41,720 Speaker 1: between the Wagner group, this this private military group that's 442 00:25:41,720 --> 00:25:44,800 Speaker 1: fighting on the Russian side, and the Russian General Staff 443 00:25:45,240 --> 00:25:48,040 Speaker 1: reports that Russia has now lost half of its tanks 444 00:25:48,080 --> 00:25:52,080 Speaker 1: and basically doesn't have uh well trained troops to send 445 00:25:52,119 --> 00:25:56,159 Speaker 1: in anymore. So they're really trying to show Russia listen, 446 00:25:56,200 --> 00:25:58,879 Speaker 1: if you want to keep prosecuting this war, it is 447 00:25:58,880 --> 00:26:02,879 Speaker 1: going to be extremely costly for you. Munich, you know, 448 00:26:03,000 --> 00:26:05,680 Speaker 1: Munich has really changed over the years because the Munich 449 00:26:05,760 --> 00:26:11,520 Speaker 1: Security Conference has become, uh, this venue for Western countries 450 00:26:11,560 --> 00:26:13,800 Speaker 1: to gather in one space. I mean, I've been in that. 451 00:26:13,960 --> 00:26:16,159 Speaker 1: In that place, it's crazy. You'll be walking through this 452 00:26:16,200 --> 00:26:19,280 Speaker 1: crowded hall and oh, there's the German Chancellor, there's the 453 00:26:19,320 --> 00:26:22,119 Speaker 1: German Oh there's Justin Trudeau. You're sort of rubbing suddenly 454 00:26:22,160 --> 00:26:26,439 Speaker 1: in a room, rubbing shoulders with all these major power players. 455 00:26:26,480 --> 00:26:28,520 Speaker 1: This is really the place. I mean, in a way, 456 00:26:28,560 --> 00:26:31,000 Speaker 1: it's perfect timing for Joe Biden because this is really 457 00:26:31,040 --> 00:26:34,560 Speaker 1: the place where Western officials and people from around the 458 00:26:34,560 --> 00:26:37,359 Speaker 1: world gather and make these pledges of unity, you know, 459 00:26:37,800 --> 00:26:40,680 Speaker 1: stressing the importance of the of the global order that 460 00:26:41,080 --> 00:26:43,840 Speaker 1: you know, the international laws and norms, and so it's 461 00:26:43,840 --> 00:26:46,560 Speaker 1: a perfect place to sort of direct that message back 462 00:26:46,560 --> 00:26:49,040 Speaker 1: at Putin. Talk to us Nick about what's happening on 463 00:26:49,080 --> 00:26:51,600 Speaker 1: the battlefield right now. General Mark Millie spoke a couple 464 00:26:51,640 --> 00:26:54,360 Speaker 1: of days ago along with the Defense Secretary to reporters, 465 00:26:54,400 --> 00:26:56,840 Speaker 1: describing this again as a war of attrition, but one 466 00:26:56,880 --> 00:27:00,000 Speaker 1: that is really gutting to your point earlier, the run 467 00:27:00,040 --> 00:27:02,200 Speaker 1: in military. Here's what he said. Their progress is slow. 468 00:27:02,200 --> 00:27:04,960 Speaker 1: It's a war of electrician and taking heavy cassties. Their 469 00:27:05,040 --> 00:27:10,200 Speaker 1: leadership and morale is not great. Um, and they're struggling mightily. However, Uh, 470 00:27:10,240 --> 00:27:13,280 Speaker 1: they do have numbers. Uh. And as you know, uh, 471 00:27:13,560 --> 00:27:16,600 Speaker 1: President Putin did a call up of several hundred thousand. Uh, 472 00:27:16,600 --> 00:27:19,320 Speaker 1: and those folks have been arriving on the battlefield, so 473 00:27:19,359 --> 00:27:22,120 Speaker 1: they do have numbers. At what point, though, to those 474 00:27:22,240 --> 00:27:28,000 Speaker 1: numbers show the diminishing returns of opening prisons, for instance, 475 00:27:28,280 --> 00:27:30,560 Speaker 1: grabbing anyone you can and sending them into the battlefield. 476 00:27:30,720 --> 00:27:33,800 Speaker 1: At a certain point, you can't win a war that way. Well, 477 00:27:33,840 --> 00:27:38,000 Speaker 1: I mean, you're right, And we do have reports that 478 00:27:38,000 --> 00:27:40,359 Speaker 1: that Russia is trying to be a little bit more 479 00:27:41,359 --> 00:27:44,119 Speaker 1: parsimonious in the way that it fires artillery shells and 480 00:27:44,160 --> 00:27:46,720 Speaker 1: things like that. There are suggestions that it is running out. 481 00:27:46,760 --> 00:27:50,600 Speaker 1: But you know, the numbers are so big, and compared 482 00:27:50,640 --> 00:27:54,880 Speaker 1: to Ukraine, whose army is is quite a bit smaller, 483 00:27:54,960 --> 00:27:57,359 Speaker 1: so there's there is a real numbers game that is 484 00:27:57,400 --> 00:27:59,359 Speaker 1: that it is hard to square against. I mean, Russia 485 00:27:59,400 --> 00:28:03,320 Speaker 1: is is not going to be running out of boots 486 00:28:03,359 --> 00:28:06,640 Speaker 1: on the ground. They may not be super high quality soldiers, 487 00:28:06,680 --> 00:28:09,560 Speaker 1: but they're they're not running out of that particularly soon. 488 00:28:09,600 --> 00:28:12,199 Speaker 1: The other problem you have here is that this is 489 00:28:12,640 --> 00:28:16,640 Speaker 1: obviously a war, but Ukraine so far has been restricted 490 00:28:16,760 --> 00:28:20,800 Speaker 1: from hitting Russian targets inside Crimea, which Russia took in 491 00:28:20,840 --> 00:28:23,720 Speaker 1: twenty fourteen, or inside of Russia itself. That's a very 492 00:28:23,720 --> 00:28:25,679 Speaker 1: deliberate policy by the West because they don't want to 493 00:28:25,680 --> 00:28:29,000 Speaker 1: start a wider war with NATO. But you have this 494 00:28:29,080 --> 00:28:32,719 Speaker 1: issue where a lot of Russian assets are essentially untouched. 495 00:28:33,080 --> 00:28:35,240 Speaker 1: One of the big ones is its air force, and 496 00:28:35,800 --> 00:28:40,240 Speaker 1: uh General Milliye has talked about this before. Russia has 497 00:28:40,320 --> 00:28:42,560 Speaker 1: used its air force to some degree, but not to 498 00:28:42,680 --> 00:28:46,280 Speaker 1: the fullest extent possible. So Ukraine is very much focused 499 00:28:46,280 --> 00:28:50,160 Speaker 1: on defense and protecting from incoming missiles and fighter jets 500 00:28:50,160 --> 00:28:52,760 Speaker 1: and things like that, but they are not targeting Russian 501 00:28:52,800 --> 00:28:55,360 Speaker 1: forces on the ground inside Russia. And that's something that 502 00:28:55,440 --> 00:28:57,480 Speaker 1: Russia is using to its advantage for sure. And of 503 00:28:57,520 --> 00:29:00,920 Speaker 1: course the call for fighter jets, cant and news. As 504 00:29:00,920 --> 00:29:03,400 Speaker 1: we go into the second year, we've seen a lot 505 00:29:03,440 --> 00:29:08,320 Speaker 1: of different levels of hardware balked at and then eventually delivered. Uh, 506 00:29:08,640 --> 00:29:11,280 Speaker 1: is that actually what they need? The Pentagon would tell 507 00:29:11,320 --> 00:29:13,560 Speaker 1: you that it's actually not that they need air defenses. 508 00:29:13,920 --> 00:29:16,719 Speaker 1: Ukraine says, please send the jets, right. I mean this 509 00:29:16,800 --> 00:29:19,640 Speaker 1: sort of fits a pattern with the Ukrainians where they 510 00:29:19,680 --> 00:29:23,080 Speaker 1: they go from one piece of kit to the next. 511 00:29:23,160 --> 00:29:24,480 Speaker 1: And you know, a couple of months ago it was 512 00:29:24,480 --> 00:29:26,640 Speaker 1: all about tanks and now it's a huge focus on 513 00:29:26,680 --> 00:29:29,960 Speaker 1: the fighter jets. I mean it's Uh. The bigger issue though, 514 00:29:30,000 --> 00:29:32,720 Speaker 1: that Ukraine argues is again that they are too too 515 00:29:32,880 --> 00:29:35,320 Speaker 1: They are focused on defense and they want to be 516 00:29:35,400 --> 00:29:38,080 Speaker 1: able to in some ways go on offense. And that's 517 00:29:38,200 --> 00:29:41,240 Speaker 1: that's a situation that Russia is exploiting and using to 518 00:29:41,320 --> 00:29:45,080 Speaker 1: its advantage. Great conversation and great insights from Nick Wadhams, 519 00:29:45,080 --> 00:29:48,800 Speaker 1: who runs our national security team for Bloomberg News here 520 00:29:48,840 --> 00:29:51,200 Speaker 1: in Washington. Nick, many thanks to you. Will be looking 521 00:29:51,200 --> 00:29:53,600 Speaker 1: for your reporting on the one year mark next week. 522 00:29:53,680 --> 00:29:57,520 Speaker 1: Thanks Joe, Tom Back to you. Bloomberg's Joe Matthew reporting 523 00:29:57,520 --> 00:30:00,600 Speaker 1: from our Bloomberg One newsroom in Washington, and you can 524 00:30:00,640 --> 00:30:04,080 Speaker 1: hear Joe on sound on weekdays five to six pm 525 00:30:04,200 --> 00:30:08,160 Speaker 1: right here on Bloomberg Radio. Coming up on Bloomberg Daybreak Weekend, 526 00:30:08,280 --> 00:30:12,640 Speaker 1: japan Central Bank faces a tangled policy web. Tom Busby, 527 00:30:12,840 --> 00:30:24,479 Speaker 1: This is Bloomberg. This is Bloomberg Daybreak Weekend. Our global 528 00:30:24,480 --> 00:30:26,520 Speaker 1: look ahead at the top stories for investors in the 529 00:30:26,560 --> 00:30:30,240 Speaker 1: coming week. I'm Tom Busby in New York. Some changes ahead, 530 00:30:30,400 --> 00:30:33,520 Speaker 1: some problems for Japan's Central Bank. And for more on 531 00:30:33,600 --> 00:30:36,040 Speaker 1: what we're watching, let's go to Hong Kong and Bloomberg 532 00:30:36,120 --> 00:30:39,920 Speaker 1: Daybreak Asia host Brian Curtis and his colleague Doug Chrisner. 533 00:30:40,080 --> 00:30:43,000 Speaker 1: Tom challenges a bound for the incoming Governor of the 534 00:30:43,000 --> 00:30:46,960 Speaker 1: Bank of Japan, Kazuo Da. How do you stimulate growth 535 00:30:47,200 --> 00:30:50,800 Speaker 1: without further stoking inflation? How do you reform the yield 536 00:30:50,800 --> 00:30:54,600 Speaker 1: curve control program without driving j g B yields up 537 00:30:54,640 --> 00:30:57,640 Speaker 1: and the end sharply higher. Now, the combination of yield 538 00:30:57,720 --> 00:31:00,440 Speaker 1: curve control and quantitative easing has earned the b o 539 00:31:00,560 --> 00:31:04,000 Speaker 1: J into the largest owner of stocks and government bonds 540 00:31:04,040 --> 00:31:07,120 Speaker 1: in Japan. The b OJ's balance sheet has jumped to 541 00:31:07,160 --> 00:31:11,080 Speaker 1: the equivalent of five dty seven billion dollars. That's equal 542 00:31:11,120 --> 00:31:13,920 Speaker 1: to a hundred and thirty percent of g d P. 543 00:31:14,880 --> 00:31:18,640 Speaker 1: Yet instead of releasing the economy's animal spirits, it's driven 544 00:31:18,680 --> 00:31:22,400 Speaker 1: investors abroad. So the question how does the new governor 545 00:31:22,440 --> 00:31:27,120 Speaker 1: get that money back without driving the end substantially higher. Well, 546 00:31:27,240 --> 00:31:29,920 Speaker 1: joining us is through all of this is Kathleen Hayes, 547 00:31:29,960 --> 00:31:34,480 Speaker 1: Bloomberg's Global Policy and Economy editor. Kathleen, thanks very much 548 00:31:34,520 --> 00:31:37,560 Speaker 1: for joining us. Let's start off with the simplest question, 549 00:31:37,680 --> 00:31:40,480 Speaker 1: or maybe it's not so simple. What's the biggest challenge 550 00:31:40,600 --> 00:31:46,680 Speaker 1: that Kazuoita faces. Well, the biggest challenge is starting to 551 00:31:46,760 --> 00:31:49,720 Speaker 1: walk down the path of normalization, and you've just laid 552 00:31:49,720 --> 00:31:54,320 Speaker 1: out all the difficulties. Uh Inflation is rising in Japan. 553 00:31:54,400 --> 00:31:56,240 Speaker 1: It's far above its target, but a lot of it 554 00:31:56,320 --> 00:31:59,640 Speaker 1: is commodity price driven, and the b O J currently 555 00:31:59,680 --> 00:32:04,040 Speaker 1: doesn't think that's potentially sustainable. So they feel that the 556 00:32:04,320 --> 00:32:08,560 Speaker 1: current crew says, look, we can't stop monetary easing, and 557 00:32:08,640 --> 00:32:10,440 Speaker 1: we're getting there's going to be a new governor at 558 00:32:10,440 --> 00:32:13,080 Speaker 1: the HELM, but there's still gonna be a lot of 559 00:32:13,080 --> 00:32:15,719 Speaker 1: the same people on the board, so it's not as 560 00:32:15,720 --> 00:32:18,680 Speaker 1: though you're gonna have a wholesale change because you get 561 00:32:18,720 --> 00:32:22,040 Speaker 1: a new governor and uh, he is well respected, well 562 00:32:22,080 --> 00:32:24,760 Speaker 1: known within and out without outside of the Bank of 563 00:32:24,840 --> 00:32:30,120 Speaker 1: Japan and in japan economic circles and globally. But it's 564 00:32:30,160 --> 00:32:33,680 Speaker 1: just even starting. It is going to be tough because 565 00:32:33,720 --> 00:32:36,320 Speaker 1: of the ramifications it could quickly have in the market. 566 00:32:36,440 --> 00:32:39,080 Speaker 1: So from what I've read, he seems to be characterized 567 00:32:39,080 --> 00:32:42,760 Speaker 1: as being methodical. He's a gradualist, as one of our 568 00:32:42,800 --> 00:32:46,239 Speaker 1: colleagues put a pragmatist and dubbed an owl in the 569 00:32:46,240 --> 00:32:49,080 Speaker 1: tradition of Christine Legarde, who said she was neither a 570 00:32:49,120 --> 00:32:51,680 Speaker 1: hawk nor a dove, but aimed to be the wiser bird. 571 00:32:52,000 --> 00:32:55,440 Speaker 1: So in terms of creating kind of a stable environment 572 00:32:55,480 --> 00:32:59,320 Speaker 1: for the conversation to begin and not disrupt markets, not 573 00:32:59,440 --> 00:33:04,000 Speaker 1: create a volatil right of course, And I think whoever 574 00:33:04,120 --> 00:33:07,640 Speaker 1: would have gotten that job had it been Deputy Governor 575 00:33:07,680 --> 00:33:10,520 Speaker 1: am A Miya who turned the JAB down. He didn't 576 00:33:10,560 --> 00:33:12,160 Speaker 1: think he was. He thought he was too close to 577 00:33:12,200 --> 00:33:14,600 Speaker 1: the process of creating this whole system, and he was. 578 00:33:14,680 --> 00:33:17,320 Speaker 1: He was the architect of Yale curve control itself. That 579 00:33:17,400 --> 00:33:19,600 Speaker 1: he didn't think he could he could appropriately review it. 580 00:33:19,640 --> 00:33:21,640 Speaker 1: And that's what's going to happen first, and that's been 581 00:33:21,680 --> 00:33:25,240 Speaker 1: signaled by Prime Minister Fumyo Kishida for about the past 582 00:33:25,280 --> 00:33:28,160 Speaker 1: two or three months. There. In a ten years ago 583 00:33:29,920 --> 00:33:33,280 Speaker 1: led by former Prime Minister Abe uh there the government 584 00:33:33,320 --> 00:33:35,200 Speaker 1: made a new accord with the b o J to 585 00:33:35,360 --> 00:33:37,880 Speaker 1: get to two percent inflation as quickly as they could 586 00:33:38,080 --> 00:33:41,800 Speaker 1: and then committed to two years and never exactly got there. 587 00:33:42,280 --> 00:33:44,440 Speaker 1: Uh So that's the first thing. And I think this 588 00:33:44,480 --> 00:33:45,960 Speaker 1: is going to be methodical. I think it's gonna be 589 00:33:45,960 --> 00:33:48,960 Speaker 1: step by step, and everybody has said for the past 590 00:33:48,960 --> 00:33:52,440 Speaker 1: three or four months, I've asked this question communication. You 591 00:33:52,520 --> 00:33:55,800 Speaker 1: need somebody who's a good communicator because communicating what you're 592 00:33:55,800 --> 00:33:57,920 Speaker 1: doing and why to the markets is going to be critical. 593 00:33:57,960 --> 00:33:59,960 Speaker 1: Well to your point, I mean, is a big champion 594 00:34:00,000 --> 00:34:01,880 Speaker 1: of forward guidance. I mean, he was one of the 595 00:34:01,960 --> 00:34:04,240 Speaker 1: kind of pioneers in that from what I've read about 596 00:34:04,400 --> 00:34:07,280 Speaker 1: the way in which the b o J offers forward guidance. 597 00:34:07,320 --> 00:34:09,640 Speaker 1: Of course, he's never had to do it himself, since 598 00:34:09,640 --> 00:34:13,440 Speaker 1: we shouldn't say that since five and let's remember too 599 00:34:13,520 --> 00:34:15,680 Speaker 1: that he established he was part of a very hubbish, 600 00:34:15,800 --> 00:34:18,000 Speaker 1: dubbish crew. But they needed it, you know, they were 601 00:34:18,040 --> 00:34:22,040 Speaker 1: still struggling a lot with inflation and ultimately growth, but 602 00:34:22,360 --> 00:34:25,720 Speaker 1: he voted for He helped us. You're in quantitative easing 603 00:34:25,920 --> 00:34:28,919 Speaker 1: negative rates, so this is not some guy who's got 604 00:34:29,280 --> 00:34:31,359 Speaker 1: We can't really tell if he's a hawker dot. I 605 00:34:31,360 --> 00:34:34,600 Speaker 1: think the best central bankers they're not inherently hawkish or dovish. 606 00:34:34,800 --> 00:34:37,840 Speaker 1: They're inherently people who want to figure it out. All right, Kathleen, 607 00:34:37,880 --> 00:34:40,080 Speaker 1: out of time now, but thanks very much for shedding 608 00:34:40,120 --> 00:34:42,799 Speaker 1: some light on these big challenges ahead for the Bank 609 00:34:42,840 --> 00:34:46,440 Speaker 1: of Japan and its new governor. Kathleen Hayes Bloomberg's Global 610 00:34:46,440 --> 00:34:50,720 Speaker 1: Policy and Economy editor. I'm Brian Curtis, along with Doug Krisner. 611 00:34:50,960 --> 00:34:54,440 Speaker 1: You can catch us every weekday here for Bloomberg Daybreak Asia, 612 00:34:54,520 --> 00:34:57,760 Speaker 1: beginning at seven am in Hong Kong and six pm 613 00:34:57,920 --> 00:35:00,680 Speaker 1: on Wall Street. Tom. Thank you, Brian and Doug. And 614 00:35:00,800 --> 00:35:03,560 Speaker 1: that does it for this edition of Bloomberg Daybreak Weekend. 615 00:35:03,880 --> 00:35:06,160 Speaker 1: Join us again Monday morning at five am Wall Street 616 00:35:06,239 --> 00:35:08,680 Speaker 1: time for the latest on markets overseas and the news 617 00:35:08,800 --> 00:35:12,040 Speaker 1: you need to start your day. I'm Tom Busby. Stay 618 00:35:12,120 --> 00:35:14,799 Speaker 1: with us. Top stories and global business headlines are coming 619 00:35:14,880 --> 00:35:15,799 Speaker 1: up right now.