WEBVTT - Daybreak Weekend: New Inflation Data, Party Conferences, Elections in Japan 0:00:02.040 --> 0:00:04.360 This is Bloomberg day Break Weekend, our global look at 0:00:04.400 --> 0:00:06.480 the top stories in the coming week from our day 0:00:06.480 --> 0:00:08.920 Break anchors all around the world, and straight ahead on 0:00:08.960 --> 0:00:11.760 the program. After the Fed's big rate cut, we look 0:00:11.760 --> 0:00:14.560 ahead to a fresh reading on the Central banks preferred 0:00:14.760 --> 0:00:18.760 measure of inflation PCE plus. Could the uneven housing market 0:00:18.800 --> 0:00:22.040 see a boost with lower lending rates. I'm Tom Busby 0:00:22.120 --> 0:00:22.640 in New York. 0:00:22.720 --> 0:00:24.840 I'm callin heatgre in London, where we're looking ahead to 0:00:24.840 --> 0:00:28.440 one of the most pivotal periods on the UK's political calendar. 0:00:28.600 --> 0:00:31.400 I'm Brian Curtis in Hong Kong. A wide open race 0:00:31.480 --> 0:00:34.960 in the upcoming LDP election in Japan narrows. 0:00:35.479 --> 0:00:39.440 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 0:00:39.479 --> 0:00:42.960 eleve on three OW, New York, BLOOMBERGEN ninety nine to one, Washington, 0:00:43.080 --> 0:00:47.280 d C, Bloombergen ninety two to nine, Boston, Bloomberg nine sixty, 0:00:47.360 --> 0:00:52.320 San Francisco, DAB Digital Radio, London, Syris XM one twenty one, 0:00:52.360 --> 0:00:55.120 and around the world on Bloomberg Radio dot com and 0:00:55.200 --> 0:00:56.720 via the Bloomberg Business App. 0:01:00.240 --> 0:01:03.120 I'm Tom Busby. We begin today's program with the Federal 0:01:03.120 --> 0:01:06.800 reserve and inflation. Now, the FED cutting its benchmark lending 0:01:06.840 --> 0:01:10.560 rate by fifty basis points this past Wednesday and hinting 0:01:10.600 --> 0:01:13.720 it's not done yet, lowering rates two more FOMC meetings 0:01:13.800 --> 0:01:16.240 this year. So what does the FED see in its 0:01:16.280 --> 0:01:19.559 dot plot and is inflation really in check? For more 0:01:19.959 --> 0:01:23.759 we turned out a Bloomberg economist, Stuart Paul, So start, 0:01:23.880 --> 0:01:27.600 after that aggressive rate cut fifty basis points, what is 0:01:27.600 --> 0:01:28.720 the FED thinking now? 0:01:29.319 --> 0:01:32.040 The Fed was thinking that it was a bit behind 0:01:32.120 --> 0:01:34.320 the curve and it was necessary to do a catch 0:01:34.360 --> 0:01:37.200 up rate cut. The FED had been focusing on inflation 0:01:37.640 --> 0:01:40.959 almost exclusively for a couple of years now, but the 0:01:40.959 --> 0:01:43.720 balance of risks is now improved now. That's to say 0:01:43.760 --> 0:01:46.480 that the risk of a surge in inflation in the 0:01:46.520 --> 0:01:49.720 near term is pretty muted, but risk of deterioration in 0:01:49.760 --> 0:01:53.040 the labor market is more at the forefront now, So 0:01:53.080 --> 0:01:55.680 it is more important to do that catch up cut, 0:01:56.040 --> 0:01:58.360 get the fifty basis points out of the way. But 0:01:58.560 --> 0:02:01.520 looking ahead, it's like going to go at a slower cadence. 0:02:01.760 --> 0:02:04.960 We're likely to see just two more modest twenty five 0:02:05.000 --> 0:02:08.200 basis point cuts this year, in November and December, early 0:02:08.240 --> 0:02:09.680 November and December. 0:02:09.880 --> 0:02:12.560 And we're likely to see just four. 0:02:13.040 --> 0:02:15.960 Twenty five basis point cuts next year, probably at a 0:02:16.000 --> 0:02:16.919 quarterly cadence. 0:02:17.680 --> 0:02:21.800 And does all this mean a soft landing. 0:02:22.880 --> 0:02:26.200 Well, it depends exactly what you mean by a soft landing, right, Oh, 0:02:26.200 --> 0:02:30.160 you tell me so. If we're expecting inflation to quickly 0:02:30.200 --> 0:02:33.120 get back to the two percent target target without any 0:02:33.200 --> 0:02:37.120 sort of a deterioration the labor market from here, not likely. 0:02:37.280 --> 0:02:40.920 If we're expecting sort of that long last mile, but 0:02:41.560 --> 0:02:45.360 nothing crazy in either the growth or labor market landscape, 0:02:45.600 --> 0:02:48.639 but a tolerable but slow move back to the two 0:02:48.639 --> 0:02:52.000 percent target. I think that's entirely possible. The things that 0:02:52.120 --> 0:02:55.399 keep in mind, though, is that the labor market has 0:02:55.480 --> 0:02:58.200 been cooling, so there is that upside risk to the 0:02:58.280 --> 0:03:01.920 unemployment rate, and things just haven't been as good in 0:03:02.000 --> 0:03:04.360 the labor market as some of the headline figures have 0:03:04.440 --> 0:03:07.160 been suggesting for well over a year. The pace of 0:03:07.240 --> 0:03:10.280 payrolls has not actually been as strong as the headline 0:03:10.280 --> 0:03:13.360 figures have been saying each month, and they will be 0:03:13.480 --> 0:03:16.960 revised down in due time. So it's more like a 0:03:17.000 --> 0:03:21.960 soft ish landing, but we're not as likely to enter 0:03:22.040 --> 0:03:25.200 a recession, That recession risk isn't nearly as potent as 0:03:25.240 --> 0:03:25.800 it once was. 0:03:25.919 --> 0:03:28.280 I mean, we're still adding jobs every month, just not 0:03:28.360 --> 0:03:30.560 as many as we've seen in past months. 0:03:30.600 --> 0:03:33.600 Correct, we're adding We're still adding jobs, we're adding them 0:03:33.600 --> 0:03:36.800 at a slower pace, and we're probably not adding them 0:03:36.920 --> 0:03:39.680 at a pace that's fast enough to keep the unemployment 0:03:39.800 --> 0:03:40.960 rate totally steady. 0:03:41.480 --> 0:03:44.880 But you've seen this focus now for the FED away 0:03:44.960 --> 0:03:48.640 from inflation more toward the labor market. I mean, does 0:03:48.680 --> 0:03:50.720 that tell you that they feel we are on the 0:03:50.800 --> 0:03:54.080 right path for inflation, that it is in check in 0:03:54.080 --> 0:03:56.080 a way. It's not at the two percent target, but 0:03:56.120 --> 0:03:59.000 it's certainly heading that way. But the real threat rent now, 0:03:59.080 --> 0:04:01.160 the real risk maybe the labor market. 0:04:01.400 --> 0:04:04.040 That's right, So the real risk is the labor market. 0:04:04.040 --> 0:04:06.680 Inflation has been in check. Most of the things that 0:04:06.720 --> 0:04:11.040 have been supporting or undergirding inflation at this point are 0:04:11.080 --> 0:04:14.720 things like shelter, so a critical a critical necessity for 0:04:14.800 --> 0:04:18.920 consumers and something that's pretty sticky. Prices are pretty sticky 0:04:18.960 --> 0:04:22.279 for shelter and some items services in particular that have 0:04:22.360 --> 0:04:25.400 catch up inflation, things like auto insurance and homeowners insurance. 0:04:25.400 --> 0:04:27.440 When the price of your car and the price of 0:04:27.480 --> 0:04:29.920 your home go up, and the replacement cost of those 0:04:29.920 --> 0:04:32.760 things go up, so too will the insurance premiums for 0:04:32.920 --> 0:04:36.120 those items, and so we have that stickier inflation. Now, 0:04:36.160 --> 0:04:39.080 that's why we're likely to see core inflation of zero 0:04:39.120 --> 0:04:41.680 point two percent just to touch under zero point two 0:04:41.720 --> 0:04:43.760 percent for the month of August. When we look at 0:04:43.800 --> 0:04:46.880 the core PCE Price Index that's the FEDS preferred measure. 0:04:47.640 --> 0:04:49.800 But again, because of some of those sticky items in 0:04:49.839 --> 0:04:53.000 the core and because of unfavorable base effects over the 0:04:53.040 --> 0:04:56.120 last year, we'll probably see an uptick in the annual 0:04:56.200 --> 0:04:59.039 measure of core inflation when we get the August reading, 0:04:59.279 --> 0:05:01.800 an uptick ti about two point seven percent from two 0:05:01.880 --> 0:05:05.480 point six But again because of those sticky items, because 0:05:05.480 --> 0:05:08.279 of the unfavorable base effects, the FED will probably fade 0:05:08.279 --> 0:05:08.760 that reading. 0:05:09.400 --> 0:05:12.400 So we've seen housing and you talked about insurance, but 0:05:12.920 --> 0:05:16.440 energy prices at the gas pump, we've seen, you know, 0:05:17.200 --> 0:05:19.680 a real dip just even in the past month, the 0:05:19.680 --> 0:05:22.440 steady decline, but a real dip. Also volatile prices for 0:05:22.520 --> 0:05:25.279 food they have stabilized, they haven't gotten any worse. So 0:05:26.040 --> 0:05:29.560 could that mean, you know, could that show up in 0:05:29.640 --> 0:05:32.440 the headline reading a lot better than expected, or you're 0:05:32.480 --> 0:05:36.200 still saying all these other factors housing rents, you know, 0:05:36.600 --> 0:05:38.400 are really going to keep things in check. 0:05:38.800 --> 0:05:40.359 That's a good point. I think that you're right. I 0:05:40.360 --> 0:05:42.359 think that the headline is going to be quite a 0:05:42.360 --> 0:05:45.200 bit better. I think that on our best estimate is 0:05:45.240 --> 0:05:49.680 that monthly headline pce inflation. So adding back in food 0:05:49.720 --> 0:05:53.600 and energy, we expect the monthly headline inflation reading to 0:05:53.640 --> 0:05:56.720 register to zero point one percent, so a bit slower 0:05:56.839 --> 0:05:59.240 inflation for the headline than for the core. And we 0:05:59.279 --> 0:06:02.200 also expect the annual measure to improve to about two 0:06:02.240 --> 0:06:04.839 point two percent from two point five percent previously, So 0:06:05.520 --> 0:06:07.719 headline's going to be a little bit better. Something to 0:06:07.800 --> 0:06:10.960 keep in mind, though, is that the decline in gasoline prices, 0:06:10.960 --> 0:06:13.640 which has been good for folks when they drive around 0:06:13.680 --> 0:06:16.720 and see prices at the pump, it might actually support 0:06:16.800 --> 0:06:20.760 sentiment a little bit. That's downstream of declining global energy prices, 0:06:21.120 --> 0:06:24.920 and that's a consequence of expectations for slower global growth. 0:06:25.279 --> 0:06:27.760 So again it just speaks to the FED being at 0:06:27.760 --> 0:06:30.560 the at the right point in the rate cutting cycle, 0:06:30.560 --> 0:06:33.400 getting started with that jumbo cut to try to support 0:06:33.400 --> 0:06:34.680 global growth going forward. 0:06:35.400 --> 0:06:38.640 Now, also out this week, August personal income and personal 0:06:38.760 --> 0:06:41.880 spending data. Are people still spending? That is the question. 0:06:42.279 --> 0:06:44.039 Are we going to see that in the personal incomes 0:06:44.080 --> 0:06:44.719 and spending? 0:06:44.880 --> 0:06:47.159 People are still spending, but they're quite a bit more 0:06:47.240 --> 0:06:49.960 selective in what they're spending on. So we're still going 0:06:50.000 --> 0:06:53.839 to see that increase in spending on housing, on healthcare. 0:06:54.160 --> 0:06:57.480 But when we look more closely at goods in particular, 0:06:57.520 --> 0:07:00.800 when we look at things like autos, look at things 0:07:00.920 --> 0:07:04.440 like appliances and other home durables, things that are more 0:07:04.480 --> 0:07:07.640 interest sensitive, consumers are getting a bit more selective. They're 0:07:07.680 --> 0:07:12.200 also searching for bargains online as opposed to shopping more 0:07:12.200 --> 0:07:16.360 frivolously just walking down Rodeo Drive. So we are again 0:07:16.480 --> 0:07:21.520 seeing spending rising, but spending more so on necessities than 0:07:21.600 --> 0:07:23.160 on discretionary categories. 0:07:23.440 --> 0:07:26.520 All right, Well, the August PCE the Price Index out 0:07:26.520 --> 0:07:30.240 this Friday are thanks to Stuart Paull of Bloomberg Economics. 0:07:30.520 --> 0:07:33.679 While we turn now from inflation data to housing data. 0:07:33.680 --> 0:07:36.040 With the interest rate cut from the Fed this past week, 0:07:36.480 --> 0:07:39.640 will the uneven housing market get a boost through lower 0:07:39.680 --> 0:07:42.880 lending rates, which have already been trending lower or are 0:07:43.000 --> 0:07:45.280 rising home prices and a dearth of homes on the market, 0:07:45.520 --> 0:07:48.640 squeezing too many would be buyers out of the marketplace. 0:07:49.000 --> 0:07:52.200 For more, we're joined by Bloomberg Intelligence home builder analyst 0:07:52.640 --> 0:07:55.880 Drew Reading. Now Drew Banks lenders they've been lowering the 0:07:55.960 --> 0:07:57.800 rates for weeks. They're now at a two year low 0:07:57.840 --> 0:08:00.720 averaging six point one five percent. But with this move 0:08:00.760 --> 0:08:02.880 from the Fed last week, are they now poised to 0:08:02.960 --> 0:08:05.920 edge even lower? And how long will it take before 0:08:05.960 --> 0:08:08.440 we see those pre pandemic rates of three and a 0:08:08.480 --> 0:08:09.720 half percent or so. 0:08:09.720 --> 0:08:12.800 So, as you mentioned, mortgage rates have already been moving down. 0:08:12.880 --> 0:08:15.480 They've really been coming down since late April when they 0:08:16.040 --> 0:08:18.000 kind of peaked this year at seven and a half percent, 0:08:18.040 --> 0:08:20.960 and then there's another move lower in July. So the 0:08:21.000 --> 0:08:23.800 tenure yield and mortgage rates kind of anticipated what was 0:08:23.840 --> 0:08:25.920 going to happen with the Fed. So I wouldn't expect 0:08:26.040 --> 0:08:28.200 a whole lot more movement on the rate front in 0:08:28.280 --> 0:08:30.640 the near term. In terms of when we think that's 0:08:30.680 --> 0:08:32.680 going to start to impact the market, I think we 0:08:32.720 --> 0:08:35.720 already have. You know, there hasn't been a massive shift 0:08:35.760 --> 0:08:38.040 in demand to this point, but we have seen a 0:08:38.120 --> 0:08:40.480 market that continues the trend in the right direction, and 0:08:40.480 --> 0:08:45.000 we saw a pickup in mortgage purchase applications. We saw 0:08:45.040 --> 0:08:47.720 a little bit better data on housing starts, so I 0:08:47.720 --> 0:08:51.640 think we are starting to see the benefit from those 0:08:51.720 --> 0:08:52.319 lower rates. 0:08:52.480 --> 0:08:55.640 Yeah, those green shoots. What is behind that jump though, 0:08:55.640 --> 0:08:58.319 when housing starts, I mean that was a pretty significant 0:08:58.400 --> 0:09:00.880 leap from August. 0:09:00.120 --> 0:09:01.640 Of it had to do with the bounce back from 0:09:01.720 --> 0:09:04.319 weather in the prior month, so that's certainly part of it. 0:09:04.640 --> 0:09:07.320 The other thing to remember is that builders have really 0:09:07.360 --> 0:09:10.160 been trying to align their production so starts, with what 0:09:10.200 --> 0:09:12.959 they're seeing in the demand environment. So as demand has 0:09:12.960 --> 0:09:15.400 started to pick up after kind of a lull in 0:09:15.440 --> 0:09:18.520 the summer, I think you're starting to see the corresponding 0:09:18.600 --> 0:09:20.000 increase in housing activity. 0:09:20.760 --> 0:09:24.720 Now. Builder confidence had also been moving higher. They must 0:09:24.760 --> 0:09:27.640 be through the roof right now after this rate cut, 0:09:27.760 --> 0:09:31.880 and you know, all these these indications that things are 0:09:31.920 --> 0:09:32.439 picking up. 0:09:32.760 --> 0:09:35.600 Yeah, I mean, expectations pretty much across the board or 0:09:35.600 --> 0:09:37.920 that in the next several months we should see demand 0:09:38.320 --> 0:09:42.080 perk up even further. What's interesting for the builders, as 0:09:42.080 --> 0:09:44.679 we've discussed in the past, is they've had a lot 0:09:44.720 --> 0:09:47.280 of success even when the market was slow by buying 0:09:47.320 --> 0:09:50.440 down mortgage rates. So they've been doing pretty well over 0:09:50.440 --> 0:09:52.920 the last several months, and we think that with rates 0:09:52.920 --> 0:09:55.239 starting to come back down, they may have an opportunity 0:09:55.600 --> 0:09:58.000 to kind of dial back their use of sales incentives, 0:09:58.040 --> 0:10:00.640 which if you think bigger pictures for the public come builders, 0:10:00.640 --> 0:10:02.480 that could be a benefit to the margin side. 0:10:02.679 --> 0:10:05.200 Now in the week ahead, there's a lot more housing 0:10:05.280 --> 0:10:08.400 data coming out new home sales, pending home sales for August, 0:10:08.679 --> 0:10:11.840 also home prices for July. Are you expecting to see 0:10:11.880 --> 0:10:14.439 any more positive trends in all that data? 0:10:14.559 --> 0:10:16.400 Yeah. With the new home sales, I expect to see 0:10:16.400 --> 0:10:18.440 a market that continues to trend in the right direction. 0:10:18.480 --> 0:10:22.600 As they said earlier, we got some purchase applications specific 0:10:22.720 --> 0:10:26.080 to the new home market not too long ago, and 0:10:26.080 --> 0:10:28.880 what that showed us is that demand in August was 0:10:28.920 --> 0:10:31.680 actually the strongest for this time of the year since 0:10:31.800 --> 0:10:35.000 twenty twenty, So that's a real positive indication for the market. 0:10:35.559 --> 0:10:37.840 We had some data on existing home sales which was 0:10:37.880 --> 0:10:39.680 a little soft, but what you have to remember is 0:10:39.720 --> 0:10:43.200 that represents closings, so that likely reflects deals that were 0:10:43.200 --> 0:10:45.800 signed in June and July when rates were still in 0:10:45.840 --> 0:10:47.079 that seven percent range. 0:10:47.120 --> 0:10:49.880 Now that existing home sales that was last Thursday are 0:10:50.120 --> 0:10:53.120 is it still a problem that people are not putting 0:10:53.160 --> 0:10:56.079 the houses up for sale, you know, because of the 0:10:56.559 --> 0:10:59.360 rates are down. Six point five percent is great, but 0:10:59.440 --> 0:11:03.120 it's still double if you had your mortgage ten years ago, 0:11:03.320 --> 0:11:06.760 you know. I mean, are people still you know, not 0:11:06.880 --> 0:11:08.840 putting their homes up for sale afraid to buy a 0:11:08.840 --> 0:11:10.640 new one at those high rates. 0:11:11.120 --> 0:11:13.680 Yeah, it's a great question, and there's a lot of 0:11:13.679 --> 0:11:16.320 disincentive for kurrent homeowner who doesn't need to move to 0:11:16.320 --> 0:11:18.400 put their house on the market and taking a higher rate. 0:11:18.880 --> 0:11:22.479 If you look at kind of the composition of outstanding mortgages, 0:11:22.880 --> 0:11:25.360 more than eighty percent have a rate below five percent 0:11:25.400 --> 0:11:28.480 and sixty five percent or below four percent. So I 0:11:28.480 --> 0:11:32.480 think that that lock and rate, you know, is still 0:11:32.480 --> 0:11:34.640 a factor. I think it will start start to loosen 0:11:34.760 --> 0:11:36.559 up as we get through the year and into next 0:11:36.640 --> 0:11:39.280 year because people have been transacting at these higher rates. 0:11:40.559 --> 0:11:43.200 So it's definitely a concern, but I do think that 0:11:43.400 --> 0:11:45.800 it starts to ease a little bit as we get 0:11:45.800 --> 0:11:46.520 into next year. 0:11:47.400 --> 0:11:50.120 Now, speaking of next year, you've reported that home sales 0:11:50.280 --> 0:11:55.160 typically move higher after a presidential election. Why is that 0:11:55.280 --> 0:11:57.760 and are you expecting to see that no matter who 0:11:57.760 --> 0:11:59.199 wins the White House in November? 0:11:59.720 --> 0:12:02.800 Yes, So when we looked at what happens typically in 0:12:02.880 --> 0:12:06.319 an election year, you know, there's not a whole heck 0:12:06.360 --> 0:12:08.200 of a lot of impact on home sales. I know, 0:12:08.559 --> 0:12:11.160 you know, there could be an impact on confidence, maybe 0:12:11.160 --> 0:12:12.880 that impact that kind of the lull we saw in 0:12:12.920 --> 0:12:15.720 the summer, But really the point was to show that 0:12:15.840 --> 0:12:20.040 regardless of what party ends up winning, home sales have 0:12:20.160 --> 0:12:22.280 had success in the following year. And I think, you know, 0:12:22.320 --> 0:12:24.599 there's other factors at play, certainly what's happening with the 0:12:24.600 --> 0:12:27.080 broader economy and what's happening with rates. And I think, 0:12:27.559 --> 0:12:29.760 you know, if we do kind of get this soft 0:12:29.840 --> 0:12:32.959 landing that we're talking about and rates, you know, remain 0:12:33.000 --> 0:12:35.600 in the low six percent range, even fall into the 0:12:35.600 --> 0:12:37.760 five percent range, I think home sales should do pretty 0:12:37.800 --> 0:12:38.440 well next year. 0:12:38.720 --> 0:12:41.520 Well, a lot to look forward to, Bloomberg Intelligence home 0:12:41.559 --> 0:12:44.880 builder analyst Drew Redding, thanks for joining us and coming 0:12:44.920 --> 0:12:47.040 up on Bloomberg Day Break weekend, we look ahead to 0:12:47.080 --> 0:12:51.400 one of the most pivotable periods on the UK's political calendar. 0:12:51.679 --> 0:13:05.160 I'm Tom Busby and This is Bloomberg. This is Bloomberg 0:13:05.200 --> 0:13:07.720 Daybreak weekend, our global look ahead at the top stories 0:13:07.720 --> 0:13:10.560 for investors in the coming week. I'm Tom Busby in 0:13:10.600 --> 0:13:12.800 New York. Up later in our program we head to 0:13:12.800 --> 0:13:16.320 Asia and preview the race to become Japan's next Prime minister. 0:13:16.440 --> 0:13:19.280 But first in the coming days, the UK's most powerful 0:13:19.280 --> 0:13:23.480 politicians will vacate the Palace of Westminster for their party 0:13:23.520 --> 0:13:26.120 conferences all around the country. It's a pivotal time for 0:13:26.160 --> 0:13:29.400 the ruling Labor Party as it prepares for its first budget, 0:13:29.800 --> 0:13:32.520 and as the Conservative Party licks its wounds and crowns 0:13:32.559 --> 0:13:33.160 a new leader. 0:13:33.240 --> 0:13:33.640 For more. 0:13:33.760 --> 0:13:36.079 Let's go to London and bring in Bloomberg Daybreak europe 0:13:36.080 --> 0:13:38.160 Banker Caroline Hepker Tom. 0:13:38.280 --> 0:13:42.680 After the summer's general election and landslide Labor victory, UK 0:13:42.800 --> 0:13:46.160 politics is settling into its back to school rhythm, with 0:13:46.320 --> 0:13:48.800 a new party and a new prime minister at the helm. 0:13:49.280 --> 0:13:53.240 A staple of the autumnal political calendar is, of course, 0:13:53.360 --> 0:13:57.400 party conference season, where members gather to regroup and reflect 0:13:57.480 --> 0:14:01.559 on the year ahead. Traditionally the health in historic seaside 0:14:01.600 --> 0:14:06.000 resorts like Blackpool and Brighton, the gatherings can often give 0:14:06.120 --> 0:14:09.520 rise to a gender, setting events and turn young talent 0:14:09.640 --> 0:14:13.320 into rising stars. This year conference season falls at a 0:14:13.360 --> 0:14:16.880 critical time for the two biggest parties in Parliament. Dust 0:14:16.920 --> 0:14:21.080 is settling on the Labour Party's emphatic July election victory, 0:14:21.360 --> 0:14:26.720 as jubilation turns to expectation and the economic reality facing 0:14:26.760 --> 0:14:30.920 the government. On economic decisions, Kirs Starmer has already faced 0:14:31.040 --> 0:14:35.400 fervent opposition to what his party has called difficult decisions 0:14:35.640 --> 0:14:39.440 to means test the winter fuel allowance that is granted 0:14:39.800 --> 0:14:43.920 to pensioners, and also to maintain the cap on benefits 0:14:43.960 --> 0:14:48.120 for families to a maximum of two children. The first 0:14:48.160 --> 0:14:52.720 test four Starmer's administration will come in the government's inaugural 0:14:52.800 --> 0:14:56.600 budget on the thirtieth of October, but first he must 0:14:56.640 --> 0:15:00.680 convince his party that he has a plan. Meanwhile, the 0:15:00.720 --> 0:15:04.960 Conservatives will face a different question altogether at their gathering 0:15:05.040 --> 0:15:08.720 in Birmingham, the future direction of the party, as Tory 0:15:08.840 --> 0:15:12.600 members consider who to anoint their next leader. For the 0:15:12.640 --> 0:15:16.320 Liberal Democrats, who have already concluded their conference in Bournemouth, 0:15:16.360 --> 0:15:19.720 the issue has been where now after the party secured 0:15:19.720 --> 0:15:23.400 and historic seventy two seats in the vote in July. 0:15:23.840 --> 0:15:26.400 It's something that I have been discussing on the Bloomberg 0:15:26.520 --> 0:15:30.840 UK Partics podcast with the former lib Dem leader, so 0:15:31.000 --> 0:15:31.760 Vince Cable. 0:15:32.280 --> 0:15:36.400 First priority will be to consolidate the base that's already 0:15:36.440 --> 0:15:40.560 built up. And you know these are relatively high income 0:15:40.640 --> 0:15:44.800 South of England, suburban rural. I mean, it's a very 0:15:44.840 --> 0:15:50.040 clear constituency, it's not undifferentiated, but that this is not, 0:15:50.080 --> 0:15:54.360 as it were, not natural center left territory. But what 0:15:54.440 --> 0:15:58.239 Libdems are very good at is digging in doing extremely 0:15:58.280 --> 0:16:02.200 good local camper in constituency work. And I would think 0:16:02.280 --> 0:16:06.720 that unless there's some terrible misfortune, that they should be 0:16:06.720 --> 0:16:10.360 able to hold on to the overwhelming bulk of these 0:16:10.440 --> 0:16:14.760 by the next election. But the libdems fortunes in large part, 0:16:14.840 --> 0:16:17.200 I think depend on what happens to the other the 0:16:17.280 --> 0:16:21.280 two major parties. I mean, the Conservative Party, if they 0:16:21.520 --> 0:16:24.240 make a bad choice of leaders, if they continue to 0:16:24.320 --> 0:16:27.240 behave the way they have in recent years, is going 0:16:27.280 --> 0:16:30.720 to continue to flounder. They lose support to us in 0:16:30.800 --> 0:16:34.160 their heartlands, and they could make no progress on the 0:16:34.200 --> 0:16:39.320 other front because reform is gobbling up the populist nationalist vote, 0:16:40.320 --> 0:16:42.920 and that the Tory Party could find itself in a 0:16:43.000 --> 0:16:46.320 kind of existential crisis. I mean, we don't know, but 0:16:46.400 --> 0:16:50.440 that could well happen. Then in terms of labor. They 0:16:50.480 --> 0:16:53.280 are clearly already losing support, and they're going to lose 0:16:53.320 --> 0:16:57.040 support in the four hundred plus seats that they won 0:16:57.120 --> 0:17:00.200 at the last election. But the question then is where 0:17:00.240 --> 0:17:02.760 will it go? I mean, will it go to reform 0:17:02.880 --> 0:17:06.680 if they get better organized. Nigel Farage is a good 0:17:06.760 --> 0:17:12.000 TV personality but clearly not an organizational junius. Or could 0:17:12.000 --> 0:17:16.480 it go to the dissident left, the reborn Corby Knights 0:17:16.720 --> 0:17:17.880 or the Green Party. 0:17:18.000 --> 0:17:20.640 Okay, okay, but hang on a second. Let's cut through 0:17:20.640 --> 0:17:22.800 this a little bit and say is there appetite in 0:17:22.800 --> 0:17:26.320 the Liberal Democrats for leadership? Because there was a glimmer 0:17:26.320 --> 0:17:28.520 of it in the election campaign? Is there now? 0:17:29.080 --> 0:17:29.280 Oh? 0:17:29.320 --> 0:17:32.639 I think so. I mean, I think the mantra which 0:17:32.720 --> 0:17:37.680 is a good mantra. It's a constructive opposition. I don't 0:17:37.720 --> 0:17:41.600 think we just want to go around you cashing in 0:17:41.640 --> 0:17:45.320 on every drift in the public mood. I want to 0:17:45.320 --> 0:17:47.879 play a show that we can be a force in 0:17:48.000 --> 0:17:52.920 Parliament and building on the base that we've already got. 0:17:53.520 --> 0:17:57.080 That was the former Liberal Democrat leader and former Business 0:17:57.119 --> 0:18:00.359 Secretary Vince Cable speaking to me ant Ewan on the 0:18:00.359 --> 0:18:04.760 Bloomberg UK Politics podcast. So what is in store for 0:18:04.920 --> 0:18:08.560 the UK's most powerful politicians then when they gather in 0:18:08.600 --> 0:18:12.680 the coming days, I've been asking Bloomberg's associate editor Alva Ray. 0:18:13.000 --> 0:18:16.919 We started by discussing where Keir Starmer is heading into 0:18:17.040 --> 0:18:18.119 his party's event. 0:18:18.680 --> 0:18:22.639 He's having, i'd say, at a rocky time at the moment, 0:18:23.640 --> 0:18:27.840 his party is being slightly rocked by allegations of cronyism, 0:18:28.080 --> 0:18:31.480 a lot of scrutiny of gifts and freebies that the 0:18:31.520 --> 0:18:35.680 Prime Minister has received, and scrutiny of a wonder owner 0:18:35.760 --> 0:18:40.080 in particular Wahidali, who we have profiled on Bloomberg and 0:18:42.280 --> 0:18:46.040 revealed some things about in stories in the past few weeks. 0:18:46.119 --> 0:18:48.960 But there's sort of other challenges for Keir Starmer that 0:18:49.760 --> 0:18:52.560 there's a lot of tension among his top advisors and 0:18:52.680 --> 0:18:57.440 so his chief of staff, Sue Gray, has been named 0:18:57.480 --> 0:19:00.120 in a BBC story. The story itself is less import 0:19:00.320 --> 0:19:03.040 than the fact that she has been targeted by colleagues 0:19:03.080 --> 0:19:07.240 for quite a an aggressive briefing. So he's dealing with 0:19:07.320 --> 0:19:11.840 quite a lot of discontent and sort of difficult stories 0:19:12.240 --> 0:19:14.000 so soon into his premiership. 0:19:14.000 --> 0:19:17.280 I mean he only won the election in July. 0:19:18.200 --> 0:19:21.920 But then also they're quite quite substantial fiscal difficulties, so 0:19:21.960 --> 0:19:23.200 I'm sure we'll come on to talk about. 0:19:24.160 --> 0:19:27.920 Yeah, and this idea of factionalism, of divisions within the 0:19:27.960 --> 0:19:31.960 labor parties. You say, very recently elected, do you think 0:19:31.960 --> 0:19:34.359 that that will mean there'll be a big focus on 0:19:34.480 --> 0:19:37.719 party unity? I mean also there has already been in 0:19:37.760 --> 0:19:42.080 the actual parliamentary session. There's been rebellion already over policy. 0:19:42.200 --> 0:19:44.600 So do you think there'll be a sort of focus 0:19:44.760 --> 0:19:49.000 on trying to I mean, a surely celebrate the recent 0:19:49.119 --> 0:19:52.439 victory at the party conference, but then also try to 0:19:52.640 --> 0:19:53.760 unify the party. 0:19:53.920 --> 0:19:57.679 It's not so much factionalism in the way that we 0:19:57.720 --> 0:20:02.160 would have seen under perhaps Ermie Corbyn's leadership. It's more 0:20:02.240 --> 0:20:05.439 sort of just tension, tensions on an individual level between 0:20:05.880 --> 0:20:06.879 individual people. 0:20:07.200 --> 0:20:09.440 But as you say, there has been. 0:20:10.119 --> 0:20:13.719 A bit of tension already, and there's been a rebellion 0:20:14.320 --> 0:20:17.639 over this issue of the Winter Fuel Alliance, which is 0:20:17.640 --> 0:20:19.800 a sort of benefit given to pensioners to pay for 0:20:19.840 --> 0:20:23.280 their heating bills in the winter. Rachel reeves the incoming 0:20:23.359 --> 0:20:28.680 chancellor has decided to means test that she announced that 0:20:29.080 --> 0:20:32.919 before the summer and was clearly not expecting the backlash 0:20:33.080 --> 0:20:37.639 that she received. So even though they have passed that 0:20:37.840 --> 0:20:40.320 now and that will that will go ahead. 0:20:40.480 --> 0:20:42.480 Lots of labor MPs abstained. 0:20:42.680 --> 0:20:46.840 Some cabinet ministers anonymously told news outlets that they were 0:20:47.200 --> 0:20:50.720 nervous about the decision. And essentially this decision has has 0:20:50.760 --> 0:20:55.520 expended a lot of political capital very early on, and 0:20:55.600 --> 0:20:58.960 it makes all the all the decisions that are coming 0:20:59.080 --> 0:21:02.280 quite difficult. Because Rachel Riefs still has to deliver a 0:21:02.400 --> 0:21:05.240 very difficult budget. She's been speaking about twenty two billion 0:21:05.280 --> 0:21:09.240 black hole in the public finances. She's asking cabinet ministers 0:21:09.280 --> 0:21:11.919 to look for cuts in their departments. We'll see a 0:21:11.920 --> 0:21:16.080 lot of conference probably of individual cabinet ministers hinting that 0:21:16.119 --> 0:21:19.200 they want more money for ailing public services, for prisons, 0:21:19.200 --> 0:21:22.640