WEBVTT - Surveillance: The Fed & the Labor Market 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.200 --> 0:00:13.200 with Jonathan Ferrell and Lisa Abramowitz. Daily we bring you 0:00:13.280 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.799 Find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg dot Com, 0:00:23.920 --> 0:00:28.960 and of course on the Bloomberg terminal. We need to 0:00:28.960 --> 0:00:30.960 get from the data this week on the Job's report 0:00:31.000 --> 0:00:34.760 on Friday after November two, where a FED will decide 0:00:34.840 --> 0:00:38.240 Risksman joins us sound Chief Economists at JP Morgan Bruce. 0:00:38.240 --> 0:00:40.920 I usually go global, but I gotta go domestic at 0:00:40.960 --> 0:00:44.239 today the FED will decide how close are we to 0:00:44.479 --> 0:00:48.159 a FED that will decide what to do over the 0:00:48.200 --> 0:00:53.200 next number of meetings. Well, I think the basic message 0:00:53.200 --> 0:00:55.560 of the FED is telling us is that they're committed 0:00:55.600 --> 0:00:59.240 to creating a softer labor market, to pushing the unemployment rate, 0:00:59.280 --> 0:01:03.280 of that the picture on inflation has been concerning enough, 0:01:03.880 --> 0:01:06.880 and that they really want to gain control over credibility here. 0:01:07.560 --> 0:01:10.119 So unless we get a really big downward surprise here, 0:01:10.120 --> 0:01:12.360 I think we're not only on track for a seventy 0:01:12.440 --> 0:01:16.319 five basis point move on November two, but further big 0:01:16.360 --> 0:01:18.759 moves in the next couple of meetings after that. So 0:01:18.800 --> 0:01:20.480 what does your rate get out to? I mean the 0:01:20.520 --> 0:01:22.720 game here, the power game is three and three quarters 0:01:22.760 --> 0:01:26.280 for even up to five. How does that What does 0:01:26.319 --> 0:01:28.720 that mean for the Bank of England, What does it 0:01:28.760 --> 0:01:30.479 mean for the Bank of Japan? What does it mean 0:01:30.520 --> 0:01:34.839 for the Bank of Indonesia. Well, I think the FED 0:01:34.920 --> 0:01:37.280 as we would see it goes up to the mid 0:01:37.319 --> 0:01:40.600 fours and stopping at the mid fours in our forecast 0:01:40.680 --> 0:01:43.640 does require to see a material slowing and job growth 0:01:43.680 --> 0:01:46.000 over the next few months, which is in our forecast, 0:01:46.040 --> 0:01:48.960 but obviously we haven't seen yet. Um. I think the 0:01:49.000 --> 0:01:51.400 Bank of England story is really going to be dependent 0:01:51.480 --> 0:01:54.640 on how much the government gains credibility. We think they're 0:01:54.680 --> 0:01:57.400 on track for getting rates up at least a four percent, 0:01:57.760 --> 0:02:00.560 probably more as we go through the next few And 0:02:00.600 --> 0:02:02.960 as you're noting, there's a number of other central banks 0:02:02.960 --> 0:02:05.680 in em that have wanted to slow down, maybe even 0:02:05.720 --> 0:02:09.639 stop here. They've been using FX intervention, they've been using 0:02:09.680 --> 0:02:12.639 their rhetoric. But with the FED moving, with the volatility 0:02:12.639 --> 0:02:15.799 we're seeing in markets, uh, it's harder. And we've obviously 0:02:15.840 --> 0:02:18.639 been backing off of what we thought was some kind 0:02:18.680 --> 0:02:22.200 of moderation going on in the m central banks. Well, Bruce, 0:02:22.240 --> 0:02:24.520 that really raises the question of what point the dollar 0:02:24.639 --> 0:02:26.560 becomes the US is problem, not just the rest of 0:02:26.560 --> 0:02:29.240 the world's problem. What's the trigger point for the U 0:02:29.320 --> 0:02:32.079 s starting to respond for the US's sake, not just 0:02:32.280 --> 0:02:34.760 out of some charity for other nations that are really 0:02:34.760 --> 0:02:37.400 struggling in the face of the green back. So I 0:02:37.440 --> 0:02:39.880 think the big issue here is does the FED get 0:02:39.960 --> 0:02:44.880 the kind of controlled moderation in labor markets and growth 0:02:45.480 --> 0:02:48.240 does it see inflation come down? I think on the 0:02:48.240 --> 0:02:52.280 inflation story, the dollar rises, combining with what we think 0:02:52.360 --> 0:02:56.520 is a fairly significant fading in both commodity and supply 0:02:56.680 --> 0:02:59.200 chain pressures, we think we're set up for a pretty 0:02:59.240 --> 0:03:02.760 decent drop often goods pricing here in the next few months. 0:03:02.760 --> 0:03:05.520 We've already started to see it on energy um and 0:03:05.560 --> 0:03:08.520 I think the economy actually shows resilience here. It looks 0:03:08.560 --> 0:03:11.000 like it's tracking two to three percent growth in the 0:03:11.040 --> 0:03:13.480 current quarter. So I think you have attention that the 0:03:13.480 --> 0:03:16.959 FED will get a benefit here on inflation, I think 0:03:16.960 --> 0:03:19.239 in the next few months, but it may not get 0:03:19.280 --> 0:03:21.400 the job market, It may not get the growth number 0:03:21.440 --> 0:03:24.280 that gives it the comfort to stop, in which case 0:03:24.320 --> 0:03:26.880 the concern is is not so much that I think 0:03:27.760 --> 0:03:30.000 the dollar is itself a drag in the near term, 0:03:30.040 --> 0:03:32.360 but the Fed keeps going in a way that it 0:03:32.440 --> 0:03:35.320 doesn't pay enough attention to the lags, and therefore the 0:03:35.360 --> 0:03:38.640 economy slows much more sharply next year. Let's realize the 0:03:38.720 --> 0:03:41.640 risk here is looking at six twelve months down the road, 0:03:41.680 --> 0:03:43.880 not where we are right now. And this really speaks 0:03:43.920 --> 0:03:45.920 to the column that Paul Kruman wrote at the end 0:03:45.920 --> 0:03:47.600 of last week in the New York Times, where he 0:03:47.600 --> 0:03:51.400 basically said, is the Fed breaking too hard? The risks 0:03:51.440 --> 0:03:55.840 have moved to possibly yes? Do you agree with that view? Well, 0:03:55.880 --> 0:03:58.040 I think before we ask whether the Fed is breaking 0:03:58.040 --> 0:04:00.600 too hard, we want to ask is the Fed intending 0:04:00.640 --> 0:04:03.440 to break things? Because if you listen to Pal, if 0:04:03.440 --> 0:04:06.080 you listen to some other speakers, they seem to be 0:04:06.080 --> 0:04:09.600 preparing us for a significant slowing and in job growth 0:04:09.640 --> 0:04:12.840 and perhaps a meaningful rise in the unemployment rate. So 0:04:12.880 --> 0:04:14.839 I think, yeah, there is a risk that they moved 0:04:14.880 --> 0:04:18.120 too hard because they're I think, concerned about seeing results 0:04:18.120 --> 0:04:20.520 and not paying um the kind of attention to the 0:04:20.600 --> 0:04:23.760 lags in the monetary transmission mechanism. But there's also a 0:04:23.760 --> 0:04:27.040 concern that the FED is decided that it's it's much 0:04:27.080 --> 0:04:31.080 more appropriate to risk a recession here than keeping inflation 0:04:31.440 --> 0:04:34.600 unusually high. Person. None of this is in the textbooks. 0:04:34.640 --> 0:04:37.320 It's noted the Krugman textbooks, the man Cue textbooks of 0:04:37.440 --> 0:04:41.440 chasm in textbooks with the survey data. On Friday, I 0:04:41.480 --> 0:04:44.479 have a three month moving average of non farm payrolls 0:04:44.520 --> 0:04:49.520 of two D eighties six thousand. That's job formation. Is 0:04:49.600 --> 0:04:52.440 JP Morgan saying that will break that that will slip 0:04:52.480 --> 0:04:56.040 down to some appallingly three months moving average of say 0:04:56.080 --> 0:05:00.520 a hundred and sixty thousand. Well, U, we have a 0:05:00.520 --> 0:05:03.400 three forecast for three hundred thousand job games on Friday, 0:05:03.480 --> 0:05:07.840 so clearly that's a pretty strong number, even if it's 0:05:07.839 --> 0:05:11.560 a moderation. I think to get the FED to pause, 0:05:12.000 --> 0:05:13.680 you need job growth to slow to at least a 0:05:13.760 --> 0:05:17.320 hundred thousand UH a month over the next two or 0:05:17.360 --> 0:05:20.400 three months. UH. That I think is a harder one 0:05:20.440 --> 0:05:23.680 to to get confident. And that's that is what's based 0:05:23.800 --> 0:05:26.120 on our forecast. At the FED by the first quarter 0:05:26.520 --> 0:05:28.640 sees that and is ready to pause, and I think 0:05:28.680 --> 0:05:31.360 that's the key issue here, both in terms of getting 0:05:31.400 --> 0:05:34.120 the FED to pause and also the concern that if 0:05:34.120 --> 0:05:36.960 they don't see that and they keep moving, that they 0:05:37.120 --> 0:05:40.360 go further than they actually need to. Bruce, we gotta 0:05:40.400 --> 0:05:42.440 expand on that. That's a stunning number. I have a 0:05:42.520 --> 0:05:45.160 run rate back decades of a hundred and fifty thousand, 0:05:45.160 --> 0:05:47.560 and maybe you come up to two hundred thousand per 0:05:47.640 --> 0:05:51.320 month for non farm payrolls. Is a healthy and normal America. 0:05:51.760 --> 0:05:54.320 You're saying we've got to get down to one hundred thousand, 0:05:54.640 --> 0:05:57.839 one hundred thousand than another hundred thousand to make this 0:05:57.960 --> 0:06:01.440 FED blink. Well, yeah, I think if you want to 0:06:01.480 --> 0:06:04.080 have an economy in which the unemployment rate is moving 0:06:04.120 --> 0:06:07.240 in a controlled way to uh roughly four and a 0:06:07.279 --> 0:06:09.400 half percent unemployment rate, which is what I think the 0:06:09.440 --> 0:06:12.120 FED is telling us, you need job growth to be 0:06:12.440 --> 0:06:14.760 a soft A hundred thousand may not even do it, 0:06:14.960 --> 0:06:17.360 but I'd say a hundred thousand is probably the kind 0:06:17.360 --> 0:06:19.960 of number the FED needs to see to be comfortable 0:06:20.160 --> 0:06:23.000 to be thinking about pausing. Bruce. This goes to something 0:06:23.000 --> 0:06:24.920 that you flipped at earlier. Do you think that it's 0:06:24.960 --> 0:06:28.320 inappropriate for the FED reserved to be targeting the unemployment 0:06:28.400 --> 0:06:30.880 rate at a time when the jobs market has drop 0:06:31.120 --> 0:06:35.520 dramatically changed post pandemic. I think it's appropriate for the 0:06:35.520 --> 0:06:38.120 FED to be targeting a softening in the labor market. 0:06:38.320 --> 0:06:41.080 I think it's appropriate for the FED to be paying 0:06:41.120 --> 0:06:45.160 attention to what's happening in the inflation process, wages, salients, 0:06:45.200 --> 0:06:48.359 inflation expectations. But I think it's also appropriate for the 0:06:48.360 --> 0:06:51.159 FED to be forward looking, which is to recognize that 0:06:51.240 --> 0:06:53.800 there's lags in the process, that they're getting a restrictive 0:06:53.800 --> 0:06:57.240 policy in place. And the difficult call is do you 0:06:57.800 --> 0:07:00.800 stop on the tightening before you've gotten everything you want 0:07:00.800 --> 0:07:03.839 to see in the data. That's really the tough call 0:07:03.920 --> 0:07:06.119 that they're going to have to make here. At some point, 0:07:06.680 --> 0:07:09.280 I think somewhere in the range of four or foreign 0:07:09.320 --> 0:07:14.080 a percent seems perfectly reasonable to be pausing, but they 0:07:14.120 --> 0:07:16.400 may not have the labor market outcomes at that time 0:07:16.520 --> 0:07:18.800 that makes them comfortable to do so. Bruce, this is 0:07:18.800 --> 0:07:20.720 the question, isn't it. I think you just framed it perfectly. 0:07:20.760 --> 0:07:22.640 How can you be forward looking if you're chasing the 0:07:22.720 --> 0:07:29.080 lanking and indicator exactly and you're also being uncomfortable by 0:07:29.080 --> 0:07:33.320 the fact that inflation is persistently. I that you're worried 0:07:33.320 --> 0:07:37.200 about salients in terms of the lagged inflation affecting price 0:07:37.240 --> 0:07:40.080 and weight setting. So it's really I think important to 0:07:40.120 --> 0:07:42.239 be forward looking. But it's really hard to be forward 0:07:42.280 --> 0:07:45.000 looking here. Chris Cassman and jakep Mark and Bruce. Wonderful 0:07:45.160 --> 0:07:58.440 to hear from you, sir. Thank you as always. I 0:07:58.520 --> 0:08:00.520 do you think the return assumptions need to shift lower? 0:08:01.600 --> 0:08:03.880 Maybe they're shifting right now. Let's do that right now 0:08:03.920 --> 0:08:07.360 with Kelvisin of RBC Capital Markets. Laurie is it's small 0:08:07.400 --> 0:08:11.840 caps time? Hi? Thanks for having me, Tom, And I 0:08:11.880 --> 0:08:14.120 think it is. If you look at small cap relative 0:08:14.160 --> 0:08:17.160 to large cap. Just pull up the rt Y against 0:08:17.160 --> 0:08:19.600 the SPX on your Bloomberg. We've been in sort of 0:08:19.640 --> 0:08:22.200 a trading range all year on the relative trade, and 0:08:22.240 --> 0:08:24.680 if you look at small caps, we're basically at historic 0:08:24.800 --> 0:08:29.000 valuations on both an absolute and relative valuation. We've already 0:08:29.000 --> 0:08:31.360 priced in a big spike and jobless claims, and typically 0:08:31.440 --> 0:08:34.280 you want to buy small caps when the unemployment rate 0:08:34.320 --> 0:08:36.600 starts to tick up, so you want to keep that 0:08:36.640 --> 0:08:38.560 in mind as we look ahead to Friday. But I 0:08:38.600 --> 0:08:41.240 will just say this, um, small caps have really been 0:08:41.360 --> 0:08:44.320 orphaned for quite some times. They are more domestic, and 0:08:44.360 --> 0:08:47.600 we are hearing a lot of interest UM in small caps, 0:08:47.679 --> 0:08:50.240 even from people who are very barish on the market overall. 0:08:50.600 --> 0:08:53.280 UM So we're overweight and we feel very good about 0:08:53.280 --> 0:08:55.760 that call. In the turmoil we're in, including low g 0:08:55.840 --> 0:08:59.320 d P, will there be transactions and combinations that combines 0:08:59.440 --> 0:09:04.160 small ups into mid caps. It's interesting time. I mean, 0:09:04.200 --> 0:09:07.080 we have been combing the transcripts among the big cap 0:09:07.120 --> 0:09:09.199 companies for commentary about it in and A and we're 0:09:09.200 --> 0:09:11.160 not seeing it pick up yet. So I wouldn't say 0:09:11.160 --> 0:09:13.640 it's necessarily eminent, But I do think that when you're 0:09:13.640 --> 0:09:15.920 in a sluggish growth environment, and I think that's the 0:09:15.960 --> 0:09:18.320 price we have to pay for a short, shallow recession, 0:09:18.320 --> 0:09:20.400 if indeed that's what we end up getting, I do 0:09:20.440 --> 0:09:22.600 think companies will try to go out and buy growth 0:09:22.720 --> 0:09:24.720 UM And you know, we we find that a lot 0:09:24.760 --> 0:09:27.040 of small cap companies are also much better run than 0:09:27.080 --> 0:09:29.679 they were in the past, much cleaner ballot keep, much 0:09:29.720 --> 0:09:32.680 higher quality management teams. UM. So we think the asset 0:09:32.720 --> 0:09:34.319 base is more attractive than it may have been in 0:09:34.400 --> 0:09:38.040 past cycles as well. Floor is overweighting small caps a 0:09:38.120 --> 0:09:42.160 fight to lose less or actually to get returns that 0:09:42.200 --> 0:09:44.320 are bigger than some of the negative returns that we're 0:09:44.360 --> 0:09:48.079 seeing across the board and brought indexes. I think it's 0:09:48.080 --> 0:09:50.200 a great question, Lisa, and I think that depends on 0:09:50.240 --> 0:09:52.760 your time horizon. In the short term, as stock search 0:09:52.840 --> 0:09:54.960 for a bottom. I do think it's unlikely that small 0:09:55.000 --> 0:09:57.360 caps will start going off while everything else is still 0:09:57.360 --> 0:10:00.200 going down. Um, So it may simply just be you 0:10:00.240 --> 0:10:02.439 lose less on the on the way down to kind 0:10:02.440 --> 0:10:05.200 of find that absolute bottom. But at the same time, 0:10:05.240 --> 0:10:06.920 I will tell you, Lisa, when you talk to people 0:10:06.920 --> 0:10:09.199 who have done small cap for a very long time 0:10:09.440 --> 0:10:11.000 and you go back and look at the history, the 0:10:11.040 --> 0:10:13.640 pivots back into small cap tend to be pretty sharp. 0:10:14.040 --> 0:10:15.600 So I do think it's an area where if you 0:10:15.640 --> 0:10:17.320 really kind of wait around and try to pick the 0:10:17.320 --> 0:10:19.280 bottom in the market, you're gonna miss the Turney. You 0:10:19.320 --> 0:10:21.760 do tend to make a lot of that outperformance in 0:10:21.800 --> 0:10:24.320 those early days in the trade. Right now, we're looking 0:10:24.360 --> 0:10:27.320 at eight five and clothes on Friday for the SMP 0:10:27.400 --> 0:10:30.199 five hundred. Your target for your end is forty two hundred. 0:10:30.559 --> 0:10:32.920 What's the trigger? What's the pivot point that gets us 0:10:33.000 --> 0:10:35.240 up there is it just the bear market rally that 0:10:35.320 --> 0:10:38.680 we heard about from a number of analysts. I think 0:10:38.720 --> 0:10:40.360 that's one thing you can look at. I mean, we 0:10:40.400 --> 0:10:42.760 actually found if you look at the SMP five hundred 0:10:42.840 --> 0:10:45.320 this year in two, it's got about a seventy two 0:10:45.320 --> 0:10:47.960 percent correlation with house stocks for trading back in two 0:10:47.960 --> 0:10:50.760 thousand two, which was another period of kind of painful 0:10:50.800 --> 0:10:54.400 normalization after a big market shock, an initial rally. And 0:10:54.480 --> 0:10:57.000 so if you sort of go through that playbook and 0:10:57.080 --> 0:10:58.840 there was a fierce four Q rally and then you 0:10:58.880 --> 0:11:00.440 gave most of it back in the or s quarter, 0:11:00.600 --> 0:11:03.120 that seems like a plausible way for things to turn 0:11:03.160 --> 0:11:05.800 out this time around as well. I think also, Lisa, 0:11:05.840 --> 0:11:08.560 we're about a month out from the midterm elections, and 0:11:08.600 --> 0:11:10.880 go back to the summer, I started really getting an 0:11:10.880 --> 0:11:12.920 earful from a lot of investors about how that would 0:11:12.920 --> 0:11:16.000 be a potentially positive catalyst for markets. So we do 0:11:16.040 --> 0:11:18.199 think that's something on investors radar. And if you look 0:11:18.240 --> 0:11:21.520 at the generic congressional ballot, after you know, several weeks 0:11:21.559 --> 0:11:23.640 of seeing the pulling data kind of shift back in 0:11:23.720 --> 0:11:26.640 democrats favor, we actually saw the Republicans pull ahead of 0:11:26.679 --> 0:11:30.440 Democrats in the congressional generic congressional ballot data last week, 0:11:30.520 --> 0:11:32.280 So things are starting to shift a little bit the 0:11:32.360 --> 0:11:34.640 more market friendly way. In the latest date of their all, 0:11:34.760 --> 0:11:37.959 I just wanted to squeeze this in Nike, FedEx, Apple, 0:11:38.120 --> 0:11:42.320 Tesla missing this morning. What are you learning from corporations 0:11:42.320 --> 0:11:46.320 about how quickly this downtown is coming around? Well, look, 0:11:46.360 --> 0:11:48.200 I think what we are learning, John, is that we 0:11:48.240 --> 0:11:50.440 are starting to see some companies rip off the our 0:11:50.520 --> 0:11:52.440 needs band aid. And if you go back to the summer, 0:11:52.480 --> 0:11:54.839 that is something investors were telling me they really needed 0:11:54.880 --> 0:11:57.880 to see half and to get comfortable with buying markets. 0:11:57.920 --> 0:11:59.880 People said, you know, we want to buy stocks around 0:12:00.000 --> 0:12:03.040 fifteen times PE the market around fifteen sixteen times P. 0:12:03.600 --> 0:12:05.200 But we just need a little bit of certainty on 0:12:05.240 --> 0:12:07.240 that e. We need to see the numbers come down. 0:12:07.600 --> 0:12:10.120 You know, we'll see if the early reporters turn out 0:12:10.120 --> 0:12:11.560 to be a harbinger of what's to come in the 0:12:11.600 --> 0:12:14.040 actual reporting season. Um, but I do think, you know, 0:12:14.080 --> 0:12:17.120 kind of getting those learnings expectations down is something that 0:12:17.200 --> 0:12:19.720 we really need to see. Hi, Luri, thank you all 0:12:19.800 --> 0:12:21.360 some mental whites. Let me kind of saying to that 0:12:21.559 --> 0:12:29.240 of MBC Capital markets. What an interesting day and it 0:12:29.360 --> 0:12:32.360 is about the greater economies of the world. One of 0:12:32.400 --> 0:12:34.520 the great facts is Madrid as the best museum in 0:12:34.559 --> 0:12:37.000 the world. It is called the Prado and it is 0:12:37.040 --> 0:12:39.560 a must visit and that speaks to the healing of 0:12:39.600 --> 0:12:44.000 tourism in Spain. Spain is booming, like Paris, like London. 0:12:44.360 --> 0:12:47.080 It's been a very strong story, but with it too 0:12:47.440 --> 0:12:51.520 and up to ten inflation. Maria today on now with 0:12:51.559 --> 0:12:57.760 the Deputy Prime Minister of Spain, Tom, thank you so much, 0:12:57.760 --> 0:12:59.560 and we are joined of course by Spain's fine as 0:12:59.600 --> 0:13:02.680 Minister and Deputy Prime Minister and Aia Colvino Wan. They 0:13:02.760 --> 0:13:06.199 ask God morning, I have a lot of questions about Europe, 0:13:06.200 --> 0:13:07.880 but first of all I have to get your thoughts 0:13:07.880 --> 0:13:10.040 on what's going on in the UK, because today we've 0:13:10.080 --> 0:13:13.199 seen a huge you term from the UK government. Markets 0:13:13.200 --> 0:13:16.160 really flipping on this country. I don't want to create trouble, 0:13:16.240 --> 0:13:18.840 but when you look at that country, isn't a message 0:13:18.880 --> 0:13:21.360 in terms of what not to do going into the winter. 0:13:21.520 --> 0:13:24.120 Perhaps for you, I think it's very good news that 0:13:24.160 --> 0:13:26.800 they back tracked, in particular when it comes to the 0:13:27.000 --> 0:13:30.960 reduction of the taxes on the wealthiest parts of society, 0:13:30.960 --> 0:13:33.360 because it really shows that it's not only a matter 0:13:33.440 --> 0:13:36.040 of financial stability, it's also a matter of fairness. We're 0:13:36.080 --> 0:13:39.800 all confronted with the challenge how to contain prices, how 0:13:39.840 --> 0:13:43.359 to support our economies, how to fund our public services, 0:13:43.520 --> 0:13:46.560 and we need to ensure that we have fiscal sustainability, 0:13:46.640 --> 0:13:49.760 financial stability, but also a fair distribution of the impact 0:13:49.760 --> 0:13:52.160 of the world, so that means essentially tax the rich 0:13:52.360 --> 0:13:56.680 more to some extent. That's what all international institutions are recommending, 0:13:56.800 --> 0:13:59.959 and this is what the Spanish government has been defend 0:14:00.080 --> 0:14:03.200 think when it comes to the international framework, not not 0:14:03.400 --> 0:14:06.559 specifically or not only this dimensions, but generally we need 0:14:06.559 --> 0:14:09.680 a fair tax system. We need to avoid a race 0:14:09.720 --> 0:14:11.520 to the bottom, which at the end of the day 0:14:11.640 --> 0:14:14.800 is making all of us poorer when we need stronger 0:14:14.840 --> 0:14:18.480 states to also face the blackmail coming from Russia. And 0:14:18.520 --> 0:14:20.400 that's a message perhaps for listra Us. But I don't 0:14:20.400 --> 0:14:23.480 want to create trouble intentionally, perhaps between the e N 0:14:23.640 --> 0:14:26.160 and the UK. So let's talk about Europe. It seems 0:14:26.200 --> 0:14:29.080 to me there's forces that are pulling from different ways. 0:14:29.240 --> 0:14:32.360 You have demand instruction which seems to be working at 0:14:32.400 --> 0:14:35.640 least the message is resonated with Europeans. The storage is up. 0:14:35.960 --> 0:14:38.240 You have an escalation in the war and an escalation 0:14:38.280 --> 0:14:40.800 in the energy war in your view, with the outlook 0:14:40.840 --> 0:14:45.280 for Europe going into the winter, we're challenging at a 0:14:45.400 --> 0:14:48.920 very challenging moment. No, because the war is entering a 0:14:48.960 --> 0:14:51.800 new phase. So it seems we also see that not 0:14:51.960 --> 0:14:58.240 stream supply was cut first of September. The positive element 0:14:58.320 --> 0:15:01.680 here is that prices are not continuing to escalate as 0:15:01.720 --> 0:15:05.400 they did in past months when Putting was using the 0:15:05.520 --> 0:15:09.200 energy blackmail. Also, I think that actually what we see 0:15:09.240 --> 0:15:12.400 now is that the storage level is appropriate, that Europe 0:15:12.400 --> 0:15:15.400 is having a stronger voice when it comes to international 0:15:15.520 --> 0:15:18.400 energy markets, and we should continue in that direction with 0:15:18.440 --> 0:15:22.000 a response which is united determined and also based on 0:15:22.080 --> 0:15:25.480 solidarity between the different member states. When you see solidarity, 0:15:25.640 --> 0:15:27.680 last week Germany came up with the two hundred billion 0:15:27.720 --> 0:15:30.560 your package to save their households and companies. Is that 0:15:30.720 --> 0:15:35.000 solidarity for you? Well, I understand that each country is 0:15:35.520 --> 0:15:37.880 subject to a different kind of challenge now, I mean 0:15:37.960 --> 0:15:42.200 the increase of energy prices hit Spain maybe before other 0:15:42.240 --> 0:15:46.120 countries because of the flexibility of our electricity markets, but 0:15:46.240 --> 0:15:49.080 now we see that inflation is already going down in Spain, 0:15:49.120 --> 0:15:53.080 whereas we see in Germany that the situation is very different. 0:15:53.160 --> 0:15:56.120 They have a higher dependence on Russian gas and oil, 0:15:56.440 --> 0:15:59.560 and so we have to be respectful of the different 0:15:59.600 --> 0:16:02.440 specific the cities of the different countries and ensure that 0:16:02.760 --> 0:16:05.840 our framework and our rules are fit for purpose in 0:16:05.840 --> 0:16:08.320 the sense of allowing for this flexibility in terms of 0:16:08.320 --> 0:16:12.160 the response at the national level, but reinforcing the European 0:16:12.280 --> 0:16:15.440 level instruments so that we ensure fair treatment of all 0:16:15.480 --> 0:16:18.480 citizens and companies throughout the UN were from that messages 0:16:18.520 --> 0:16:21.480 a final question. On Wednesday, the Spanish Prime Minister pro 0:16:21.520 --> 0:16:24.360 Sanchez will meet with the German chancellor. Is he going 0:16:24.360 --> 0:16:27.240 to convince the Germans to drop their opposition to this 0:16:27.360 --> 0:16:32.280 price cap on gas? I hope so we'll definitely Spain well. 0:16:32.320 --> 0:16:34.600 For the last year, Spain has been pushing for a 0:16:34.640 --> 0:16:38.160 European response. We've been pushing for price cups. We've been 0:16:38.200 --> 0:16:42.640 pushing for a joint purchases h an overhaul of the 0:16:42.680 --> 0:16:47.800 European legislation. We managed to have a very exception which 0:16:47.840 --> 0:16:50.440 is allowing us to have a gas price cup between 0:16:50.720 --> 0:16:53.640 Spain and in Spain and Portugal, and this is already 0:16:53.840 --> 0:16:57.960 saving European Spanish citizens and companies more than two point 0:16:58.000 --> 0:17:00.240 five billion euros, you know, and it's proving too allow 0:17:00.320 --> 0:17:02.760 us to have lower prices in other countries. It has 0:17:02.800 --> 0:17:06.480 even the coupled the wholesale gas price from the mediterrane 0:17:06.560 --> 0:17:09.760 of the bery and gas from the t TF reference, 0:17:10.000 --> 0:17:13.800 which shows that we can act and we can change 0:17:13.800 --> 0:17:15.960 things if we act together. So I am sure this 0:17:16.040 --> 0:17:19.800 will be discussed in the summit between Spain and Germany 0:17:19.840 --> 0:17:22.119 on Wednesday, and I hope we took convince Germany to 0:17:22.160 --> 0:17:24.760 move in this direction. And it's interesting how the diplomatic 0:17:24.760 --> 0:17:27.840 ties are changing between Madrid and Berlin, perhaps growing close 0:17:27.880 --> 0:17:31.240 over the past three weeks, in particular when it comes 0:17:31.240 --> 0:17:33.480 to potential gas suppliers coming in from Spain. But you 0:17:33.480 --> 0:17:35.960 also make it clear that has to go both ways. 0:17:36.560 --> 0:17:38.919 Nada Calvinia, thank you so much for joining us on 0:17:39.000 --> 0:17:41.320 bloomber TV this morning, and we hope to see very soon, 0:17:41.359 --> 0:17:44.600 of course, in a few in a few hours time. Yes, yes, indeed, 0:17:44.600 --> 0:17:47.360 thank you, radiant, thank you so much, and guys back 0:17:47.359 --> 0:17:49.359 to you, Maria, thank you one of the best marit 0:17:49.359 --> 0:17:53.560 today there alongside Nadia Calvin or Spain's Deputy Deputy Prime Minister. 0:18:03.880 --> 0:18:07.119 John Gets from Birmingham. Is Bloomberg's Lizzie Burden out of 0:18:07.160 --> 0:18:12.320 the UK morning, Lizzie, Good morning John. While I'm out 0:18:12.320 --> 0:18:16.119 Conservative Party conference and I'm sat here with Chloe Smith, 0:18:16.119 --> 0:18:18.760 the Secretary of State for Work and Pensions. Chloe, thank 0:18:18.800 --> 0:18:20.760 you so much for making time for me. It's a 0:18:20.760 --> 0:18:24.480 wild morning here in Birmingham. This budget that the Chancellor 0:18:24.520 --> 0:18:27.639 had announced was described as reverse robin Hood. At the 0:18:27.680 --> 0:18:29.800 one end, you were cutting the top rate of income 0:18:29.880 --> 0:18:33.040 tax that has now been reversed. But at the other end, 0:18:33.040 --> 0:18:35.800 the Chancellor said he'd cut the benefits of people who 0:18:35.800 --> 0:18:38.560 are not trying hard enough to get a job. Are 0:18:38.600 --> 0:18:40.440 you not going to you turn on that as well 0:18:40.480 --> 0:18:44.840 when it's equally politically toxic. I think the key point 0:18:45.160 --> 0:18:48.040 about the growth package that the Chancellor set out is 0:18:48.040 --> 0:18:50.480 that it is all about getting more people into jobs 0:18:50.600 --> 0:18:52.640 and getting higher wages. And in fact you can see 0:18:52.680 --> 0:18:55.000 that around us as a slogan here at the conference 0:18:55.080 --> 0:18:56.879 is painted on the stairs just over there that we 0:18:56.920 --> 0:19:00.440 want to be able to deliver more jobs and higher wages. Now, 0:19:00.440 --> 0:19:03.359 the majority of the growth package set out was to 0:19:03.440 --> 0:19:06.440 be able to do that, for example, including putting money 0:19:06.520 --> 0:19:09.719 straight back into people's pockets through the adjustment to the 0:19:09.760 --> 0:19:12.399 lower rate of income tax and of course that builds 0:19:12.400 --> 0:19:15.320 on the cost of living package and the energy price guarantee. 0:19:15.520 --> 0:19:17.800 Now my role is then to be able to help 0:19:17.840 --> 0:19:21.280 people into those jobs that growth package will create, and 0:19:21.359 --> 0:19:23.280 that to me is a real priority. So to pay 0:19:23.320 --> 0:19:26.360 for all your tax cuts, to have any credibility and markets, 0:19:26.440 --> 0:19:28.680 you're going to have to cut spending. The one thing 0:19:28.680 --> 0:19:31.840 that the Prime Minister promised yesterday was that she was 0:19:31.880 --> 0:19:34.680 going to raise pensions in line with inflation. We're on 0:19:34.720 --> 0:19:37.320 a cost of living crisis. Has the Chancellor asked you 0:19:37.359 --> 0:19:41.120 to your cut cutting benefits? The Prime Minister was right 0:19:41.160 --> 0:19:43.399 to talk about the triple or on pensions. That's been 0:19:43.440 --> 0:19:45.199 a commitment of ours for a while, and that's been 0:19:45.240 --> 0:19:48.440 a clear public commitment already. Now, naturally there is then 0:19:48.480 --> 0:19:50.919 also the decision to be taken about benefits operating. This 0:19:50.960 --> 0:19:53.080 is one for me to take in my role. I 0:19:53.119 --> 0:19:55.080 can't tell you here and now what that will be 0:19:55.119 --> 0:19:56.560 and what the data that goes inside it will be, 0:19:56.520 --> 0:19:58.720 because I have to wait for that data to come 0:19:58.760 --> 0:20:01.080 to me. Now, the key principle though, that I want 0:20:01.119 --> 0:20:03.560 to take in approaching that decision is how we can 0:20:03.600 --> 0:20:07.000 best protect the most vulnerable in our society. And for me, 0:20:07.359 --> 0:20:10.119 this builds on those elements of the cost of living 0:20:10.160 --> 0:20:12.840 support that we have already been doing and delivering. My 0:20:12.920 --> 0:20:15.000 department has been making payments to people and they'll be 0:20:15.040 --> 0:20:18.400 more coming out very shortly that are supporting people at 0:20:18.400 --> 0:20:20.280 that time with real needs. Why is it fair to 0:20:20.359 --> 0:20:24.000