WEBVTT - (Radio) 0:00:02.200 --> 0:00:05.160 This is Bloomberg Daybreak Weekend, our global look at the 0:00:05.200 --> 0:00:08.400 top stories in the coming week from our Daybreak anchors 0:00:08.520 --> 0:00:11.200 all around the world. Straight ahead on the program, the 0:00:11.240 --> 0:00:15.240 housing market and the economy. I'm Amy Morris in Washington. 0:00:15.640 --> 0:00:18.120 I'm Stephen Carol in London. We're asking if things look 0:00:18.160 --> 0:00:22.000 any better or worse for next year. I'm Brian Curtis 0:00:22.000 --> 0:00:24.799 Bloomberg Daybreak a ship. We crack the code on the 0:00:24.840 --> 0:00:28.360 biggest market trends expected in twenty three for Hong Kong 0:00:28.400 --> 0:00:31.800 and China. I'm Joe Matthew in Washington. President Biden ends 0:00:31.840 --> 0:00:36.280 a tough year on a high note. That's all straight 0:00:36.320 --> 0:00:40.159 ahead on Bloomberg Daybreak Weekend on Bloomberg eleven three, on 0:00:40.280 --> 0:00:44.599 New York Bloomberg one, Washington d C, Bloomberg one oh 0:00:44.640 --> 0:00:48.360 six one Boston, Bloomberg nine sixties, San Francisco, d A 0:00:48.479 --> 0:00:52.040 B Digital Radio, London, Sirius XM one nine ten, and 0:00:52.120 --> 0:00:55.000 around the world on Bloomberg Radio dot com and via 0:00:55.080 --> 0:01:01.320 the Bloomberg Business App. Good day to you. I'm Amy 0:01:01.320 --> 0:01:04.200 more As we begin today's program with housing. A bunch 0:01:04.240 --> 0:01:07.240 of housing data coming next week, including pending home sales 0:01:07.280 --> 0:01:12.400 for November economists we've surveyed are forecasting another drop. You remember, 0:01:12.440 --> 0:01:16.240 pending sales fell in October as buyers faced mortgage rates 0:01:16.319 --> 0:01:19.520 pretty much at twenty year highs. Pending home sales are 0:01:19.520 --> 0:01:22.440 a leading indicator, so we're watching that one closely for 0:01:22.520 --> 0:01:25.520 you here this coming Wednesday, with live coverage breaking it 0:01:25.560 --> 0:01:29.040 all down for you on Bloomberg Radio. Existing home sales 0:01:29.120 --> 0:01:32.600 also fell in November, but it's interesting some are saying 0:01:32.680 --> 0:01:36.200 home sales may not fall much more from here, including 0:01:36.240 --> 0:01:39.120 Mark Zandy of Moody's Analytics. Yeah, I think in terms 0:01:39.120 --> 0:01:42.440 of home sales, I think we're pretty close to the bottom, 0:01:42.480 --> 0:01:45.440 pretty close to the bottom, and that reflects the peak 0:01:45.560 --> 0:01:48.160 in mortgage rates, which we're back a couple of months 0:01:48.200 --> 0:01:51.320 ago when they were significantly north of seven percent for 0:01:51.440 --> 0:01:54.360 three year fix. Now we're down closer to six percent 0:01:54.440 --> 0:01:57.080 and I don't think we're going back to over seven again. 0:01:57.160 --> 0:01:58.920 So I think we're pretty close to the bottom and 0:01:58.960 --> 0:02:02.480 sales now. Mark's Andy of Moody's Analytics also tells us 0:02:02.640 --> 0:02:06.120 that home prices could fall more from here because mortgages 0:02:06.160 --> 0:02:08.760 are still just taking up too much of people's paychecks 0:02:08.840 --> 0:02:11.320 right now. You're right, I mean affordability has been completely 0:02:11.320 --> 0:02:13.680 hammered here, and that's the fundamental issue. You know, you 0:02:13.760 --> 0:02:16.720 mix the high mortgage rates with the high previously high 0:02:16.720 --> 0:02:19.320 house prices, it's just too much to bear. I mean, 0:02:19.360 --> 0:02:22.640 I think the average monthly payment for a typical for 0:02:22.880 --> 0:02:25.960 American buying a typical priced home is up the seven 0:02:26.000 --> 0:02:27.880 eight hundred bucks from where it was about a year ago. 0:02:27.919 --> 0:02:31.400 And that's just not affordable. So we need a combination 0:02:31.440 --> 0:02:34.239 to get restore affordability and get demand moving in the 0:02:34.320 --> 0:02:37.280 right direction again. We need a combination of of lower 0:02:37.320 --> 0:02:42.480 mortgage rates, lower house prices, and rising incomes. And my senses, 0:02:42.480 --> 0:02:44.960 if mortgage rates come in back to you know, five 0:02:45.000 --> 0:02:46.560 and a half percentag is, which is where I would 0:02:46.560 --> 0:02:49.560 expect them in the long run, incomes continue to rise, 0:02:49.639 --> 0:02:52.360 we don't go into recession. We need about a ten 0:02:52.440 --> 0:02:56.200 percent decline in house prices to restore for affordability sufficiently. 0:02:56.560 --> 0:03:00.320 That probably won't happen until late going into twenty I 0:03:00.360 --> 0:03:02.960 think we've got a couple of years here before affordability 0:03:03.000 --> 0:03:04.799 we'll get to a place where you know, demand will 0:03:04.800 --> 0:03:08.440 start to improve again, significantly improve. Now. Mark Zany, chief 0:03:08.480 --> 0:03:12.320 economist of Moodies Analytics, also tells us he thinks the 0:03:12.400 --> 0:03:15.280 Fed does not need to go too much higher on 0:03:15.360 --> 0:03:19.320 its benchmark interest rate, and one reason he thinks inflation 0:03:19.480 --> 0:03:23.640 is abating is that rents are coming down. Market rents, 0:03:23.680 --> 0:03:25.120 you know, the rents that are being charged people that 0:03:25.160 --> 0:03:28.880 are signing leases today, they've suddenly gone week and down 0:03:29.000 --> 0:03:32.040 for uh for in part because rents are so high 0:03:32.120 --> 0:03:34.760 that people can't afford to rent. So you had so 0:03:34.840 --> 0:03:37.480 called demand destruction and a lot more supply. The supply 0:03:37.520 --> 0:03:40.600 chains are easing and builders can get appliances and building materials. 0:03:40.680 --> 0:03:43.240 Labor markets are easing. For an Immigrants that work in 0:03:43.280 --> 0:03:45.920 construction sites are getting on the job, getting a lot 0:03:45.920 --> 0:03:49.040 more properties going across the finish line to completion. More 0:03:49.080 --> 0:03:53.000 more supply less demand. Rents are weak, and that's gonna 0:03:53.040 --> 0:03:55.680 show up in the cost of housing services over the 0:03:55.720 --> 0:03:58.120 course of the next six, six and twelve months. And 0:03:58.120 --> 0:04:01.880 that's one reason I feel reasonably confident that inflation's gonna 0:04:01.880 --> 0:04:04.040 be coming in here pretty quickly. We're also going to 0:04:04.160 --> 0:04:07.240 be getting the SNP Cora Logic Home Price Index this 0:04:07.320 --> 0:04:11.240 coming Tuesday that is expected to show home prices fell 0:04:11.280 --> 0:04:14.120 about one and a half percent monthly in October, but 0:04:14.320 --> 0:04:17.640 still gained more than eight percent year on year. Michael 0:04:17.680 --> 0:04:21.160 fred Antoni is chief economist at the Mortgage Bankers Association 0:04:21.520 --> 0:04:25.239 and says, if mortgage rates stay lower than the October peak, 0:04:25.680 --> 0:04:28.520 we could see a big wave of home buying starting 0:04:28.560 --> 0:04:32.520 this coming March and April. If we can keep rates six, 0:04:32.640 --> 0:04:34.560 maybe a little bit below stakes as we get into 0:04:34.600 --> 0:04:37.000 the first quarter of next year, when we're at the 0:04:37.040 --> 0:04:40.280 beginning of the spring buying season, that's really going to 0:04:40.400 --> 0:04:43.160 be impactful. A lot of the folks have stepped away 0:04:43.160 --> 0:04:46.359 from the market in two and May and June because 0:04:46.360 --> 0:04:48.640 of that sticker shock and stayed away through the fall. 0:04:49.240 --> 0:04:52.000 They still need to live somewhere. They're still seeing their 0:04:52.040 --> 0:04:55.920 rent increase. So I'm not going to be surprised if 0:04:55.960 --> 0:04:58.359 the market shifts a bit more towards sort of the 0:04:58.400 --> 0:05:01.640 first time home buyer segment, because again, a lot of 0:05:01.640 --> 0:05:03.760 the folks that would have planned to have bought last 0:05:03.839 --> 0:05:05.520 year put it off. Give him this Vike and raid 0:05:05.600 --> 0:05:07.479 swee had just a little bit of leite of relief 0:05:07.520 --> 0:05:10.040 and mortgage rage, they could come back. Michael fred Antonia 0:05:10.120 --> 0:05:13.159 is chief economist at the Mortgage Bankers Association, and he 0:05:13.200 --> 0:05:16.640 also tells us he thinks that nationally home prices won't 0:05:16.800 --> 0:05:20.040 fall too much more next year, maybe one down on 0:05:20.080 --> 0:05:22.560 the year. We'll be getting more data on that from 0:05:22.600 --> 0:05:26.200 the f hf A this coming Tuesday. As well. Housing 0:05:26.240 --> 0:05:29.760 demand very affected by the ability to get a mortgage. 0:05:29.880 --> 0:05:33.039 Another thing we're watching in the housing market how big 0:05:33.080 --> 0:05:36.480 banks are doing on their promise to boost lending to 0:05:36.600 --> 0:05:39.920 black homebuyers. Joining me now to talk about this very 0:05:39.960 --> 0:05:43.479 important part of the housing story that's shaping the economic 0:05:43.520 --> 0:05:46.200 health of housing and black Americans in the months and 0:05:46.279 --> 0:05:50.760 years to come, Bloomberg Senior economics writer Sean Donnan. Sean, 0:05:50.839 --> 0:05:53.000 it is always a pleasure. Thanks for taking the time 0:05:53.000 --> 0:05:56.599 with us. Hey, thanks so much for having me. Now 0:05:56.839 --> 0:05:59.679 set the stage for me here. You did a deep 0:06:00.040 --> 0:06:04.880 five into a block in Baltimore. Um, and this actually 0:06:04.880 --> 0:06:07.480 wound up being a feature story in a Bloomberg Big 0:06:07.520 --> 0:06:11.200 take on the Bloomberg Terminal. It's really fascinating. Tell us 0:06:11.200 --> 0:06:15.880 what you found. Yeah, what we dived into was really 0:06:16.160 --> 0:06:19.159 one of the main causes of the racial wealth gap 0:06:19.200 --> 0:06:22.520 in America. We have learned a lot about in recent 0:06:22.600 --> 0:06:26.920 years about how there's this persistent gap in wealth between 0:06:27.480 --> 0:06:30.599 black families and white families, and and how that kind 0:06:30.600 --> 0:06:33.359 of nause at the economy. One of the main causes 0:06:33.400 --> 0:06:38.839 of that is the home ownership gap. Black families, about 0:06:38.600 --> 0:06:41.800 forty of them own the homes that they live in 0:06:42.000 --> 0:06:46.200 versus about of white families. And that is a gap 0:06:46.279 --> 0:06:48.200 that has persisted for years. And one of the things 0:06:48.240 --> 0:06:52.240 we saw in recent years is the big banks in America, 0:06:52.520 --> 0:06:58.880 alongside other companies, make some big promises to the black community, 0:06:59.040 --> 0:07:02.599 to the USA economy to try and close that racial 0:07:02.640 --> 0:07:06.320 wealth gap, that home ownership gap. And so we dove 0:07:06.360 --> 0:07:09.320 into that, and that took us all the way down 0:07:09.400 --> 0:07:14.720 to the block of Waber Captain. Now, when you got there, 0:07:14.720 --> 0:07:17.920 when you dig when you were digging deep, let's say, 0:07:18.080 --> 0:07:22.040 did you find that promises were made and well, not 0:07:22.320 --> 0:07:27.720 kept necessarily, but at least the attempt was there. So 0:07:29.040 --> 0:07:31.960 the promises that we looked at were some big, ambitious 0:07:31.960 --> 0:07:35.840 promises made by the banks. Wells Fargo in made the 0:07:35.880 --> 0:07:40.080 biggest of those. It said that it would lend sixty 0:07:40.160 --> 0:07:45.160 billion dollars that's billion, not a million, sixty billion dollars 0:07:45.280 --> 0:07:48.560 to create two hundred and fifty thousand black homeowners in 0:07:48.600 --> 0:07:51.760 America within a decade and so we looked at the 0:07:51.840 --> 0:07:56.040 data and what we found was that actually every year 0:07:56.200 --> 0:08:00.840 since making that promise, Wells Fargo, which was the biggest 0:08:01.160 --> 0:08:03.480 bank player was actually the biggest player in the mortgage 0:08:03.480 --> 0:08:08.160 market in back in that every year since making that promise, 0:08:08.280 --> 0:08:12.960 Wells Fargo has actually backed fewer mortgages to black home 0:08:13.040 --> 0:08:15.960 buyers than it did the year before, and that it's 0:08:16.000 --> 0:08:18.880 gone down to a point where actually the San Francisco 0:08:18.920 --> 0:08:25.720 based lender underwrote forty fewer mortgages to black buyers than 0:08:25.800 --> 0:08:29.920 it did in when it made that promise. It isn't 0:08:29.920 --> 0:08:32.880 the only bank to have made such a promise. JP 0:08:33.000 --> 0:08:38.320 Morgan in October twenty after that summer of racial reckoning 0:08:38.360 --> 0:08:40.520 that we had in America, and made a promise to 0:08:41.360 --> 0:08:47.080 create or originate mortgages to an additional forty thousand black 0:08:47.480 --> 0:08:52.040 and Latino buyers over five years. Now it's much earlier 0:08:52.080 --> 0:08:57.160 into delivering on its promise. But in one it originated 0:08:57.240 --> 0:09:01.640 just two more mortgages to black comebuyers than it did 0:09:01.640 --> 0:09:04.240 in the year it said as a benchmark, and it's 0:09:04.320 --> 0:09:09.560 lending to Latino home buyers actually went down in Bank 0:09:09.600 --> 0:09:13.959 of America has made some some slightly different promises. They're 0:09:14.080 --> 0:09:17.280 they're they're broader, they're harder to measure, but it's pledged 0:09:17.520 --> 0:09:23.000 thirty billion dollars in lending and down payment assistance to 0:09:23.559 --> 0:09:28.480 minority and low income homeowners in America. All of this 0:09:28.679 --> 0:09:33.560 matters because what we're seeing across the board and what 0:09:33.600 --> 0:09:35.480 we've seen over the last fifteen years, it's been a 0:09:35.520 --> 0:09:40.440 big dip in in originations and mortgages that are issued 0:09:40.520 --> 0:09:44.960 to two black home buyers in America, and that hasn't 0:09:45.480 --> 0:09:48.680 caught up with where we were back If you remember 0:09:48.960 --> 0:09:51.640 the last financial crisis of the two thousand and eight 0:09:51.640 --> 0:09:54.400 two thousand nine, the subprime crisis was the type of 0:09:54.480 --> 0:09:56.680 lending we had back in the early two thousands that 0:09:56.920 --> 0:10:02.120 beetn't caught up to those levels until actually in the 0:10:02.160 --> 0:10:06.079 middle of the pandemic. And in that time, we've had 0:10:06.160 --> 0:10:09.640 a huge housing boom of property boom in America, and 0:10:09.679 --> 0:10:12.400 there's a lot of wealth that's been created for homeowners 0:10:12.400 --> 0:10:16.600 in America that black families simply have missed out on 0:10:17.160 --> 0:10:20.000 because they have that lower homeownership break. All Right, just 0:10:20.240 --> 0:10:23.720 terrific reporting, Sean, Thank you so much for digging deep 0:10:23.880 --> 0:10:27.120 into this issue. You can find it on Bloomberg's Big 0:10:27.120 --> 0:10:29.640 Take and on the Bloomberg terminal. Thank you so much, Sean, 0:10:30.200 --> 0:10:33.200 thanks for having me, Bloomberg Senior economics writer Sean Donn 0:10:33.240 --> 0:10:36.520 And and coming up on Bloomberg Daybreak weekend, things aren't 0:10:36.559 --> 0:10:40.200 exactly looking up for the UK economy in three more 0:10:40.240 --> 0:10:43.679 on that just ahead. I'm Amy Morris. This is Bloomberg. 0:10:58.440 --> 0:11:00.960 This is Bloomberg Daybreak week and our globe will look 0:11:00.960 --> 0:11:04.000 ahead at the top stories for investors in the coming week. 0:11:04.200 --> 0:11:07.559 I'm Ammy Morris in Washington. Up later in our program 0:11:07.640 --> 0:11:12.000 as President Biden really finally hit his stride, but first 0:11:12.040 --> 0:11:15.200 a roller coaster year for the UK economy, with political 0:11:15.280 --> 0:11:19.319 upheaval adding to the already gloomy economic outlook. Things aren't 0:11:19.320 --> 0:11:21.920 looking up in three either. The o E c D 0:11:22.080 --> 0:11:24.360 is warning the UK is said to be the worst 0:11:24.440 --> 0:11:27.920 performer in the G twenty Russia for the next two years. 0:11:28.240 --> 0:11:30.679 For more, let's go to London and bring in Bloomberg 0:11:30.760 --> 0:11:34.559 Daybreak Europe anchor Stephen Carroll. We've had three prime ministers, 0:11:34.679 --> 0:11:37.520 four finance ministers, and one ill fated budget in the 0:11:37.600 --> 0:11:40.040 UK this year, all of that dragging the pounds than 0:11:40.080 --> 0:11:43.640 an inch of parity versus the US dollar at one point. Overall, 0:11:43.720 --> 0:11:46.080 it's been quite the wild ride for the UK economy. 0:11:46.160 --> 0:11:49.080 Now the Bank of England is expecting a prolonged recession 0:11:49.400 --> 0:11:52.160 in twenty three. Joining us to discuss the year that 0:11:52.360 --> 0:11:55.200 was and what's ahead our UK correspondent Lizzie Byrden and 0:11:55.200 --> 0:11:58.240 our senior UK economist Dan Hansen. And Lizzie, let's start 0:11:58.320 --> 0:12:00.560 with you. One measure of the volatile as we've seen 0:12:00.559 --> 0:12:02.600 this year is in the pound. Talk us through what 0:12:02.679 --> 0:12:05.720 were the highlights and low lights for sterling? And two, 0:12:05.880 --> 0:12:08.199 I think it's very obvious what the low light would 0:12:08.200 --> 0:12:10.240 have been, but you could say that this whole year 0:12:10.280 --> 0:12:12.960 has been an annus horrible ifs for sterling. So we 0:12:13.040 --> 0:12:15.880 started the year at one dollar thirty five and then 0:12:15.920 --> 0:12:18.880 the pound dropped to a record low in September of 0:12:18.960 --> 0:12:22.120 near adult the parity, and of course that was just 0:12:22.320 --> 0:12:26.040 after the mini budget. And ultimately it was the chaos 0:12:26.080 --> 0:12:29.560 in currency and FX markets that ousted Liz Trust. They 0:12:29.559 --> 0:12:32.559 were the guardrails on the government in the end. Now 0:12:32.600 --> 0:12:35.760 we've got Risci Snack in number ten. His fiscal plans 0:12:35.760 --> 0:12:40.679 are obviously more austere than Lizz Truss. Is this Dullness 0:12:40.720 --> 0:12:45.000 dividend has helped to recover the pound somewhat, but even 0:12:45.040 --> 0:12:49.319 after the recent rebound, it's still sterling down almost ten 0:12:49.400 --> 0:12:51.920 percent since the start of the year. Yes, dollar strength 0:12:51.960 --> 0:12:55.079 has played in but to give it some historical context, 0:12:55.440 --> 0:12:59.680 two has been the pound's worst ever apart from the 0:12:59.679 --> 0:13:02.640 break sit vote, the financial crisis and Black Wednesday in 0:13:02.760 --> 0:13:06.520 ninety two another collection of greatest hits. Don How is 0:13:06.559 --> 0:13:09.880 the UK economy finishing the year compared to how it started? Well, 0:13:09.880 --> 0:13:11.800 it started the year pretty strongly if you look at 0:13:11.840 --> 0:13:14.000 the data, because if you if you remember back then, 0:13:14.160 --> 0:13:16.200 it seems an awful long time ago. Now we had 0:13:16.240 --> 0:13:18.559 we had the rebound from the homochron wave, so you 0:13:18.600 --> 0:13:20.560 had a pretty strong GDP reading at the start of 0:13:20.559 --> 0:13:23.400 the year, and since then things have really really slowed 0:13:23.440 --> 0:13:25.680 down to the second quarter was there was growth in 0:13:25.679 --> 0:13:27.839 the second quarter, but it was weak, and then we've 0:13:27.800 --> 0:13:30.000 obviously had a fall in GDP in the third quarter, 0:13:30.160 --> 0:13:33.160 and most forecasts are expecting a fall in GDP in 0:13:33.200 --> 0:13:35.600 the final quarter. Though I think I know we've we're 0:13:35.640 --> 0:13:38.400 gonna we're most likely going to have two consecutive quarters 0:13:38.400 --> 0:13:40.480 of negative growth, which as we all know that will 0:13:40.520 --> 0:13:42.760 signal the start of a technical recession, but I think 0:13:43.040 --> 0:13:46.040 try and sort of put a positive spin on it. Actually, 0:13:46.160 --> 0:13:48.840 those two quarters have been very, very mild in terms 0:13:48.880 --> 0:13:51.240 of their drops. So you've had a point two drop 0:13:51.320 --> 0:13:54.280 in the in the third quarter and the fourth quarter. 0:13:54.320 --> 0:13:57.000 The Bank of England has said that it thinks that 0:13:57.040 --> 0:14:00.960 the drop waby point one percent, So yeah, us it's 0:14:01.000 --> 0:14:02.760 not good news. But when you put that in the 0:14:02.760 --> 0:14:05.600 context of the living squeeze that is occurring here in 0:14:05.640 --> 0:14:10.080 the UK, actually the economy is holding up relatively well. Yes, 0:14:10.160 --> 0:14:13.320 we were probably heading into a recession of protractive recession, 0:14:13.360 --> 0:14:15.640 but it's going, at least on our forecast, to be 0:14:15.679 --> 0:14:18.920 relatively mild. So I know, those aren't Those aren't words 0:14:18.920 --> 0:14:21.680 people want to hear, recession, downturn. But actually when you 0:14:21.720 --> 0:14:23.680 look at the depth of it relative to his past 0:14:23.760 --> 0:14:26.160 down turns, it doesn't look like it's going to be 0:14:26.240 --> 0:14:30.440 as bad. Okay, Lizzie. In terms of Sterling, are we 0:14:30.560 --> 0:14:33.480 over the worst of the upheaval that we've seen this 0:14:33.560 --> 0:14:38.280 year when we look into three Yes, But says she trepidaciously, 0:14:39.040 --> 0:14:41.280 if you look at the options market, there's currently a 0:14:41.320 --> 0:14:43.800 fort chance that the plan is going to get stuck 0:14:43.880 --> 0:14:46.680 between one dollar turn and one dollar thirty for the 0:14:46.720 --> 0:14:48.960 next two years, and that's still it's weakest have a 0:14:49.040 --> 0:14:52.920 trading range. And that's because of the factors Done talks about. 0:14:53.120 --> 0:14:56.000 We've got a year of high inflation ahead rising interest 0:14:56.080 --> 0:14:59.600 rates to combat it, housing slowdown, and this is a 0:14:59.680 --> 0:15:02.920 content innuation of a long term downward trends. So the 0:15:03.040 --> 0:15:06.360 five years before the Brexit vote in twenty sixteen, the 0:15:06.360 --> 0:15:09.320 pounds average was about one dollar fifty nine. The five 0:15:09.400 --> 0:15:12.040 years before that it was about one dollar seventy six. 0:15:12.440 --> 0:15:16.440 But it's not just a Brexit thing. It's what Brexit 0:15:16.560 --> 0:15:20.360 has created, more trade frictions with the EU, It's left 0:15:20.360 --> 0:15:23.640 the labor market short of workers, it's undermined business investment. 0:15:24.480 --> 0:15:27.200 Looking ahead Bank of America. I was there speaking to 0:15:27.240 --> 0:15:30.360 the economists last week. They say that Sterling in three 0:15:30.440 --> 0:15:33.320 is actually going to be dominated by Brexit and whether 0:15:33.600 --> 0:15:36.720 this government can reach a compromise on Brexit, whether they 0:15:36.720 --> 0:15:40.080 can find a sustainable solution on the Northern Ireland Protocol. 0:15:40.400 --> 0:15:43.880 And I have to say, even though Rischie Sunac, probably 0:15:43.880 --> 0:15:47.480 for the benefit of the Brexit wing of his party, 0:15:47.640 --> 0:15:51.080 has talked tough on not wanting a Swiss style deal 0:15:51.120 --> 0:15:54.480 as as was reported. Actually in the markets, people are 0:15:54.560 --> 0:15:58.120 very optimistic that he will be pragmathematic on Brexit. So 0:15:58.240 --> 0:16:01.520 for me, three is about feeling how much he's willing 0:16:01.520 --> 0:16:04.120 to stand up to his party or in their eyes, 0:16:04.480 --> 0:16:06.960 the degree to which he's a true Brexitter. Yeah, indeed, 0:16:06.960 --> 0:16:09.720 And of course the deadline for that that everyone's notionally 0:16:09.760 --> 0:16:12.320 aiming for is the anniversary of the Good Friday Agreement 0:16:12.320 --> 0:16:13.920 in April of next year. Is the hope is that 0:16:13.960 --> 0:16:16.160 they will have done a deal between the UK and 0:16:16.200 --> 0:16:18.640 the EU by then that will resolve the issues and 0:16:18.680 --> 0:16:21.000 allow there to be an official commemoration of that deal 0:16:21.040 --> 0:16:24.880 without the ongoing political tensions that we've seen in Northern 0:16:24.880 --> 0:16:27.600 Ireland on that issue. And optimistically all of this back 0:16:27.640 --> 0:16:31.240 and forth is just choreography to show that everybody's trying 0:16:31.480 --> 0:16:34.640 to defend their sides, but hopefully we'll get to something then. Yeah. 0:16:35.240 --> 0:16:37.560 Let's take a listen now to what the Bank having 0:16:37.600 --> 0:16:40.080 The Governor Andrew Bailey said that their last rate decision 0:16:40.120 --> 0:16:43.640 about what he expects in terms of inflation next year. 0:16:44.040 --> 0:16:47.320 We think we've seen, possibly this week, the first glimmer 0:16:47.800 --> 0:16:49.800 that with the figures that were released this week that 0:16:49.920 --> 0:16:52.280 it's not only beginning to come down, but it was 0:16:52.280 --> 0:16:53.840 a little bit below where we thought it would be, 0:16:53.840 --> 0:16:55.800 and that's obviously very good news, but it's a long 0:16:55.840 --> 0:16:58.560 way to go, and there is and we expect that 0:16:58.600 --> 0:17:00.880 to happen. By the way, we expect inflation to start 0:17:00.920 --> 0:17:03.960 falling more rapidly, probably from the late spring onwards, but 0:17:04.000 --> 0:17:05.960 there is a risk that it won't happen in that way, 0:17:06.200 --> 0:17:09.359 particularly because the labor market and labor supply in this 0:17:09.520 --> 0:17:12.960 country are so tight. Okay, So that's what Andrew Bailey 0:17:13.040 --> 0:17:15.320 has to say about the outlook for the next year. 0:17:15.560 --> 0:17:18.480 Dan Hansen, what are the particular pressure points you're watching 0:17:18.480 --> 0:17:20.920 out for going into next year. Andrew Bailey seems to 0:17:20.920 --> 0:17:23.960 think things are going to improve pretty soon an inflation, Yes, 0:17:24.000 --> 0:17:26.159 so I think I think you can think of the 0:17:26.200 --> 0:17:29.120 inflation path next year in sort of to two elements 0:17:29.200 --> 0:17:31.360 to it. So over the winter and into the first 0:17:31.400 --> 0:17:34.119 quarter of next year, we don't think inflation is going 0:17:34.160 --> 0:17:36.600 to drop below ten per cent. I think our forecast 0:17:36.640 --> 0:17:39.240 in March in fact, just has it dropping a little 0:17:39.280 --> 0:17:41.840 bit low below ten per cent here to nine and 0:17:41.880 --> 0:17:44.000 a half. So you've got pretty sticky inflation for the 0:17:44.040 --> 0:17:46.720 next sort of four or five months. But then what 0:17:46.800 --> 0:17:49.359 you'll we think at least and we hope you'll see, 0:17:49.480 --> 0:17:52.920 is these base effects coming through um and the impact 0:17:53.080 --> 0:17:55.760 of the energy price rises that we've seen this year 0:17:55.800 --> 0:17:59.560 falling out of the annual comparison. And what the Governor 0:17:59.640 --> 0:18:02.680 was a loud into there was the good news from 0:18:02.680 --> 0:18:05.639 the latest inflation print was that core goods inflation. So 0:18:05.680 --> 0:18:07.600 this is a bit of the inflation basket that's been 0:18:07.640 --> 0:18:11.880 really impacted by supply constraints, and we've seen it coming 0:18:11.920 --> 0:18:15.800 off very sharply in the US. We think those that 0:18:15.800 --> 0:18:17.680 that part of the inflation basket is going to ease 0:18:17.760 --> 0:18:20.600 quite sharply as well. So I think what you'll get 0:18:20.720 --> 0:18:24.439 is is a pretty sharp fall in inflation. But the 0:18:24.520 --> 0:18:26.359 key thing to remember here is that I think the 0:18:26.440 --> 0:18:30.280 easy bid is getting from say ten to four or five, 0:18:31.200 --> 0:18:33.520 the hard bid is getting from four or five to two. 0:18:33.760 --> 0:18:36.600 And what that reflects is what's going on, as the 0:18:36.600 --> 0:18:38.960 Governor mentioned there as well, is what's going on in 0:18:39.000 --> 0:18:42.000 the labor market, and what's going on in with services inflation, 0:18:42.119 --> 0:18:44.760 and before you get services inflation, what's going on in 0:18:44.760 --> 0:18:47.960 pay So I think you'll see you'll see a pretty 0:18:47.960 --> 0:18:51.080 sharp drop this year, but they're the sort of easy yards. 0:18:51.560 --> 0:18:53.720 You've got the hardy yards to come. And that will 0:18:53.800 --> 0:18:55.840 that will only really be revealed in the latter half 0:18:55.880 --> 0:18:59.040 of three the sort of what's the residual bit of 0:18:59.080 --> 0:19:02.159 inflation and that that's really what will that will focus 0:19:02.200 --> 0:19:05.000 the bank next year as well, Lizzie, we are rattling 0:19:05.040 --> 0:19:06.840 towards the end of the year in the UK and 0:19:06.920 --> 0:19:09.520 amidst this massive wave of strikes. Is that going to 0:19:09.520 --> 0:19:11.720 be a continuing theme when we think about the labor 0:19:11.760 --> 0:19:16.080 Marcus next year. Well, my colleague Philip aldric Our, senior 0:19:16.720 --> 0:19:20.840 UK Economics reporter, had a really interesting conversation with Charles Goodhart, 0:19:20.880 --> 0:19:24.400 who's a former bankoving the policymaker, and he said that 0:19:24.440 --> 0:19:27.320 it might not just be a winter of discontent, it 0:19:27.320 --> 0:19:31.200 could be a year of discontent unless the government agrees 0:19:31.280 --> 0:19:35.600 to a wage deal to end this industrial action. Labor's 0:19:35.600 --> 0:19:37.879 point the opposition Labor Party is that you need to 0:19:37.920 --> 0:19:41.160 treat it as a whole rather than strike by strike, 0:19:41.280 --> 0:19:44.560 union by union. And if you think about what DNS 0:19:44.600 --> 0:19:46.920 saying that this inflation is going to be sticky, it's 0:19:46.960 --> 0:19:49.600 not going to drop below ten percent for four to 0:19:49.720 --> 0:19:53.760 five months. That really keeps the pressure on the government. Okay, 0:19:53.840 --> 0:19:56.240 thank you very much to Blomberg's UK corresponded Lizzie Burden, 0:19:56.240 --> 0:19:59.359 and to our senior UK economist Dan Hansen as well. 0:19:59.640 --> 0:20:01.760 I'm even Carl in London. You can catch us every 0:20:01.800 --> 0:20:04.600 weekday morning here for Bloomberg Daybreak Europe, beginning at six 0:20:04.640 --> 0:20:07.880 am in London and one am on Wall Streets. Thank you, Stephen. 0:20:07.960 --> 0:20:11.399 Coming up on Bloomberg Daybreak weekend. President Biden continues to 0:20:11.480 --> 0:20:14.720 chalk up successes. But can it last? We'll find out. 0:20:14.760 --> 0:20:23.600 I'm Amy Morris. This is Bloomberg broadcasting live from the 0:20:23.680 --> 0:20:27.200 Bloomberg in our active broker studio in New York. Bloomberg 0:20:27.240 --> 0:20:31.360 Even three oh to Washington, d C, Bloomberg to Boston, 0:20:31.440 --> 0:20:34.840 Bloomberg one O six one to San Francisco, Bloomberg nine 0:20:34.960 --> 0:20:38.240 sixty to the country Sirius XM Channel one nineteen to 0:20:38.440 --> 0:20:41.520 London d A B Digital Radio, and around the globe 0:20:41.600 --> 0:20:45.240 the Bloomberg Business Act and Bloomberg Radio dot Com. This 0:20:45.520 --> 0:20:55.280 is Bloomberg day Break Weekend. I'm Amy Morris in Washington 0:20:55.400 --> 0:20:57.679 with your global look ahead at the top stories for 0:20:57.800 --> 0:21:00.760 investors in the coming week has does it in Biden 0:21:00.920 --> 0:21:03.879 really finally hit his stride. Were more here in our 0:21:03.920 --> 0:21:06.560 Bloomberg NY nine one newsroom in Washington. We go to 0:21:06.600 --> 0:21:09.800 Bloomberg Sound On host Joe Matthew. Jo thank you Amy. 0:21:09.840 --> 0:21:12.080 President Biden feeling good as he heads into the new 0:21:12.160 --> 0:21:14.720 year after what was arguably the best mid term performance 0:21:14.760 --> 0:21:18.120 by a sitting president in decades. The President saying, it's 0:21:18.119 --> 0:21:21.359 clear Americans are committed to protecting and defending democracy, a 0:21:21.440 --> 0:21:24.560 strong rejection of election deniers at every level, from those 0:21:24.560 --> 0:21:28.360 seeking lead our states and those of seeking to serve 0:21:28.440 --> 0:21:31.400 in Congress, and also those seeking to oversee the election. 0:21:31.800 --> 0:21:34.120 Joining us now to talk about this, Bloomberg White House 0:21:34.240 --> 0:21:37.159 reporter Josh wind Grove, Josh, happy holiday, is great to 0:21:37.200 --> 0:21:39.120 see you. Thank you for being here as we talk 0:21:39.200 --> 0:21:43.080 about this moment for Joe Biden. Uh, not only did 0:21:43.080 --> 0:21:45.560 he outperform in the mid terms, your reporting shows that 0:21:46.160 --> 0:21:47.879 he did a bit of an end run around his 0:21:48.040 --> 0:21:52.800 own advisors by insisting that democracy itself beyond the ballot 0:21:53.000 --> 0:21:55.080 as opposed to so many other issues that were in 0:21:55.119 --> 0:22:01.160 the air. I guess his instincts were correct. Yeah, I think, Look, 0:22:01.560 --> 0:22:04.439 this is a guy that likes to measure twice or 0:22:04.480 --> 0:22:07.240 three times and four times, five times and then cut once. Right, 0:22:07.560 --> 0:22:09.719 Like the knock on that strategy is sometimes they get 0:22:09.760 --> 0:22:12.040