1 00:00:00,240 --> 00:00:07,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:10,320 --> 00:00:12,600 Speaker 2: This is Bloomberg day Break Weekend, our global look at 3 00:00:12,640 --> 00:00:14,880 Speaker 2: the top stories in the coming week from our Daybreak 4 00:00:14,880 --> 00:00:17,360 Speaker 2: anchors all around the world, and straight ahead on the program, 5 00:00:17,400 --> 00:00:20,560 Speaker 2: we look ahead to this week's monetary policy decision from 6 00:00:20,600 --> 00:00:23,760 Speaker 2: the Fed, plus a first batch of big tech earnings. 7 00:00:24,040 --> 00:00:25,320 Speaker 2: I'm Tom Busby. 8 00:00:25,000 --> 00:00:25,560 Speaker 3: In New York. 9 00:00:25,720 --> 00:00:28,120 Speaker 4: I'm Caline Hecker here in London, where we're asking how 10 00:00:28,120 --> 00:00:31,680 Speaker 4: the European Central Bank will negotiate the new World Order. 11 00:00:32,040 --> 00:00:34,520 Speaker 5: I'm Doug Prisoner looking at what we can expect from 12 00:00:34,600 --> 00:00:37,360 Speaker 5: next week's print on CPI in Australia. 13 00:00:38,479 --> 00:00:42,520 Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 14 00:00:42,560 --> 00:00:46,240 Speaker 1: eleven to three yeh New York, Bloomberg ninety nine to one, Washington, DC, 15 00:00:46,760 --> 00:00:51,000 Speaker 1: Bloomberg ninety two to nine, Boston, DAB Digital Radio, London, 16 00:00:51,440 --> 00:00:54,600 Speaker 1: Sirius XM one twenty one, and around the world on 17 00:00:54,680 --> 00:00:57,840 Speaker 1: Bloomberg Radio, dot Com and the Bloomberg Business App. 18 00:01:02,760 --> 00:01:04,560 Speaker 2: Good day to you. I'm Tom Busby, and we begin 19 00:01:04,600 --> 00:01:07,520 Speaker 2: today's program with the Federal Reserve. The FED, concluding its 20 00:01:07,720 --> 00:01:10,959 Speaker 2: two day meeting on Wednesday, expected to issue its first 21 00:01:11,080 --> 00:01:14,520 Speaker 2: monetary policy decision of the new year. For more on 22 00:01:14,560 --> 00:01:17,240 Speaker 2: what we might expect to see and why, we're joined 23 00:01:17,280 --> 00:01:22,120 Speaker 2: by Michael McKee, Bloomberg International Economics and Policy correspondent. Well, Michael, 24 00:01:22,120 --> 00:01:25,080 Speaker 2: after cutting rates for three meetings in a row, what 25 00:01:25,240 --> 00:01:27,720 Speaker 2: do you expect to see this week from the Fed? 26 00:01:28,360 --> 00:01:31,160 Speaker 6: Not much. The Fed is going to be on hold. 27 00:01:31,800 --> 00:01:34,880 Speaker 6: They've pretty much made that clear. The markets have right 28 00:01:34,920 --> 00:01:38,479 Speaker 6: now priced in a one basis point chance of any 29 00:01:38,520 --> 00:01:41,360 Speaker 6: kind of FED move, So nobody's expecting a whole lot. 30 00:01:41,440 --> 00:01:44,600 Speaker 6: It's more going to be the focus on j Powell 31 00:01:44,840 --> 00:01:48,000 Speaker 6: and his press conference afterwards and what he might say 32 00:01:48,040 --> 00:01:52,040 Speaker 6: about future FED moves. All of this in the context 33 00:01:52,160 --> 00:01:56,360 Speaker 6: of the new president and what his economic plans are 34 00:01:56,360 --> 00:02:00,760 Speaker 6: going to be, since they don't know yet, and you know, 35 00:02:00,840 --> 00:02:03,559 Speaker 6: we're kind of a week into this and we haven't 36 00:02:03,600 --> 00:02:06,240 Speaker 6: heard yet what he's going to do with tariffs and things. 37 00:02:06,880 --> 00:02:10,760 Speaker 6: At this point, the Fed's on hold until there's some 38 00:02:10,880 --> 00:02:11,440 Speaker 6: more news. 39 00:02:11,880 --> 00:02:14,400 Speaker 2: Well, let's talk about what the FED is dealing with. 40 00:02:14,480 --> 00:02:19,000 Speaker 2: As far as data, the US labor market remains strong December, 41 00:02:19,080 --> 00:02:21,359 Speaker 2: job creation better than forecast on a plan, with right 42 00:02:21,480 --> 00:02:25,120 Speaker 2: low wages outpacing inflation. Long term unemployment though that was 43 00:02:25,120 --> 00:02:26,600 Speaker 2: a surprise at a three year high. 44 00:02:26,440 --> 00:02:30,440 Speaker 6: This week, though, right, yeah, it's not a total surprise 45 00:02:30,520 --> 00:02:34,799 Speaker 6: in that what we have seen lately is companies are 46 00:02:34,800 --> 00:02:37,760 Speaker 6: not hiring. They're not really firing. The total number of 47 00:02:37,800 --> 00:02:41,800 Speaker 6: people who are filing initial jobless claims is still very low. 48 00:02:42,240 --> 00:02:45,560 Speaker 6: It's sort of bounced around because of the holidays and 49 00:02:45,600 --> 00:02:47,840 Speaker 6: seasonal adjustment factors. And now we have a little bit 50 00:02:47,840 --> 00:02:50,320 Speaker 6: of input of people who've lost their jobs in the 51 00:02:50,360 --> 00:02:54,200 Speaker 6: Los Angeles fires, But in general, people are not hiring, 52 00:02:54,240 --> 00:02:55,919 Speaker 6: so if you do lose your job, it takes a 53 00:02:55,960 --> 00:02:59,720 Speaker 6: little bit longer now to find a job. The number 54 00:02:59,720 --> 00:03:03,800 Speaker 6: of continuing claims rising up too, close to two million, 55 00:03:04,480 --> 00:03:07,240 Speaker 6: but that's not telling us that the economy is in 56 00:03:07,320 --> 00:03:11,160 Speaker 6: trouble at all. The labor market still feels strong. Of course, 57 00:03:11,200 --> 00:03:15,320 Speaker 6: the Fed's going to be watching every jobs report very closely. 58 00:03:15,880 --> 00:03:20,520 Speaker 6: And inflation has been well behaved, if not coming down. 59 00:03:21,120 --> 00:03:24,600 Speaker 2: Yeah, let's talk about inflation. So CPI in December two 60 00:03:24,639 --> 00:03:28,360 Speaker 2: point nine percent year over year PCE two point eight percent, 61 00:03:28,800 --> 00:03:32,359 Speaker 2: so not bad, not great, still a little far from 62 00:03:32,360 --> 00:03:35,360 Speaker 2: the target. But as you say, you know, steady. 63 00:03:35,280 --> 00:03:38,640 Speaker 6: Treading water basically is kind of where we are, and 64 00:03:39,200 --> 00:03:41,640 Speaker 6: the issue for the FAT is they look at PCE, 65 00:03:41,960 --> 00:03:45,240 Speaker 6: which runs maybe three or four basis points below where 66 00:03:45,400 --> 00:03:49,680 Speaker 6: CPI does, and so we're looking at two point four 67 00:03:49,720 --> 00:03:53,720 Speaker 6: percent for PCE. End of this week, we're going to 68 00:03:53,760 --> 00:03:58,160 Speaker 6: get the PCE report for the month of December, and 69 00:03:58,760 --> 00:04:02,480 Speaker 6: betting is it's going to be restrained. But CPI is 70 00:04:02,480 --> 00:04:06,200 Speaker 6: what Americans look at and makes it into the newspapers 71 00:04:06,240 --> 00:04:09,040 Speaker 6: and things like that, and that has an effect on 72 00:04:09,200 --> 00:04:12,720 Speaker 6: inflation expectations. And we did see in the most recent 73 00:04:12,920 --> 00:04:17,000 Speaker 6: University of Michigan reports that people were expecting, at least 74 00:04:17,000 --> 00:04:21,960 Speaker 6: over a longer time horizon, inflation to rise. And if 75 00:04:22,000 --> 00:04:24,480 Speaker 6: that's the case, then the FED is going to be 76 00:04:24,560 --> 00:04:26,719 Speaker 6: keeping a close eye on that because they worry that 77 00:04:26,760 --> 00:04:30,560 Speaker 6: if inflation expectations keep going up, then people are going 78 00:04:30,600 --> 00:04:32,719 Speaker 6: to go back and ask their buses for raises and 79 00:04:32,760 --> 00:04:36,479 Speaker 6: you get into the circular situation that they've been trying 80 00:04:36,480 --> 00:04:39,440 Speaker 6: hard to avoid for years. Doesn't look like we're really 81 00:04:39,480 --> 00:04:43,560 Speaker 6: going to have that happen, but it's something to keep. 82 00:04:43,400 --> 00:04:45,640 Speaker 2: An eye on, so we kind of know what we're 83 00:04:45,680 --> 00:04:48,919 Speaker 2: dealing with on inflation. We see the results of the 84 00:04:49,000 --> 00:04:53,320 Speaker 2: labor market housing very uneven but still struggling. The wild 85 00:04:53,360 --> 00:04:56,880 Speaker 2: cut here, as you alluded to before, is President Trump 86 00:04:57,080 --> 00:05:00,520 Speaker 2: his new policies, how it affects the economy. It will 87 00:05:00,520 --> 00:05:03,039 Speaker 2: affect the Fed's decisions. So let's talk about that. Last 88 00:05:03,080 --> 00:05:05,400 Speaker 2: time he was in the White House, you appointed Jerome 89 00:05:05,440 --> 00:05:08,080 Speaker 2: Powell to chair the FED, but when the Central Bank 90 00:05:08,080 --> 00:05:11,360 Speaker 2: made some pretty difficult decisions, he did not agree with 91 00:05:11,800 --> 00:05:15,000 Speaker 2: I'm being kind here. He was unrelenting in his criticism, 92 00:05:15,040 --> 00:05:19,120 Speaker 2: demanding to be consultant on rates and on policy. Is 93 00:05:19,200 --> 00:05:24,560 Speaker 2: anything going to change other than you know, as you said, immigration, 94 00:05:24,880 --> 00:05:27,840 Speaker 2: his raids that took place last week. 95 00:05:27,880 --> 00:05:31,920 Speaker 6: I mean, well, we're not expecting any major change in 96 00:05:31,960 --> 00:05:36,080 Speaker 6: the President's attitude towards the Federal Reserve. I don't want 97 00:05:36,080 --> 00:05:39,360 Speaker 6: to speak for him, because he certainly speaks enough. But 98 00:05:40,279 --> 00:05:43,599 Speaker 6: he did insult Powell and the FED last time because 99 00:05:43,640 --> 00:05:46,479 Speaker 6: they weren't cutting interest rates and weren't cutting interest rates 100 00:05:46,520 --> 00:05:49,360 Speaker 6: as fast as he wanted, and so one can imagine 101 00:05:49,360 --> 00:05:51,320 Speaker 6: that he's not going to be happy that the FED 102 00:05:51,480 --> 00:05:53,919 Speaker 6: is on hold now. I think there are enough areas 103 00:05:54,600 --> 00:05:58,719 Speaker 6: in which he stuck his fingers immediately after taking the 104 00:05:58,720 --> 00:06:01,440 Speaker 6: oath of office that he made not be too focused 105 00:06:01,440 --> 00:06:04,200 Speaker 6: on this week's FED meeting. But if the Fed stays 106 00:06:04,200 --> 00:06:06,359 Speaker 6: on hold for a while because they think some of 107 00:06:06,400 --> 00:06:10,920 Speaker 6: his policies are going to be inflationary, then I would 108 00:06:10,960 --> 00:06:13,400 Speaker 6: imagine we will hear from him on that. 109 00:06:13,680 --> 00:06:16,480 Speaker 2: A decision from the Federal Reserve this Wednesday about two 110 00:06:16,520 --> 00:06:19,880 Speaker 2: pm Wall Street Time. Our thanks to Michael McKee, Bloomberg 111 00:06:19,920 --> 00:06:23,400 Speaker 2: International Economics and Policy correspondent. We now turn to the 112 00:06:23,440 --> 00:06:26,320 Speaker 2: current Q four earning season as Wall Street prepares to 113 00:06:26,320 --> 00:06:29,080 Speaker 2: get its first batch of big tech results this week 114 00:06:29,480 --> 00:06:32,719 Speaker 2: from Apple, Microsoft, and Meta platforms. And for more on 115 00:06:32,760 --> 00:06:35,799 Speaker 2: what to expect, we're joined by man Deep Singh, Bloomberg 116 00:06:35,839 --> 00:06:40,479 Speaker 2: Intelligence senior tech industry analysts. The big question is artificial 117 00:06:40,520 --> 00:06:43,760 Speaker 2: intelligence still the big driver for big tech and for 118 00:06:43,880 --> 00:06:46,039 Speaker 2: each of those companies? What do you expect to see 119 00:06:46,080 --> 00:06:46,520 Speaker 2: this week? 120 00:06:47,000 --> 00:06:47,240 Speaker 3: Yeah? 121 00:06:47,360 --> 00:06:51,000 Speaker 7: Look, I think four Q is typically a seasonally strong 122 00:06:51,080 --> 00:06:54,960 Speaker 7: quarder for MAC seven companies, and I expect this time 123 00:06:55,000 --> 00:06:57,840 Speaker 7: it will be no different. Although you know what we 124 00:06:57,920 --> 00:07:02,359 Speaker 7: saw with President trump'son auguration and the project's target which 125 00:07:02,440 --> 00:07:06,560 Speaker 7: really impacts the AI spend. I mean, look, you know, 126 00:07:07,160 --> 00:07:10,280 Speaker 7: once the government is behind something like this in a 127 00:07:10,320 --> 00:07:13,360 Speaker 7: big way, and it's bringing in new dollars, which is 128 00:07:13,840 --> 00:07:15,840 Speaker 7: the case here, you know, the one hundred billion dollars 129 00:07:15,840 --> 00:07:19,480 Speaker 7: an dollars, and just to put it in context, the 130 00:07:20,080 --> 00:07:23,560 Speaker 7: you know, the total capex spending in twenty twenty four 131 00:07:23,640 --> 00:07:26,200 Speaker 7: from the four big hyperscalers was around two hundred and 132 00:07:26,200 --> 00:07:29,840 Speaker 7: forty billion, and that was like fifty six percent growth. 133 00:07:29,920 --> 00:07:34,360 Speaker 7: So clearly, you know that momentum should be intact if 134 00:07:34,400 --> 00:07:37,400 Speaker 7: we get these additional one hundred billion dollars in twenty 135 00:07:37,480 --> 00:07:42,240 Speaker 7: twenty five, which I think was the aim of this discussion. 136 00:07:42,320 --> 00:07:44,680 Speaker 7: So look, I mean when I look at the earnings, 137 00:07:45,320 --> 00:07:48,800 Speaker 7: Meta is expected to grow earnings close to thirty percent, 138 00:07:49,000 --> 00:07:53,000 Speaker 7: Alphabet also over twenty five percent, and these are you know, 139 00:07:53,080 --> 00:07:57,440 Speaker 7: off a very strong comp So Microsoft's earnings growth will 140 00:07:57,480 --> 00:08:02,760 Speaker 7: be somewhat slower because their depreciation expenses are going up now. 141 00:08:03,120 --> 00:08:05,800 Speaker 7: And we know Apple has been struggling, you know, with 142 00:08:05,880 --> 00:08:09,040 Speaker 7: the China exposure, and their top line remains muted. So 143 00:08:09,920 --> 00:08:14,640 Speaker 7: Apple is has continued to kind of struggle when it 144 00:08:14,720 --> 00:08:17,920 Speaker 7: comes to really driving that top line. But again everyone 145 00:08:18,000 --> 00:08:21,600 Speaker 7: is waiting for that big smartphone refers cycle with this 146 00:08:21,760 --> 00:08:22,360 Speaker 7: AI wave. 147 00:08:22,600 --> 00:08:25,360 Speaker 2: Well that's coming, and well that brings us to Apple then, 148 00:08:25,400 --> 00:08:28,320 Speaker 2: So Apple beaten to the punch. It looks like this 149 00:08:28,440 --> 00:08:31,000 Speaker 2: year from Samsung with an ultra thin phone, they really 150 00:08:31,040 --> 00:08:33,360 Speaker 2: think ultra thin is gonna boost sales right. 151 00:08:33,520 --> 00:08:37,040 Speaker 7: Well, so more than the foam factor. To me, what's 152 00:08:37,240 --> 00:08:41,559 Speaker 7: really important here is the impact of tariffs and what 153 00:08:41,679 --> 00:08:45,760 Speaker 7: goes on, you know, with the China exposure, because Apple 154 00:08:45,920 --> 00:08:51,120 Speaker 7: supply chain is still predominantly in China, and even though 155 00:08:51,120 --> 00:08:53,640 Speaker 7: they have you know, moved some of their manufacturing and 156 00:08:53,679 --> 00:08:58,559 Speaker 7: assembly to India and wait other locations. If there is 157 00:08:58,679 --> 00:09:02,040 Speaker 7: you know, universal tariffs and that's the proposal right with 158 00:09:02,200 --> 00:09:07,000 Speaker 7: China and Canada and Mexico, that will impact Apple and 159 00:09:07,240 --> 00:09:11,920 Speaker 7: you know, anybody who gets parts or products of product 160 00:09:11,920 --> 00:09:15,240 Speaker 7: components there. So clearly that is a big risk with 161 00:09:15,840 --> 00:09:18,320 Speaker 7: Apple and given its muted top line route and the 162 00:09:18,400 --> 00:09:21,440 Speaker 7: other factor I would throw in there is the whole 163 00:09:21,840 --> 00:09:25,320 Speaker 7: Google Chrome decision because one of the remedies that Google 164 00:09:25,360 --> 00:09:29,160 Speaker 7: has proposed is there shouldn't be any contracts, you know, 165 00:09:29,280 --> 00:09:32,080 Speaker 7: in terms of them being the default operating system on 166 00:09:32,160 --> 00:09:36,679 Speaker 7: iOS devices. And remember Google pays Apple over twenty billion 167 00:09:36,760 --> 00:09:39,480 Speaker 7: dollars a year to be the default operating system, so 168 00:09:39,800 --> 00:09:42,480 Speaker 7: all that revenue is in play here in terms of 169 00:09:42,480 --> 00:09:45,240 Speaker 7: how it could impact Apple services revenue for that matter. 170 00:09:45,920 --> 00:09:48,880 Speaker 2: Well, let's talk about Microsoft. You brought that up with 171 00:09:49,200 --> 00:09:53,800 Speaker 2: the stargate OpenAI. Microsoft has invested about seven hundred and 172 00:09:53,800 --> 00:09:56,800 Speaker 2: fifty million into Ai. They've pulled back since then. But 173 00:09:57,760 --> 00:10:01,040 Speaker 2: who else are the winners? We know, we know japan 174 00:10:01,120 --> 00:10:04,920 Speaker 2: Soft Bank. Open Ai is privately held company. But who 175 00:10:04,960 --> 00:10:07,960 Speaker 2: else among these big tech companies will be the beneficiary 176 00:10:08,000 --> 00:10:08,240 Speaker 2: of this? 177 00:10:08,559 --> 00:10:12,200 Speaker 7: I mean to me, you know, the suppliers, the Nvidia 178 00:10:12,280 --> 00:10:17,200 Speaker 7: and anybody who supplies to the data center kind of 179 00:10:17,440 --> 00:10:20,720 Speaker 7: build out wins here. And that's where you know, for 180 00:10:21,000 --> 00:10:25,600 Speaker 7: foundational model companies, it actually increases the pressure on a 181 00:10:25,600 --> 00:10:29,959 Speaker 7: Google or a Meta or Anthropic to increase their capex 182 00:10:30,000 --> 00:10:33,720 Speaker 7: because guess what, open ai has more compute available now 183 00:10:33,840 --> 00:10:37,400 Speaker 7: for training their large agrid models for inferencing. So that 184 00:10:37,600 --> 00:10:40,760 Speaker 7: kind of creates an advantage for open Ai Microsoft. Microsoft 185 00:10:40,760 --> 00:10:44,000 Speaker 7: has already told us they generate about ten billion in 186 00:10:44,200 --> 00:10:47,840 Speaker 7: cloud revenue from AI workloads, So if they have more 187 00:10:47,880 --> 00:10:52,439 Speaker 7: compute capacity through Oracle, and remember part of that open 188 00:10:52,480 --> 00:10:56,520 Speaker 7: ai revenue flows through Microsoft because of the you know, 189 00:10:56,559 --> 00:11:00,760 Speaker 7: the agreement they have, and so Microsoft clearly is a beneficiary. 190 00:11:00,840 --> 00:11:04,200 Speaker 7: Even though this is not being built on their cloud. 191 00:11:04,200 --> 00:11:07,360 Speaker 7: It's on Oracle Cloud. So I think that's where all 192 00:11:07,400 --> 00:11:10,640 Speaker 7: the other players on the LM and cloud side are 193 00:11:10,720 --> 00:11:14,360 Speaker 7: somewhat excluded here. And and you know, at least the 194 00:11:14,400 --> 00:11:18,080 Speaker 7: project target seems to have picked the companies that are involved, 195 00:11:18,440 --> 00:11:20,240 Speaker 7: and you know they are the direct beneficiaries. 196 00:11:20,800 --> 00:11:23,400 Speaker 2: Would you consider Meta being excluded here? 197 00:11:23,600 --> 00:11:25,840 Speaker 7: Absolutely? I mean there was no mention. 198 00:11:25,920 --> 00:11:28,400 Speaker 2: No mention at all. We've heard of you know, Nvidia 199 00:11:28,440 --> 00:11:31,480 Speaker 2: obviously a beneficiary, but yeah, I have not heard for 200 00:11:31,640 --> 00:11:33,640 Speaker 2: a company that big and Meta. 201 00:11:33,760 --> 00:11:37,760 Speaker 7: Look, it's trying to develop its own hardware. They're doubling 202 00:11:37,840 --> 00:11:41,520 Speaker 7: down when it comes to the ar glasses. The ray 203 00:11:41,520 --> 00:11:44,840 Speaker 7: Bang glasses has been a success, but they really are 204 00:11:44,920 --> 00:11:47,520 Speaker 7: going all in when it comes to developing their own 205 00:11:47,559 --> 00:11:51,520 Speaker 7: hardware to compete with Apple. Now we know Reality Labs 206 00:11:51,559 --> 00:11:54,559 Speaker 7: will end up losing about twenty billion dollars in twenty 207 00:11:54,640 --> 00:11:57,200 Speaker 7: twenty five, So whether it's going to be a creative 208 00:11:57,200 --> 00:11:59,920 Speaker 7: to EPs, time will tell, but not in the near 209 00:12:00,400 --> 00:12:02,880 Speaker 7: and that's I think something they have to be mindful of, 210 00:12:03,040 --> 00:12:07,120 Speaker 7: given they're investing more in Capex for the GPU compute 211 00:12:07,160 --> 00:12:09,440 Speaker 7: and now they are really doubling down in terms of 212 00:12:09,480 --> 00:12:11,640 Speaker 7: the you know the glasses hardware. 213 00:12:11,480 --> 00:12:13,800 Speaker 2: They'd have to sell a lot of smart watches and earbuds. 214 00:12:13,840 --> 00:12:16,959 Speaker 2: Coming up well our thanks to mandeep Seeing Bloomberg Intelligence 215 00:12:17,000 --> 00:12:20,480 Speaker 2: senior tech industry analyst, and coming up on Bloomberg day 216 00:12:20,480 --> 00:12:22,520 Speaker 2: Break weekend, we'll look at how the European Central Bank 217 00:12:22,559 --> 00:12:26,360 Speaker 2: will negotiate the new world Order. I'm Tom Busby and 218 00:12:26,440 --> 00:12:40,000 Speaker 2: this is Bloomberg. This is Bloomberg day Break weekend, our 219 00:12:40,000 --> 00:12:42,240 Speaker 2: global look ahead at the top stories for investors in 220 00:12:42,280 --> 00:12:45,079 Speaker 2: the coming week. I'm Tom Busby in New York. Up 221 00:12:45,160 --> 00:12:47,040 Speaker 2: later in our program, we'll look ahead to a key 222 00:12:47,080 --> 00:12:51,559 Speaker 2: inflation measure coming out of Australia. But first, Europe's policymakers 223 00:12:51,640 --> 00:12:53,959 Speaker 2: meet for the first time this year. In the coming days. 224 00:12:54,000 --> 00:12:57,880 Speaker 2: They're expected to cut interest rates again as inflation stabilizes 225 00:12:57,960 --> 00:12:59,360 Speaker 2: right around the two percent target. 226 00:12:59,679 --> 00:13:00,160 Speaker 8: For more. 227 00:13:00,240 --> 00:13:02,200 Speaker 2: Let's go to London and bring in Bloomberg day Break 228 00:13:02,200 --> 00:13:04,160 Speaker 2: europ Banker Caroline. 229 00:13:03,600 --> 00:13:07,120 Speaker 4: Hepgar Tom EU inflation is on track to hit its 230 00:13:07,160 --> 00:13:10,120 Speaker 4: two percent target in the coming months, clearing the way 231 00:13:10,200 --> 00:13:13,680 Speaker 4: for cuts to borrowing costs and building on the four 232 00:13:13,880 --> 00:13:17,000 Speaker 4: rate reductions we saw in twenty twenty four. But with 233 00:13:17,120 --> 00:13:19,640 Speaker 4: a new occupant in the White House and threats of 234 00:13:19,720 --> 00:13:25,359 Speaker 4: punitive tariffs swirling. Twenty twenty five's European Central Bank trajectory 235 00:13:25,720 --> 00:13:28,840 Speaker 4: is far from decided. The Bank's president, Christina gard has 236 00:13:28,840 --> 00:13:32,439 Speaker 4: made it clear that policymakers will continue along their gradual 237 00:13:32,559 --> 00:13:37,440 Speaker 4: path irrespective of US economic policy. Officials from across the 238 00:13:37,480 --> 00:13:41,840 Speaker 4: hawk doves spectrum have signaled openness to further moves after 239 00:13:41,960 --> 00:13:46,599 Speaker 4: January in Europe, although of course without pre committing twenty cuts. 240 00:13:46,679 --> 00:13:49,480 Speaker 4: Interest rates have been a hot topic at this year's 241 00:13:49,520 --> 00:13:52,840 Speaker 4: meeting of the World Economic Forum in Davos, where Bloomberg's 242 00:13:52,880 --> 00:13:56,080 Speaker 4: Jumana Bissecci has been speaking to a panel of experts 243 00:13:56,120 --> 00:14:00,000 Speaker 4: about their predictions for central bank policy. In twenty twenty five. 244 00:14:00,480 --> 00:14:02,960 Speaker 4: She discussed what is to come with the French Central 245 00:14:03,040 --> 00:14:07,360 Speaker 4: Bank governor Fanceva veilro De Gallo, State Street CEO Ron o'hanley, 246 00:14:07,480 --> 00:14:12,240 Speaker 4: the economics professor Isabella Webber from the University of Massachusetts Amherst, 247 00:14:12,520 --> 00:14:16,480 Speaker 4: and Nikolai Tangan, who is the CEO of Nahas Bank 248 00:14:16,600 --> 00:14:17,720 Speaker 4: Investment Management. 249 00:14:18,040 --> 00:14:21,760 Speaker 3: Some words about inflation and I will keep the European perspective, 250 00:14:21,960 --> 00:14:26,400 Speaker 3: but we have been collectively including the fair successful against 251 00:14:26,400 --> 00:14:29,720 Speaker 3: inflation and if I take to European figures, we were 252 00:14:29,840 --> 00:14:34,640 Speaker 3: to peak of more than ten percent October twenty two. 253 00:14:34,680 --> 00:14:36,960 Speaker 3: We are now two point four and we expect for 254 00:14:37,400 --> 00:14:39,920 Speaker 3: this year as an average two point one. So more 255 00:14:40,000 --> 00:14:46,320 Speaker 3: or less on target for the effects of the Trumps 256 00:14:46,360 --> 00:14:52,960 Speaker 3: administration is probably too early to tell. We could expect, 257 00:14:52,960 --> 00:14:56,680 Speaker 3: but I said very conciously this program to be to 258 00:14:56,800 --> 00:15:01,960 Speaker 3: have inflationary effects in the US future tariff's fiscal expansions, 259 00:15:02,080 --> 00:15:06,320 Speaker 3: et cetera. But to be seen on the European side, 260 00:15:06,560 --> 00:15:11,320 Speaker 3: I don't think that the inflationary effect will be that significant, 261 00:15:11,640 --> 00:15:16,760 Speaker 3: so I would expect this dese inflation process to go 262 00:15:16,880 --> 00:15:21,520 Speaker 3: on and our victory against inflation to be final if 263 00:15:21,520 --> 00:15:25,480 Speaker 3: I may, because the tensions on the labor and good 264 00:15:25,560 --> 00:15:30,880 Speaker 3: market in Europe are much spooler obviously, which means if 265 00:15:30,920 --> 00:15:34,080 Speaker 3: I may somewhords about short term rates and long term rates, 266 00:15:34,120 --> 00:15:39,320 Speaker 3: and using the very important difference you introduced on the 267 00:15:39,360 --> 00:15:42,160 Speaker 3: short term rates, this is about monetary policy, so this 268 00:15:42,320 --> 00:15:47,680 Speaker 3: is our responsibility for the ECB. We were the earliest 269 00:15:47,720 --> 00:15:53,400 Speaker 3: one to cut last June. We are now the lowest one. 270 00:15:53,560 --> 00:15:56,400 Speaker 3: We are three percent, while the FARED and the Bank 271 00:15:56,480 --> 00:16:01,200 Speaker 3: of England are above four percent, and I would say 272 00:16:01,240 --> 00:16:04,640 Speaker 3: that for the quarters to come, probably our task is 273 00:16:04,680 --> 00:16:09,440 Speaker 3: the simplest, also due to the fact that we are 274 00:16:10,160 --> 00:16:14,080 Speaker 3: vigilant but confident on this inflation, as I said, and 275 00:16:14,160 --> 00:16:17,240 Speaker 3: we are still quite far of the neutral rate, which 276 00:16:17,320 --> 00:16:22,520 Speaker 3: is probably estimated to be around two percent so seen 277 00:16:22,600 --> 00:16:25,680 Speaker 3: from today, but it will be data to even to 278 00:16:25,800 --> 00:16:31,120 Speaker 3: expect our policy rate to be around two percent by 279 00:16:31,200 --> 00:16:36,280 Speaker 3: next time is a plausible scenario which could mean a decaupling. 280 00:16:36,480 --> 00:16:39,960 Speaker 3: Let us be clear, between EASYB and FED, the decaupling 281 00:16:40,920 --> 00:16:43,920 Speaker 3: is not an issue. Both of us are independent on 282 00:16:43,960 --> 00:16:47,400 Speaker 3: both sides of the Atlantic. The question of long term 283 00:16:47,440 --> 00:16:48,680 Speaker 3: interest rates, so we'll. 284 00:16:48,520 --> 00:16:51,760 Speaker 4: See next summer the news person. That means in mean 285 00:16:51,880 --> 00:16:54,120 Speaker 4: summer of twenty twenty five or summer of twenty twenty six. 286 00:16:54,160 --> 00:16:54,720 Speaker 4: The market is. 287 00:16:56,680 --> 00:17:01,920 Speaker 3: Story from my English ambiguity, because this summer twenty five, 288 00:17:01,960 --> 00:17:02,320 Speaker 3: so one. 289 00:17:02,240 --> 00:17:04,640 Speaker 7: Hundred basis points cut by the midsummer. 290 00:17:04,800 --> 00:17:08,040 Speaker 3: We will see again. It's that a written I'm a 291 00:17:08,119 --> 00:17:12,119 Speaker 3: pragmat testing, you are a journalist. I'm a central banker. 292 00:17:14,119 --> 00:17:17,080 Speaker 3: But no on long term, on long term interest rates, 293 00:17:17,080 --> 00:17:20,960 Speaker 3: this is a different story here. There are belovers. Obviously, 294 00:17:22,680 --> 00:17:26,120 Speaker 3: there is also a very significant difference of levels. If 295 00:17:26,119 --> 00:17:28,879 Speaker 3: you look at the ten year interest rates, it was 296 00:17:28,960 --> 00:17:31,680 Speaker 3: yesterday about two point five in Germany and four point 297 00:17:31,720 --> 00:17:35,399 Speaker 3: six in the US. But there is some kind of 298 00:17:35,520 --> 00:17:39,280 Speaker 3: core movement or core rise in the last month. It's 299 00:17:39,280 --> 00:17:42,879 Speaker 3: a partial core rise. But what explained this rise in 300 00:17:42,960 --> 00:17:47,200 Speaker 3: the US perhaps a technical explanation which is important. As 301 00:17:47,200 --> 00:17:49,359 Speaker 3: you know, when you look at long term interest rates, 302 00:17:49,440 --> 00:17:54,439 Speaker 3: you can have two explanations. You can have monetary policy expectations, 303 00:17:55,000 --> 00:17:59,800 Speaker 3: so the succession of short term interest rates forwarded, and 304 00:18:00,040 --> 00:18:05,119 Speaker 3: then you have the term premier. What increased in the 305 00:18:05,200 --> 00:18:09,920 Speaker 3: last four months is the term premier and this reflect 306 00:18:10,119 --> 00:18:16,200 Speaker 3: increase uncertainty. It's about inflation fears, it's about two lax 307 00:18:16,480 --> 00:18:22,440 Speaker 3: fiscal policy starting with the US, and it's about global uncertainty. 308 00:18:23,320 --> 00:18:25,720 Speaker 3: To say it with other words, and I will conclude 309 00:18:25,720 --> 00:18:28,359 Speaker 3: with that, but this is a very important point on 310 00:18:28,800 --> 00:18:32,679 Speaker 3: the direction of interest rate. There is a risk that 311 00:18:33,200 --> 00:18:39,480 Speaker 3: the benefits of this inflation and monetary easing is weighted 312 00:18:39,960 --> 00:18:47,480 Speaker 3: or lost by increase uncertainty, economic fragmentation and a two 313 00:18:47,560 --> 00:18:51,000 Speaker 3: lax fiscal policy, or to say it in other words, 314 00:18:51,880 --> 00:18:56,560 Speaker 3: an economic policy in order to be efficient, including for growth, 315 00:18:56,960 --> 00:19:00,840 Speaker 3: must be consistent and this is a very important for 316 00:19:01,000 --> 00:19:02,360 Speaker 3: both sides of the Atlantic. 317 00:19:02,840 --> 00:19:06,440 Speaker 4: That was Blomberg's uman and bestually hosting a panel entitled 318 00:19:06,760 --> 00:19:10,040 Speaker 4: where interest Rates will Go at this year's meeting of 319 00:19:10,080 --> 00:19:13,760 Speaker 4: the World Economic Forum in Davos. So how will the 320 00:19:13,880 --> 00:19:18,640 Speaker 4: shift in international relations shake up the ECB's plans. I've 321 00:19:18,680 --> 00:19:23,120 Speaker 4: been speaking to Bloomberg's ECB reporter Janna Randau, asking her 322 00:19:23,280 --> 00:19:27,360 Speaker 4: how much of a factor Trumpomics will be in ECB 323 00:19:27,560 --> 00:19:29,080 Speaker 4: policymaking going forwards. 324 00:19:30,040 --> 00:19:34,640 Speaker 9: Well, frankly, it depends entirely on how it actually affects 325 00:19:34,680 --> 00:19:40,639 Speaker 9: the era's an economy. We've learned already that election campaigning 326 00:19:40,800 --> 00:19:45,480 Speaker 9: isn't governing and isn't running a government. So we'll we'll 327 00:19:45,520 --> 00:19:48,480 Speaker 9: see how much of the threats that he's made over 328 00:19:48,520 --> 00:19:53,800 Speaker 9: the past month's you know, running for office, how much 329 00:19:53,800 --> 00:19:58,520 Speaker 9: of that will actually materialize. On tariffs, we know the 330 00:19:58,560 --> 00:20:03,879 Speaker 9: sentiment seems to be bad for growth unclear you know 331 00:20:03,920 --> 00:20:07,080 Speaker 9: what it will do to inflation. So there's there's a 332 00:20:07,080 --> 00:20:11,199 Speaker 9: lot of uncertainty and that is surely going to stick around, 333 00:20:11,960 --> 00:20:14,040 Speaker 9: which of course is never good for an economy that's 334 00:20:14,080 --> 00:20:18,080 Speaker 9: already struggling, Which makes you know, the UCB stands for 335 00:20:18,560 --> 00:20:22,080 Speaker 9: a data dependent meeting by meeting approach all you know, 336 00:20:22,240 --> 00:20:23,240 Speaker 9: all the more reasonable. 337 00:20:23,680 --> 00:20:27,639 Speaker 4: Yes, absolutely, President Chum saying only recently that the EU 338 00:20:27,720 --> 00:20:31,439 Speaker 4: could be in for tariffs given how badly as he 339 00:20:31,600 --> 00:20:35,480 Speaker 4: sees it, it treats the United States. So in terms 340 00:20:35,520 --> 00:20:40,000 Speaker 4: of the punitive measures, what economists think that it risks 341 00:20:40,040 --> 00:20:42,800 Speaker 4: in terms of the hit to growth versus a hit 342 00:20:42,840 --> 00:20:44,200 Speaker 4: to inflation. 343 00:20:44,720 --> 00:20:49,040 Speaker 9: Yeah, so so on growth, it seems pretty clear that 344 00:20:49,840 --> 00:20:54,040 Speaker 9: the impact will be negative. What's more interesting is to 345 00:20:54,080 --> 00:20:57,359 Speaker 9: look at inflation, just because there are different forces at play. 346 00:20:58,440 --> 00:21:01,320 Speaker 9: Of course, you know, you're raised tears. They will push 347 00:21:01,400 --> 00:21:04,159 Speaker 9: up prices and goods we import from the US. But 348 00:21:04,800 --> 00:21:08,240 Speaker 9: the EU of course is not the only region, you know, 349 00:21:08,880 --> 00:21:12,960 Speaker 9: facing facing those threats and facing tariffs. So if China, 350 00:21:13,040 --> 00:21:17,240 Speaker 9: for example, becomes part of the part of the game, 351 00:21:17,760 --> 00:21:21,879 Speaker 9: then we might see a redirection of Chinese exports that 352 00:21:22,080 --> 00:21:26,200 Speaker 9: were once going to the US flooding into Europe. And 353 00:21:26,400 --> 00:21:31,200 Speaker 9: we of course know that China is already facing deflationary 354 00:21:31,320 --> 00:21:36,480 Speaker 9: risks that that producer prices there have have declined and 355 00:21:36,520 --> 00:21:40,159 Speaker 9: have been weak, so that might actually bring some deflationary 356 00:21:40,200 --> 00:21:44,800 Speaker 9: pressures into the Eurozone as well. So the balance is 357 00:21:44,840 --> 00:21:48,240 Speaker 9: going to be interesting. And from where I am and 358 00:21:48,400 --> 00:21:51,000 Speaker 9: from where policymakers are at the moment, it's next to 359 00:21:51,080 --> 00:21:53,040 Speaker 9: impossible to tell. 360 00:21:53,800 --> 00:21:57,679 Speaker 4: Yes, But traders are pricing in cuts for January and 361 00:21:57,880 --> 00:22:01,520 Speaker 4: March solid of those and what is the picture beyond them? 362 00:22:01,640 --> 00:22:07,399 Speaker 9: Those meetings, Yeah, January March, from from what we've heard 363 00:22:07,480 --> 00:22:10,560 Speaker 9: over the past couple of days, seem to be almost 364 00:22:10,920 --> 00:22:16,000 Speaker 9: a done deal. Even hawks like a Dutch governor a 365 00:22:16,080 --> 00:22:20,240 Speaker 9: class not said he's fine with with you know, those 366 00:22:20,359 --> 00:22:24,240 Speaker 9: those two meetings being being on the table for for 367 00:22:24,440 --> 00:22:27,200 Speaker 9: rate cuts. After that it gets a lot more interesting, 368 00:22:28,320 --> 00:22:32,280 Speaker 9: just because we're expecting for services to reprice. Don't forget 369 00:22:32,320 --> 00:22:35,919 Speaker 9: services prices are still running at a four percent clip, 370 00:22:36,280 --> 00:22:39,880 Speaker 9: so twice the ECB's target. We we should have more 371 00:22:39,920 --> 00:22:45,919 Speaker 9: information by March about or by April about Trump's policies. 372 00:22:46,240 --> 00:22:49,000 Speaker 9: We should be a bit smarter on how much of 373 00:22:49,040 --> 00:22:53,719 Speaker 9: a spring revival the economy can can produce. Uh and 374 00:22:53,760 --> 00:22:55,879 Speaker 9: so what we're seeing in markets, and also when you 375 00:22:55,920 --> 00:22:59,440 Speaker 9: ask us some speak to some economists that April is 376 00:22:59,680 --> 00:23:01,760 Speaker 9: is kind of a bit of a wild card. So 377 00:23:01,800 --> 00:23:04,919 Speaker 9: the market is currently pricing three cards through June fourth. 378 00:23:05,280 --> 00:23:08,200 Speaker 9: By the end of the year and and a lot 379 00:23:08,280 --> 00:23:11,280 Speaker 9: will depend on the forecast that will come out, on 380 00:23:11,320 --> 00:23:13,800 Speaker 9: the information that we receive until. 381 00:23:13,520 --> 00:23:17,720 Speaker 4: Then, how well has the ECB done, how well has 382 00:23:17,760 --> 00:23:22,119 Speaker 4: Europe done to get inflation, you know, back down towards 383 00:23:22,119 --> 00:23:26,120 Speaker 4: the two percent target you mentioned services inflation, So on. 384 00:23:26,080 --> 00:23:28,880 Speaker 9: The headline rate, we're not doing badly. We are at 385 00:23:28,920 --> 00:23:31,520 Speaker 9: two point four percent right now. It was a bit 386 00:23:31,520 --> 00:23:34,600 Speaker 9: of an optic at the end of last year, but 387 00:23:34,680 --> 00:23:38,119 Speaker 9: that came as expected and policymakers said, don't be you know, 388 00:23:38,240 --> 00:23:41,879 Speaker 9: don't be upset about that too much. The UCB forecasts 389 00:23:41,920 --> 00:23:45,520 Speaker 9: show inflation reaching target this year and then kind of 390 00:23:45,520 --> 00:23:49,399 Speaker 9: hovering around it. So they are reasonably confident that the 391 00:23:49,680 --> 00:23:52,600 Speaker 9: that the target is inside. They haven't declared victory yet, 392 00:23:52,640 --> 00:23:55,080 Speaker 9: and that's partly to do with those services prices, with 393 00:23:55,119 --> 00:23:59,360 Speaker 9: domestic inflation, with core inflation, which is still a bit sticky. 394 00:24:00,280 --> 00:24:03,320 Speaker 9: They expect that to change over the coming months, just because, 395 00:24:03,600 --> 00:24:06,760 Speaker 9: for example, if you think of insurance prices, they get 396 00:24:06,840 --> 00:24:09,720 Speaker 9: you know, contracts get repriced once a year, so a 397 00:24:09,760 --> 00:24:13,600 Speaker 9: lot of movement is expected there in the next weeks 398 00:24:13,720 --> 00:24:17,760 Speaker 9: and probably months, But that really needs to happen, and 399 00:24:17,840 --> 00:24:20,480 Speaker 9: if that doesn't happen, and that's why we talk about April. 400 00:24:21,119 --> 00:24:23,760 Speaker 9: That will be the moment when we know whether those 401 00:24:23,840 --> 00:24:27,760 Speaker 9: expectations that the last bastion, if you want, of really 402 00:24:27,800 --> 00:24:31,359 Speaker 9: sticky price pressures is falling, whether that is happening, and 403 00:24:31,440 --> 00:24:34,399 Speaker 9: then they might have to If that doesn't, then they 404 00:24:34,480 --> 00:24:35,920 Speaker 9: might have to think again. 405 00:24:36,640 --> 00:24:40,879 Speaker 4: Blueberg zion a round looking ahead to the ECB rate decision, 406 00:24:41,040 --> 00:24:44,600 Speaker 4: which we expect of course on the thirtieth of January. 407 00:24:44,680 --> 00:24:47,640 Speaker 4: We will have full coverage of the first rate decision 408 00:24:47,720 --> 00:24:51,000 Speaker 4: of this year. Here on Bloomberg. I'm caring Hepco in London. 409 00:24:51,080 --> 00:24:53,000 Speaker 4: You can catch us every week day morning for Bloomberg 410 00:24:53,040 --> 00:24:55,280 Speaker 4: day Break. You up beginning at six am in London. 411 00:24:55,280 --> 00:24:56,600 Speaker 4: That's one am on Wall Street. 412 00:24:56,600 --> 00:24:59,920 Speaker 2: Tom, thanks Caroline, and coming up on Bloomberg day Break Weekend, 413 00:25:00,000 --> 00:25:04,240 Speaker 2: we'll look ahead to next week's read on Australian consumer prices. 414 00:25:04,520 --> 00:25:19,400 Speaker 2: I'm Tom Busby and this is Bloomberg. This is Bloomberg 415 00:25:19,440 --> 00:25:21,480 Speaker 2: day Break Weekend, our global look ahead at the top 416 00:25:21,520 --> 00:25:24,280 Speaker 2: stories for investors in the coming week. I'm Tom Busby 417 00:25:24,280 --> 00:25:26,920 Speaker 2: in New York. The Reserve Bank of Australia doesn't meet 418 00:25:26,960 --> 00:25:29,440 Speaker 2: until next month, but a key metric on inflation is 419 00:25:29,480 --> 00:25:32,840 Speaker 2: out this week and it may sway policymakers in Sydney 420 00:25:33,119 --> 00:25:35,600 Speaker 2: on how they'll proceed. For more on what to watch 421 00:25:35,640 --> 00:25:39,159 Speaker 2: from next week's read on Australian consumer prices, let's get 422 00:25:39,200 --> 00:25:42,320 Speaker 2: to the host of the Daybreak Asia podcast, Doug Krisner. 423 00:25:42,920 --> 00:25:45,119 Speaker 5: Tom. A number of the world central banks are in 424 00:25:45,160 --> 00:25:49,440 Speaker 5: the midst of easing cycles, although recently many markets have 425 00:25:49,520 --> 00:25:52,679 Speaker 5: been forced to adjust expectations on the pace of rate cuts. 426 00:25:53,040 --> 00:25:56,920 Speaker 5: That's because of concern over inflation being stubborn. It's certainly 427 00:25:56,960 --> 00:26:00,520 Speaker 5: true where the Fed is concerned. Interestingly, the Serve Bank 428 00:26:00,520 --> 00:26:03,560 Speaker 5: of Australia has yet to pivot to cutting intrast rates. 429 00:26:03,640 --> 00:26:07,119 Speaker 5: Let's explore why joining us now is James McIntyre. He 430 00:26:07,160 --> 00:26:10,679 Speaker 5: is Bloomberg economist with a focus on Australia and New Zealand. 431 00:26:11,359 --> 00:26:15,160 Speaker 5: James joining us from our studios in Sydney. We're expecting 432 00:26:15,200 --> 00:26:18,000 Speaker 5: the report on Australian consumer prices in the week ahead. 433 00:26:18,040 --> 00:26:21,560 Speaker 5: We can talk about the various inputs into retail inflation 434 00:26:21,640 --> 00:26:24,119 Speaker 5: in a moment, but James, can you begin by giving 435 00:26:24,160 --> 00:26:27,000 Speaker 5: me an overview on the health of the Australian economy. 436 00:26:27,520 --> 00:26:29,960 Speaker 8: Yeah, well, thank you again for having me always great 437 00:26:29,960 --> 00:26:33,800 Speaker 8: to be with you, dog. So Australia's economy, where as 438 00:26:33,800 --> 00:26:37,280 Speaker 8: we look forward for twenty twenty five, we're looking for 439 00:26:37,320 --> 00:26:39,440 Speaker 8: a bit of a shift from how things have gone 440 00:26:39,840 --> 00:26:43,280 Speaker 8: in twenty twenty four. So the economy has been quite weak. 441 00:26:43,600 --> 00:26:46,359 Speaker 8: Now you might not see that sometimes of Australia's GDP 442 00:26:46,520 --> 00:26:49,919 Speaker 8: data and many Australian economic indicators, and that's because we 443 00:26:50,000 --> 00:26:53,760 Speaker 8: have this super strong population growth. So the population grew 444 00:26:53,800 --> 00:26:56,520 Speaker 8: by about two point four percent, but GDP was only 445 00:26:56,640 --> 00:26:59,560 Speaker 8: zero point eight so per person, the economy is going backwards. 446 00:26:59,560 --> 00:27:03,280 Speaker 8: It's it's a really bad outcome or in terms of 447 00:27:03,320 --> 00:27:05,840 Speaker 8: weakness for the economy, and you can see it especially 448 00:27:05,880 --> 00:27:10,159 Speaker 8: around the consumer side of the story and interest rates 449 00:27:10,640 --> 00:27:12,719 Speaker 8: being high for a very very long time. It's one 450 00:27:12,720 --> 00:27:15,360 Speaker 8: of the longest holds that the Reserve Bank of Australia 451 00:27:15,440 --> 00:27:18,320 Speaker 8: has had in the inflation targeting era over the last 452 00:27:18,920 --> 00:27:21,480 Speaker 8: thirty years or so. And what we've got there is 453 00:27:21,520 --> 00:27:24,160 Speaker 8: we've got an economy that's been very weak and we're 454 00:27:24,200 --> 00:27:27,520 Speaker 8: looking for it to pivot. We're pivoting from public demand, 455 00:27:27,600 --> 00:27:29,560 Speaker 8: which has been a key driver of growth with the 456 00:27:29,560 --> 00:27:32,640 Speaker 8: private sector being weak, to consumers stepping up this year 457 00:27:32,640 --> 00:27:34,639 Speaker 8: but they're not really going to do that unless the 458 00:27:34,720 --> 00:27:37,960 Speaker 8: RBA starts to play ball and begins to join the 459 00:27:38,040 --> 00:27:38,880 Speaker 8: rate cup parade. 460 00:27:38,920 --> 00:27:41,399 Speaker 5: So when I think of household spending, there is a 461 00:27:41,400 --> 00:27:44,120 Speaker 5: connection obviously to what's happening in the labor market. How 462 00:27:44,200 --> 00:27:46,359 Speaker 5: was the Australian jobs market right now? 463 00:27:46,480 --> 00:27:49,679 Speaker 8: Well, despite the growth being so terrible, the labor market's 464 00:27:49,760 --> 00:27:53,679 Speaker 8: really surprised on the upside. So we've had bumper jobs 465 00:27:53,680 --> 00:27:57,160 Speaker 8: growth and the unemployment rate has gone pretty much nowhere 466 00:27:57,760 --> 00:28:00,840 Speaker 8: over the course of the last twelve months. Been expecting 467 00:28:01,560 --> 00:28:05,639 Speaker 8: we had the RBA had everyone has been caught on 468 00:28:05,720 --> 00:28:08,959 Speaker 8: the hop by the strength of jobs growth that's been 469 00:28:09,000 --> 00:28:09,400 Speaker 8: going on. 470 00:28:09,640 --> 00:28:09,800 Speaker 10: Now. 471 00:28:09,840 --> 00:28:13,960 Speaker 8: Some of the public demand part or flavor of growth 472 00:28:13,960 --> 00:28:16,960 Speaker 8: in the economy or demand in the economy has been 473 00:28:17,000 --> 00:28:18,960 Speaker 8: helping that. And we look at sort of market sector 474 00:28:19,040 --> 00:28:21,639 Speaker 8: jobs and it's been weak. But nonetheless the labor market 475 00:28:21,680 --> 00:28:25,199 Speaker 8: has just remained rock solid. And that's one of the 476 00:28:25,200 --> 00:28:27,320 Speaker 8: things that if you're looking at it, you might kind 477 00:28:27,320 --> 00:28:30,760 Speaker 8: of go, well, is the RBA really really going to 478 00:28:30,840 --> 00:28:32,320 Speaker 8: cut with that backdrop there? 479 00:28:32,520 --> 00:28:34,960 Speaker 5: As I recall, one of the concerns on the part 480 00:28:35,000 --> 00:28:37,600 Speaker 5: of the RBA in the past had been the heat 481 00:28:37,640 --> 00:28:40,240 Speaker 5: in the real estate market. How is the housing market 482 00:28:40,320 --> 00:28:40,720 Speaker 5: right now? 483 00:28:41,040 --> 00:28:42,880 Speaker 8: Well, it depends where you sit. If you're in the 484 00:28:42,920 --> 00:28:47,640 Speaker 8: smaller capitals, people probably won't know the cities of Brisbane, 485 00:28:47,720 --> 00:28:50,760 Speaker 8: Perth and Adelaide. They're probably more familiar with Sydney and 486 00:28:50,800 --> 00:28:54,120 Speaker 8: Melbourne being the big Australian capital cities. Those smaller ones. 487 00:28:54,360 --> 00:28:57,840 Speaker 8: Property prices still quite affordable and they've been running and 488 00:28:57,960 --> 00:29:02,760 Speaker 8: running hard. But there's been a very different story. It's 489 00:29:02,840 --> 00:29:05,280 Speaker 8: not even there's no middle of the Goldilocks. It's hot 490 00:29:05,320 --> 00:29:09,200 Speaker 8: and cold. It's been quite cold and cooling in Sydney 491 00:29:09,240 --> 00:29:11,560 Speaker 8: and Melbourne over the last as we went into the 492 00:29:11,640 --> 00:29:15,040 Speaker 8: end of the year, with buyers sitting on their hands, 493 00:29:15,600 --> 00:29:19,840 Speaker 8: rate cuts hurting capacity to pay, and the very very 494 00:29:19,880 --> 00:29:23,640 Speaker 8: high mortgage interest rates. In Australia, we don't have fixed rates. 495 00:29:23,720 --> 00:29:27,520 Speaker 8: They're all variable floating rates off the RBA cash rates, 496 00:29:27,520 --> 00:29:29,560 Speaker 8: so it really packs a punch and it's really been 497 00:29:29,600 --> 00:29:32,600 Speaker 8: punching on those property markets in the big capital cities 498 00:29:32,760 --> 00:29:36,680 Speaker 8: and we've seen listings begin to rise, weak demand and 499 00:29:36,720 --> 00:29:40,280 Speaker 8: that's been a recipe for softening prices in those two 500 00:29:40,320 --> 00:29:43,640 Speaker 8: major capitals, which are really important for financial stability, for confidence, 501 00:29:43,640 --> 00:29:45,760 Speaker 8: for spending and probably are going to be what the 502 00:29:45,840 --> 00:29:46,920 Speaker 8: RBA cares about more. 503 00:29:47,160 --> 00:29:49,760 Speaker 5: I'm also curious about the knock on effect. What is 504 00:29:49,800 --> 00:29:52,560 Speaker 5: happening in China. Maybe there is a modest recovery that's 505 00:29:52,600 --> 00:29:55,280 Speaker 5: beginning to take hold. We may need a little bit 506 00:29:55,280 --> 00:29:57,080 Speaker 5: more in the way of data before we can make 507 00:29:57,080 --> 00:30:00,600 Speaker 5: that statement, but I'm trying to understand what's happened in 508 00:30:00,760 --> 00:30:03,920 Speaker 5: Australia as a function of what's going on in China 509 00:30:03,960 --> 00:30:07,120 Speaker 5: right now, particularly in regard to things like the mining industry. 510 00:30:07,600 --> 00:30:10,400 Speaker 8: Yeah, I think one of the key sort of takeaways 511 00:30:10,440 --> 00:30:12,360 Speaker 8: or linkages or things that we need to think about 512 00:30:12,360 --> 00:30:16,000 Speaker 8: when we're thinking about Australia and China is that key 513 00:30:16,040 --> 00:30:18,640 Speaker 8: benjmark is the iron ore price and it hasn't really 514 00:30:19,000 --> 00:30:22,960 Speaker 8: fallen away as much. And what we have seen is 515 00:30:23,080 --> 00:30:27,080 Speaker 8: that US dollar strength. So not just China, but if 516 00:30:27,080 --> 00:30:31,480 Speaker 8: we think about the international environment new Trump administration tariffs, 517 00:30:31,680 --> 00:30:34,600 Speaker 8: what is the global economic shakeup going to be? Well, 518 00:30:34,720 --> 00:30:37,760 Speaker 8: Australia already has the type of trade position with the 519 00:30:37,840 --> 00:30:41,000 Speaker 8: US that the Trump administration might like for others to see. 520 00:30:41,320 --> 00:30:43,200 Speaker 8: We run a big deficit with the US. We buy 521 00:30:43,240 --> 00:30:47,560 Speaker 8: far much much more than from the US than we 522 00:30:47,680 --> 00:30:51,320 Speaker 8: export to the US, so we're not likely to be 523 00:30:51,360 --> 00:30:56,400 Speaker 8: a tariff target. But Japan, China, these are Australia's major 524 00:30:56,560 --> 00:31:01,080 Speaker 8: export destinations. So any tariff impacts on those economies that 525 00:31:01,400 --> 00:31:05,360 Speaker 8: might soften potentially already weak economic outcomes when it comes 526 00:31:05,400 --> 00:31:07,560 Speaker 8: to China is going to be a key worry for US. 527 00:31:07,560 --> 00:31:09,360 Speaker 8: So have we seen it in the iron ore price? 528 00:31:09,840 --> 00:31:14,320 Speaker 8: Not yet. What policy makers in China and Japan do 529 00:31:14,480 --> 00:31:17,560 Speaker 8: and how they respond to any global economic shakeout is 530 00:31:17,600 --> 00:31:19,880 Speaker 8: really going to be one of the key important things 531 00:31:19,920 --> 00:31:21,920 Speaker 8: to watch over twenty twenty five For Australia. 532 00:31:22,000 --> 00:31:23,960 Speaker 5: I mentioned a moment ago that in the week ahead 533 00:31:24,000 --> 00:31:26,680 Speaker 5: we're going to be getting Australian consumer prices. When you 534 00:31:26,720 --> 00:31:30,680 Speaker 5: look at the inputs that go into calculating CPI, is 535 00:31:30,720 --> 00:31:33,440 Speaker 5: there any concern that something may come in a little 536 00:31:33,480 --> 00:31:34,360 Speaker 5: on the hard side. 537 00:31:34,680 --> 00:31:38,400 Speaker 8: Not especially we've been seeing what we've been seeing in 538 00:31:38,400 --> 00:31:43,040 Speaker 8: Australia over the CPI basket over the last little while 539 00:31:43,120 --> 00:31:46,520 Speaker 8: is the impact of some cost of living support measures 540 00:31:46,560 --> 00:31:50,440 Speaker 8: or subsidies from federal and state governments, and they've really 541 00:31:50,560 --> 00:31:53,240 Speaker 8: especially in that third quarter data. Australia has a monthly 542 00:31:53,280 --> 00:31:57,040 Speaker 8: inflation indicator, but the quarterly is the big deal. It's 543 00:31:57,080 --> 00:31:59,120 Speaker 8: the main game, and that's what we've got next week. 544 00:32:00,080 --> 00:32:03,360 Speaker 8: What the RBA will be really looking at that third 545 00:32:03,440 --> 00:32:08,560 Speaker 8: quarter data was very, very heavily suppressed from those subsidy impacts. 546 00:32:08,600 --> 00:32:11,400 Speaker 8: There'll be a little bit of that coming through. We 547 00:32:11,400 --> 00:32:17,000 Speaker 8: should also see the last of energy price declines coming 548 00:32:17,040 --> 00:32:20,640 Speaker 8: through in terms of fuel prices at the pump for motorists. 549 00:32:21,400 --> 00:32:24,800 Speaker 8: So that's the fourth quarter CPI. When we look ahead, though, 550 00:32:24,880 --> 00:32:26,960 Speaker 8: it's really going to be a question that the RBA's 551 00:32:27,480 --> 00:32:29,800 Speaker 8: going to be having to ask itself is is a 552 00:32:29,840 --> 00:32:32,600 Speaker 8: government and the federal government is facing an election of 553 00:32:32,640 --> 00:32:34,520 Speaker 8: the first half of this year. Are they going to 554 00:32:34,520 --> 00:32:37,240 Speaker 8: announce more subsidies in the next couple of months to 555 00:32:37,360 --> 00:32:39,959 Speaker 8: keep voters happy before they go to the polls. And 556 00:32:40,080 --> 00:32:44,040 Speaker 8: will the pickup that we've seen in domestic fuel prices 557 00:32:44,080 --> 00:32:46,280 Speaker 8: with a little bit of a lower Aussie dollar and 558 00:32:46,320 --> 00:32:48,560 Speaker 8: some improvement in that oil price starting to feed through 559 00:32:48,560 --> 00:32:50,840 Speaker 8: to the pump. These are going to be the kind 560 00:32:50,840 --> 00:32:53,240 Speaker 8: of questions that not necessarily from what the backward looking 561 00:32:53,280 --> 00:32:56,239 Speaker 8: data is showing, but as we look forward, those are 562 00:32:56,240 --> 00:32:57,920 Speaker 8: going to be the ones that the RBA is going 563 00:32:57,960 --> 00:33:00,080 Speaker 8: to be grappling with as to whether they feel comfortab 564 00:33:00,240 --> 00:33:03,239 Speaker 8: or not beginning to ease in February, or if they 565 00:33:03,240 --> 00:33:04,920 Speaker 8: want to see a little bit more data and maybe 566 00:33:04,920 --> 00:33:07,840 Speaker 8: see that labor market weakness finally beginning to show up 567 00:33:08,120 --> 00:33:10,080 Speaker 8: and deliver those cuts in April or May. 568 00:33:10,240 --> 00:33:12,600 Speaker 5: Hey, James, thank you so much for helping us understand 569 00:33:12,600 --> 00:33:15,560 Speaker 5: what's happening in the Australian economy as we look ahead 570 00:33:15,560 --> 00:33:19,240 Speaker 5: to this week's report on consumer prices. James McIntyre is 571 00:33:19,280 --> 00:33:23,040 Speaker 5: Bloomberg economist with a focus on Australia and New Zealand. 572 00:33:23,440 --> 00:33:26,360 Speaker 5: We moved to mainland China next. Donald Trump is wrapping 573 00:33:26,480 --> 00:33:28,400 Speaker 5: up his first week back at the White House and 574 00:33:28,480 --> 00:33:32,000 Speaker 5: we have seen numerous executive actions. He was expected to 575 00:33:32,040 --> 00:33:35,800 Speaker 5: pursue long threatened tariffs on day one, well not so, 576 00:33:36,160 --> 00:33:39,920 Speaker 5: although he has floated the idea of ten percent tariffs 577 00:33:39,920 --> 00:33:43,800 Speaker 5: against China, possibly going into effect on February first. I 578 00:33:43,880 --> 00:33:47,080 Speaker 5: spoke with Wa Chung, director of Asia Credit Research at 579 00:33:47,120 --> 00:33:51,160 Speaker 5: Alliance Bernstein, and we explored how US China trade relations 580 00:33:51,200 --> 00:33:55,040 Speaker 5: may shift and how that may play into markets. Unlike 581 00:33:55,080 --> 00:33:57,800 Speaker 5: the years of the first Trump term, China is now 582 00:33:58,200 --> 00:34:00,880 Speaker 5: struggling with a or weaker a economy. I think it's 583 00:34:00,920 --> 00:34:04,840 Speaker 5: fair to say, and given very weak domestic demand, the 584 00:34:04,920 --> 00:34:07,480 Speaker 5: economy we have seen has become a lot more reliant 585 00:34:07,480 --> 00:34:11,120 Speaker 5: on exports than it was during the first Trump trade war. 586 00:34:11,640 --> 00:34:15,520 Speaker 5: Are you concerned about the negative impact that tariffs might 587 00:34:15,560 --> 00:34:18,000 Speaker 5: have on the overall economy in China? 588 00:34:18,120 --> 00:34:22,400 Speaker 10: As you rarely pointed out US China religion has always 589 00:34:22,440 --> 00:34:25,880 Speaker 10: been a very important watch point for US has always 590 00:34:25,960 --> 00:34:30,640 Speaker 10: been a very important driver of how investors view this region. Right, 591 00:34:30,719 --> 00:34:34,239 Speaker 10: view Asia, and what we're see is that you know, 592 00:34:34,640 --> 00:34:38,680 Speaker 10: China's economic roles, it is indeed desalrating, but we do 593 00:34:38,760 --> 00:34:42,399 Speaker 10: want to point out that, you know, we really had 594 00:34:42,400 --> 00:34:46,560 Speaker 10: a policy pivot in September last year that shows that 595 00:34:46,760 --> 00:34:50,480 Speaker 10: China is really aware of the slowdown and will take 596 00:34:50,600 --> 00:34:54,799 Speaker 10: more forceful measures to address the slowdown. And also when 597 00:34:54,840 --> 00:34:58,400 Speaker 10: it comes to external pressures, right, I think with the 598 00:34:58,440 --> 00:35:01,239 Speaker 10: new administration in the US as what we are going 599 00:35:01,280 --> 00:35:05,040 Speaker 10: to have is an exhalation of tension i e. A 600 00:35:05,080 --> 00:35:08,960 Speaker 10: trade war in the form of higher terrorists for the region. 601 00:35:09,440 --> 00:35:14,319 Speaker 10: So the impact of US tariff will be greater on 602 00:35:14,440 --> 00:35:19,000 Speaker 10: China than to you know, other Asian economies. So that 603 00:35:19,120 --> 00:35:22,080 Speaker 10: is something we're going to be watching very very closely. 604 00:35:22,440 --> 00:35:25,040 Speaker 10: But you know, if you simply look at the number, right, 605 00:35:25,400 --> 00:35:31,200 Speaker 10: I think China actually successfully reduced the reliance on US 606 00:35:31,320 --> 00:35:34,840 Speaker 10: asport over the past over the past years, at least, 607 00:35:34,880 --> 00:35:36,719 Speaker 10: you know, from one point zero. 608 00:35:36,920 --> 00:35:39,719 Speaker 5: That is very true. But if you go back to 609 00:35:39,760 --> 00:35:42,280 Speaker 5: what we learned last week, GDP for all of twenty 610 00:35:42,360 --> 00:35:45,200 Speaker 5: twenty four was five percent. But what was really striking 611 00:35:45,239 --> 00:35:48,080 Speaker 5: about economic growth in China at the end of last year, 612 00:35:48,200 --> 00:35:50,319 Speaker 5: during the fourth quarter, I think the number was five 613 00:35:50,360 --> 00:35:55,000 Speaker 5: point four percent growth. So clearly many companies were concerned 614 00:35:55,080 --> 00:35:58,719 Speaker 5: about how tariffs might impact their business, and they were 615 00:35:58,719 --> 00:36:01,640 Speaker 5: trying to get product out of as sooner rather than later. 616 00:36:02,080 --> 00:36:04,719 Speaker 5: Do you expect economic growth to hold up now that 617 00:36:05,160 --> 00:36:08,360 Speaker 5: basically that event has subsided, We think it's. 618 00:36:08,320 --> 00:36:10,960 Speaker 10: Very important to engage with the companies to understand what 619 00:36:11,000 --> 00:36:14,200 Speaker 10: they are doing in order to assess the impact. First 620 00:36:14,200 --> 00:36:16,719 Speaker 10: of all, you know, you know, I think given the 621 00:36:16,760 --> 00:36:22,080 Speaker 10: fundamental headwinds to the China economy, to Chinese corporates, we 622 00:36:22,120 --> 00:36:24,719 Speaker 10: don't want to be too pessimistic, right. I think it's 623 00:36:24,719 --> 00:36:28,080 Speaker 10: important for us to have a very balanced view. As 624 00:36:28,160 --> 00:36:31,600 Speaker 10: you said, you know, the economic growth, it is slowing 625 00:36:31,680 --> 00:36:35,080 Speaker 10: down and you know, higher US tariff, it is the 626 00:36:35,120 --> 00:36:38,480 Speaker 10: fundamental headwinds. But a very important point we want to make, 627 00:36:38,520 --> 00:36:40,919 Speaker 10: we want the audience to know is, you know, higher 628 00:36:41,120 --> 00:36:47,719 Speaker 10: US tariff does not really necessarily translate into the worstening 629 00:36:48,040 --> 00:36:52,600 Speaker 10: of corporate quite fundamentals, because if you look at most 630 00:36:52,640 --> 00:36:55,120 Speaker 10: of the Asian corporates, most of the Chinese corporates, we 631 00:36:55,280 --> 00:36:58,440 Speaker 10: look at. A very important point I want to make 632 00:36:58,560 --> 00:37:01,839 Speaker 10: is that there are more even by domestic demand, right 633 00:37:02,280 --> 00:37:06,400 Speaker 10: or they have very little reliance on US or supply. 634 00:37:06,800 --> 00:37:10,120 Speaker 5: What are your expectations for additional stimulus from the government 635 00:37:10,160 --> 00:37:10,840 Speaker 5: in the year ahead. 636 00:37:11,280 --> 00:37:13,839 Speaker 10: That's a that's a very good question. I guess the 637 00:37:13,880 --> 00:37:16,640 Speaker 10: good news we have so far is that we really 638 00:37:16,760 --> 00:37:20,520 Speaker 10: had a policy pivot in September last year, right, you know, 639 00:37:21,040 --> 00:37:23,400 Speaker 10: it gives a lot of comfort to investors. That shows 640 00:37:23,440 --> 00:37:29,080 Speaker 10: that China is really you know, acknowledging that the economy 641 00:37:29,120 --> 00:37:31,480 Speaker 10: is slowing down, so we have to do something about it. 642 00:37:32,080 --> 00:37:35,440 Speaker 10: But what we hope to see more is you know, 643 00:37:35,560 --> 00:37:39,800 Speaker 10: more monetary policy a support and more physical policy support 644 00:37:40,080 --> 00:37:44,440 Speaker 10: more importantly, so these are really needed to support the economy, 645 00:37:44,480 --> 00:37:45,880 Speaker 10: to stabilize the economy. 646 00:37:46,320 --> 00:37:48,440 Speaker 5: Well, thank you very much for joining US that is 647 00:37:48,480 --> 00:37:52,239 Speaker 5: Wat Chung, director of Asia Credit Research at Alliance Bernstein, 648 00:37:52,600 --> 00:37:55,319 Speaker 5: joining us from Hong Kong. I'm Doug Christner. You can 649 00:37:55,360 --> 00:37:59,120 Speaker 5: catch us weekdays for the Daybreak Asia podcast. It's available 650 00:37:59,160 --> 00:38:02,160 Speaker 5: wherever you get your podcast. Tom. 651 00:38:02,200 --> 00:38:04,400 Speaker 2: Thanks Doug. And that does it for this edition of 652 00:38:04,440 --> 00:38:07,120 Speaker 2: Bloomberg day Break Weekend. Join us again Monday morning at 653 00:38:07,160 --> 00:38:09,280 Speaker 2: five am Wall Street Time for the latest on markets 654 00:38:09,280 --> 00:38:11,680 Speaker 2: overseas and the news you need to start your day. 655 00:38:12,160 --> 00:38:15,200 Speaker 2: I'm Tom Buzzby. Stay with us. Top stories and global 656 00:38:15,239 --> 00:38:17,399 Speaker 2: business headlines are coming up right now.