WEBVTT - Daybreak Weekend: Fed Meeting, ECB Decision, RBA Preview 0:00:00.240 --> 0:00:07.760 Bloomberg Audio Studios, Podcasts, radio news. 0:00:10.320 --> 0:00:12.600 This is Bloomberg day Break Weekend, our global look at 0:00:12.640 --> 0:00:14.880 the top stories in the coming week from our Daybreak 0:00:14.880 --> 0:00:17.360 anchors all around the world, and straight ahead on the program, 0:00:17.400 --> 0:00:20.560 we look ahead to this week's monetary policy decision from 0:00:20.600 --> 0:00:23.760 the Fed, plus a first batch of big tech earnings. 0:00:24.040 --> 0:00:25.320 I'm Tom Busby. 0:00:25.000 --> 0:00:25.560 In New York. 0:00:25.720 --> 0:00:28.120 I'm Caline Hecker here in London, where we're asking how 0:00:28.120 --> 0:00:31.680 the European Central Bank will negotiate the new World Order. 0:00:32.040 --> 0:00:34.520 I'm Doug Prisoner looking at what we can expect from 0:00:34.600 --> 0:00:37.360 next week's print on CPI in Australia. 0:00:38.479 --> 0:00:42.520 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 0:00:42.560 --> 0:00:46.240 eleven to three yeh New York, Bloomberg ninety nine to one, Washington, DC, 0:00:46.760 --> 0:00:51.000 Bloomberg ninety two to nine, Boston, DAB Digital Radio, London, 0:00:51.440 --> 0:00:54.600 Sirius XM one twenty one, and around the world on 0:00:54.680 --> 0:00:57.840 Bloomberg Radio, dot Com and the Bloomberg Business App. 0:01:02.760 --> 0:01:04.560 Good day to you. I'm Tom Busby, and we begin 0:01:04.600 --> 0:01:07.520 today's program with the Federal Reserve. The FED, concluding its 0:01:07.720 --> 0:01:10.959 two day meeting on Wednesday, expected to issue its first 0:01:11.080 --> 0:01:14.520 monetary policy decision of the new year. For more on 0:01:14.560 --> 0:01:17.240 what we might expect to see and why, we're joined 0:01:17.280 --> 0:01:22.120 by Michael McKee, Bloomberg International Economics and Policy correspondent. Well, Michael, 0:01:22.120 --> 0:01:25.080 after cutting rates for three meetings in a row, what 0:01:25.240 --> 0:01:27.720 do you expect to see this week from the Fed? 0:01:28.360 --> 0:01:31.160 Not much. The Fed is going to be on hold. 0:01:31.800 --> 0:01:34.880 They've pretty much made that clear. The markets have right 0:01:34.920 --> 0:01:38.479 now priced in a one basis point chance of any 0:01:38.520 --> 0:01:41.360 kind of FED move, So nobody's expecting a whole lot. 0:01:41.440 --> 0:01:44.600 It's more going to be the focus on j Powell 0:01:44.840 --> 0:01:48.000 and his press conference afterwards and what he might say 0:01:48.040 --> 0:01:52.040 about future FED moves. All of this in the context 0:01:52.160 --> 0:01:56.360 of the new president and what his economic plans are 0:01:56.360 --> 0:02:00.760 going to be, since they don't know yet, and you know, 0:02:00.840 --> 0:02:03.559 we're kind of a week into this and we haven't 0:02:03.600 --> 0:02:06.240 heard yet what he's going to do with tariffs and things. 0:02:06.880 --> 0:02:10.760 At this point, the Fed's on hold until there's some 0:02:10.880 --> 0:02:11.440 more news. 0:02:11.880 --> 0:02:14.400 Well, let's talk about what the FED is dealing with. 0:02:14.480 --> 0:02:19.000 As far as data, the US labor market remains strong December, 0:02:19.080 --> 0:02:21.359 job creation better than forecast on a plan, with right 0:02:21.480 --> 0:02:25.120 low wages outpacing inflation. Long term unemployment though that was 0:02:25.120 --> 0:02:26.600 a surprise at a three year high. 0:02:26.440 --> 0:02:30.440 This week, though, right, yeah, it's not a total surprise 0:02:30.520 --> 0:02:34.799 in that what we have seen lately is companies are 0:02:34.800 --> 0:02:37.760 not hiring. They're not really firing. The total number of 0:02:37.800 --> 0:02:41.800 people who are filing initial jobless claims is still very low. 0:02:42.240 --> 0:02:45.560 It's sort of bounced around because of the holidays and 0:02:45.600 --> 0:02:47.840 seasonal adjustment factors. And now we have a little bit 0:02:47.840 --> 0:02:50.320 of input of people who've lost their jobs in the 0:02:50.360 --> 0:02:54.200 Los Angeles fires, But in general, people are not hiring, 0:02:54.240 --> 0:02:55.919 so if you do lose your job, it takes a 0:02:55.960 --> 0:02:59.720 little bit longer now to find a job. The number 0:02:59.720 --> 0:03:03.800 of continuing claims rising up too, close to two million, 0:03:04.480 --> 0:03:07.240 but that's not telling us that the economy is in 0:03:07.320 --> 0:03:11.160 trouble at all. The labor market still feels strong. Of course, 0:03:11.200 --> 0:03:15.320 the Fed's going to be watching every jobs report very closely. 0:03:15.880 --> 0:03:20.520 And inflation has been well behaved, if not coming down. 0:03:21.120 --> 0:03:24.600 Yeah, let's talk about inflation. So CPI in December two 0:03:24.639 --> 0:03:28.360 point nine percent year over year PCE two point eight percent, 0:03:28.800 --> 0:03:32.359 so not bad, not great, still a little far from 0:03:32.360 --> 0:03:35.360 the target. But as you say, you know, steady. 0:03:35.280 --> 0:03:38.640 Treading water basically is kind of where we are, and 0:03:39.200 --> 0:03:41.640 the issue for the FAT is they look at PCE, 0:03:41.960 --> 0:03:45.240 which runs maybe three or four basis points below where 0:03:45.400 --> 0:03:49.680 CPI does, and so we're looking at two point four 0:03:49.720 --> 0:03:53.720 percent for PCE. End of this week, we're going to 0:03:53.760 --> 0:03:58.160 get the PCE report for the month of December, and 0:03:58.760 --> 0:04:02.480 betting is it's going to be restrained. But CPI is 0:04:02.480 --> 0:04:06.200 what Americans look at and makes it into the newspapers 0:04:06.240 --> 0:04:09.040 and things like that, and that has an effect on 0:04:09.200 --> 0:04:12.720 inflation expectations. And we did see in the most recent 0:04:12.920 --> 0:04:17.000 University of Michigan reports that people were expecting, at least 0:04:17.000 --> 0:04:21.960 over a longer time horizon, inflation to rise. And if 0:04:22.000 --> 0:04:24.480 that's the case, then the FED is going to be 0:04:24.560 --> 0:04:26.719 keeping a close eye on that because they worry that 0:04:26.760 --> 0:04:30.560 if inflation expectations keep going up, then people are going 0:04:30.600 --> 0:04:32.719 to go back and ask their buses for raises and 0:04:32.760 --> 0:04:36.479 you get into the circular situation that they've been trying 0:04:36.480 --> 0:04:39.440 hard to avoid for years. Doesn't look like we're really 0:04:39.480 --> 0:04:43.560 going to have that happen, but it's something to keep. 0:04:43.400 --> 0:04:45.640 An eye on, so we kind of know what we're 0:04:45.680 --> 0:04:48.919 dealing with on inflation. We see the results of the 0:04:49.000 --> 0:04:53.320 labor market housing very uneven but still struggling. The wild 0:04:53.360 --> 0:04:56.880 cut here, as you alluded to before, is President Trump 0:04:57.080 --> 0:05:00.520 his new policies, how it affects the economy. It will 0:05:00.520 --> 0:05:03.039 affect the Fed's decisions. So let's talk about that. Last 0:05:03.080 --> 0:05:05.400 time he was in the White House, you appointed Jerome 0:05:05.440 --> 0:05:08.080 Powell to chair the FED, but when the Central Bank 0:05:08.080 --> 0:05:11.360 made some pretty difficult decisions, he did not agree with 0:05:11.800 --> 0:05:15.000 I'm being kind here. He was unrelenting in his criticism, 0:05:15.040 --> 0:05:19.120 demanding to be consultant on rates and on policy. Is 0:05:19.200 --> 0:05:24.560 anything going to change other than you know, as you said, immigration, 0:05:24.880 --> 0:05:27.840 his raids that took place last week. 0:05:27.880 --> 0:05:31.920 I mean, well, we're not expecting any major change in 0:05:31.960 --> 0:05:36.080 the President's attitude towards the Federal Reserve. I don't want 0:05:36.080 --> 0:05:39.360 to speak for him, because he certainly speaks enough. But 0:05:40.279 --> 0:05:43.599 he did insult Powell and the FED last time because 0:05:43.640 --> 0:05:46.479 they weren't cutting interest rates and weren't cutting interest rates 0:05:46.520 --> 0:05:49.360 as fast as he wanted, and so one can imagine 0:05:49.360 --> 0:05:51.320 that he's not going to be happy that the FED 0:05:51.480 --> 0:05:53.919 is on hold now. I think there are enough areas 0:05:54.600 --> 0:05:58.719 in which he stuck his fingers immediately after taking the 0:05:58.720 --> 0:06:01.440 oath of office that he made not be too focused 0:06:01.440 --> 0:06:04.200 on this week's FED meeting. But if the Fed stays 0:06:04.200 --> 0:06:06.359 on hold for a while because they think some of 0:06:06.400 --> 0:06:10.920 his policies are going to be inflationary, then I would 0:06:10.960 --> 0:06:13.400 imagine we will hear from him on that. 0:06:13.680 --> 0:06:16.480 A decision from the Federal Reserve this Wednesday about two 0:06:16.520 --> 0:06:19.880 pm Wall Street Time. Our thanks to Michael McKee, Bloomberg 0:06:19.920 --> 0:06:23.400 International Economics and Policy correspondent. We now turn to the 0:06:23.440 --> 0:06:26.320 current Q four earning season as Wall Street prepares to 0:06:26.320 --> 0:06:29.080 get its first batch of big tech results this week 0:06:29.480 --> 0:06:32.719 from Apple, Microsoft, and Meta platforms. And for more on 0:06:32.760 --> 0:06:35.799 what to expect, we're joined by man Deep Singh, Bloomberg 0:06:35.839 --> 0:06:40.479 Intelligence senior tech industry analysts. The big question is artificial 0:06:40.520 --> 0:06:43.760 intelligence still the big driver for big tech and for 0:06:43.880 --> 0:06:46.039 each of those companies? What do you expect to see 0:06:46.080 --> 0:06:46.520 this week? 0:06:47.000 --> 0:06:47.240 Yeah? 0:06:47.360 --> 0:06:51.000 Look, I think four Q is typically a seasonally strong 0:06:51.080 --> 0:06:54.960 quarder for MAC seven companies, and I expect this time 0:06:55.000 --> 0:06:57.840 it will be no different. Although you know what we 0:06:57.920 --> 0:07:02.359 saw with President trump'son auguration and the project's target which 0:07:02.440 --> 0:07:06.560 really impacts the AI spend. I mean, look, you know, 0:07:07.160 --> 0:07:10.280 once the government is behind something like this in a 0:07:10.320 --> 0:07:13.360 big way, and it's bringing in new dollars, which is 0:07:13.840 --> 0:07:15.840 the case here, you know, the one hundred billion dollars 0:07:15.840 --> 0:07:19.480 an dollars, and just to put it in context, the 0:07:20.080 --> 0:07:23.560 you know, the total capex spending in twenty twenty four 0:07:23.640 --> 0:07:26.200 from the four big hyperscalers was around two hundred and 0:07:26.200 --> 0:07:29.840 forty billion, and that was like fifty six percent growth. 0:07:29.920 --> 0:07:34.360 So clearly, you know that momentum should be intact if 0:07:34.400 --> 0:07:37.400 we get these additional one hundred billion dollars in twenty 0:07:37.480 --> 0:07:42.240 twenty five, which I think was the aim of this discussion. 0:07:42.320 --> 0:07:44.680 So look, I mean when I look at the earnings, 0:07:45.320 --> 0:07:48.800 Meta is expected to grow earnings close to thirty percent, 0:07:49.000 --> 0:07:53.000 Alphabet also over twenty five percent, and these are you know, 0:07:53.080 --> 0:07:57.440 off a very strong comp So Microsoft's earnings growth will 0:07:57.480 --> 0:08:02.760 be somewhat slower because their depreciation expenses are going up now. 0:08:03.120 --> 0:08:05.800 And we know Apple has been struggling, you know, with 0:08:05.880 --> 0:08:09.040 the China exposure, and their top line remains muted. So 0:08:09.920 --> 0:08:14.640 Apple is has continued to kind of struggle when it 0:08:14.720 --> 0:08:17.920 comes to really driving that top line. But again everyone 0:08:18.000 --> 0:08:21.600 is waiting for that big smartphone refers cycle with this 0:08:21.760 --> 0:08:22.360 AI wave. 0:08:22.600 --> 0:08:25.360 Well that's coming, and well that brings us to Apple then, 0:08:25.400 --> 0:08:28.320 So Apple beaten to the punch. It looks like this 0:08:28.440 --> 0:08:31.000 year from Samsung with an ultra thin phone, they really 0:08:31.040 --> 0:08:33.360 think ultra thin is gonna boost sales right. 0:08:33.520 --> 0:08:37.040 Well, so more than the foam factor. To me, what's 0:08:37.240 --> 0:08:41.559 really important here is the impact of tariffs and what 0:08:41.679 --> 0:08:45.760 goes on, you know, with the China exposure, because Apple 0:08:45.920 --> 0:08:51.120 supply chain is still predominantly in China, and even though 0:08:51.120 --> 0:08:53.640 they have you know, moved some of their manufacturing and 0:08:53.679 --> 0:08:58.559 assembly to India and wait other locations. If there is 0:08:58.679 --> 0:09:02.040 you know, universal tariffs and that's the proposal right with 0:09:02.200 --> 0:09:07.000 China and Canada and Mexico, that will impact Apple and 0:09:07.240 --> 0:09:11.920 you know, anybody who gets parts or products of product 0:09:11.920 --> 0:09:15.240 components there. So clearly that is a big risk with 0:09:15.840 --> 0:09:18.320 Apple and given its muted top line route and the 0:09:18.400 --> 0:09:21.440 other factor I would throw in there is the whole 0:09:21.840 --> 0:09:25.320 Google Chrome decision because one of the remedies that Google 0:09:25.360 --> 0:09:29.160 has proposed is there shouldn't be any contracts, you know, 0:09:29.280 --> 0:09:32.080 in terms of them being the default operating system on 0:09:32.160 --> 0:09:36.679 iOS devices. And remember Google pays Apple over twenty billion 0:09:36.760 --> 0:09:39.480 dollars a year to be the default operating system, so 0:09:39.800 --> 0:09:42.480 all that revenue is in play here in terms of 0:09:42.480 --> 0:09:45.240 how it could impact Apple services revenue for that matter. 0:09:45.920 --> 0:09:48.880 Well, let's talk about Microsoft. You brought that up with 0:09:49.200 --> 0:09:53.800 the stargate OpenAI. Microsoft has invested about seven hundred and 0:09:53.800 --> 0:09:56.800 fifty million into Ai. They've pulled back since then. But 0:09:57.760 --> 0:10:01.040 who else are the winners? We know, we know japan 0:10:01.120 --> 0:10:04.920 Soft Bank. Open Ai is privately held company. But who 0:10:04.960 --> 0:10:07.960 else among these big tech companies will be the beneficiary 0:10:08.000 --> 0:10:08.240 of this? 0:10:08.559 --> 0:10:12.200 I mean to me, you know, the suppliers, the Nvidia 0:10:12.280 --> 0:10:17.200 and anybody who supplies to the data center kind of 0:10:17.440 --> 0:10:20.720 build out wins here. And that's where you know, for 0:10:21.000 --> 0:10:25.600 foundational model companies, it actually increases the pressure on a 0:10:25.600 --> 0:10:29.959 Google or a Meta or Anthropic to increase their capex 0:10:30.000 --> 0:10:33.720 because guess what, open ai has more compute available now 0:10:33.840 --> 0:10:37.400 for training their large agrid models for inferencing. So that 0:10:37.600 --> 0:10:40.760 kind of creates an advantage for open Ai Microsoft. Microsoft 0:10:40.760 --> 0:10:44.000 has already told us they generate about ten billion in 0:10:44.200 --> 0:10:47.840 cloud revenue from AI workloads, So if they have more 0:10:47.880 --> 0:10:52.439 compute capacity through Oracle, and remember part of that open 0:10:52.480 --> 0:10:56.520 ai revenue flows through Microsoft because of the you know, 0:10:56.559 --> 0:11:00.760 the agreement they have, and so Microsoft clearly is a beneficiary. 0:11:00.840 --> 0:11:04.200 Even though this is not being built on their cloud. 0:11:04.200 --> 0:11:07.360 It's on Oracle Cloud. So I think that's where all 0:11:07.400 --> 0:11:10.640 the other players on the LM and cloud side are 0:11:10.720 --> 0:11:14.360 somewhat excluded here. And and you know, at least the 0:11:14.400 --> 0:11:18.080 project target seems to have picked the companies that are involved, 0:11:18.440 --> 0:11:20.240 and you know they are the direct beneficiaries. 0:11:20.800 --> 0:11:23.400 Would you consider Meta being excluded here? 0:11:23.600 --> 0:11:25.840 Absolutely? I mean there was no mention. 0:11:25.920 --> 0:11:28.400 No mention at all. We've heard of you know, Nvidia 0:11:28.440 --> 0:11:31.480 obviously a beneficiary, but yeah, I have not heard for 0:11:31.640 --> 0:11:33.640 a company that big and Meta. 0:11:33.760 --> 0:11:37.760 Look, it's trying to develop its own hardware. They're doubling 0:11:37.840 --> 0:11:41.520 down when it comes to the ar glasses. The ray 0:11:41.520 --> 0:11:44.840 Bang glasses has been a success, but they really are 0:11:44.920 --> 0:11:47.520 going all in when it comes to developing their own 0:11:47.559 --> 0:11:51.520 hardware to compete with Apple. Now we know Reality Labs 0:11:51.559 --> 0:11:54.559 will end up losing about twenty billion dollars in twenty 0:11:54.640 --> 0:11:57.200 twenty five, So whether it's going to be a creative 0:11:57.200 --> 0:11:59.920 to EPs, time will tell, but not in the near 0:12:00.400 --> 0:12:02.880 and that's I think something they have to be mindful of, 0:12:03.040 --> 0:12:07.120 given they're investing more in Capex for the GPU compute 0:12:07.160 --> 0:12:09.440 and now they are really doubling down in terms of 0:12:09.480 --> 0:12:11.640 the you know the glasses hardware. 0:12:11.480 --> 0:12:13.800 They'd have to sell a lot of smart watches and earbuds. 0:12:13.840 --> 0:12:16.959 Coming up well our thanks to mandeep Seeing Bloomberg Intelligence 0:12:17.000 --> 0:12:20.480 senior tech industry analyst, and coming up on Bloomberg day 0:12:20.480 --> 0:12:22.520 Break weekend, we'll look at how the European Central Bank 0:12:22.559 --> 0:12:26.360 will negotiate the new world Order. I'm Tom Busby and 0:12:26.440 --> 0:12:40.000 this is Bloomberg. This is Bloomberg day Break weekend, our 0:12:40.000 --> 0:12:42.240 global look ahead at the top stories for investors in 0:12:42.280 --> 0:12:45.079 the coming week. I'm Tom Busby in New York. Up 0:12:45.160 --> 0:12:47.040 later in our program, we'll look ahead to a key 0:12:47.080 --> 0:12:51.559 inflation measure coming out of Australia. But first, Europe's policymakers 0:12:51.640 --> 0:12:53.959 meet for the first time this year. In the coming days. 0:12:54.000 --> 0:12:57.880 They're expected to cut interest rates again as inflation stabilizes 0:12:57.960 --> 0:12:59.360 right around the two percent target. 0:12:59.679 --> 0:13:00.160 For more. 0:13:00.240 --> 0:13:02.200 Let's go to London and bring in Bloomberg day Break 0:13:02.200 --> 0:13:04.160 europ Banker Caroline. 0:13:03.600 --> 0:13:07.120 Hepgar Tom EU inflation is on track to hit its 0:13:07.160 --> 0:13:10.120 two percent target in the coming months, clearing the way 0:13:10.200 --> 0:13:13.680 for cuts to borrowing costs and building on the four 0:13:13.880 --> 0:13:17.000 rate reductions we saw in twenty twenty four. But with 0:13:17.120 --> 0:13:19.640 a new occupant in the White House and threats of 0:13:19.720 --> 0:13:25.359 punitive tariffs swirling. Twenty twenty five's European Central Bank trajectory 0:13:25.720 --> 0:13:28.840 is far from decided. The Bank's president, Christina gard has 0:13:28.840 --> 0:13:32.439 made it clear that policymakers will continue along their gradual 0:13:32.559 --> 0:13:37.440 path irrespective of US economic policy. Officials from across the 0:13:37.480 --> 0:13:41.840 hawk doves spectrum have signaled openness to further moves after 0:13:41.960 --> 0:13:46.599 January in Europe, although of course without pre committing twenty cuts. 0:13:46.679 --> 0:13:49.480 Interest rates have been a hot topic at this year's 0:13:49.520 --> 0:13:52.840 meeting of the World Economic Forum in Davos, where Bloomberg's 0:13:52.880 --> 0:13:56.080 Jumana Bissecci has been speaking to a panel of experts 0:13:56.120 --> 0:14:00.000 about their predictions for central bank policy. In twenty twenty five. 0:14:00.480 --> 0:14:02.960 She discussed what is to come with the French Central 0:14:03.040 --> 0:14:07.360 Bank governor Fanceva veilro De Gallo, State Street CEO Ron o'hanley, 0:14:07.480 --> 0:14:12.240 the economics professor Isabella Webber from the University of Massachusetts Amherst, 0:14:12.520 --> 0:14:16.480 and Nikolai Tangan, who is the CEO of Nahas Bank 0:14:16.600 --> 0:14:17.720 Investment Management. 0:14:18.040 --> 0:14:21.760 Some words about inflation and I will keep the European perspective, 0:14:21.960 --> 0:14:26.400 but we have been collectively including the fair successful against 0:14:26.400 --> 0:14:29.720 inflation and if I take to European figures, we were 0:14:29.840 --> 0:14:34.640 to peak of more than ten percent October twenty two. 0:14:34.680 --> 0:14:36.960 We are now two point four and we expect for 0:14:37.400 --> 0:14:39.920 this year as an average two point one. So more 0:14:40.000 --> 0:14:46.320 or less on target for the effects of the Trumps 0:14:46.360 --> 0:14:52.960 administration is probably too early to tell. We could expect, 0:14:52.960 --> 0:14:56.680 but I said very conciously this program to be to 0:14:56.800 --> 0:15:01.960 have inflationary effects in the US future tariff's fiscal expansions, 0:15:02.080 --> 0:15:06.320 et cetera. But to be seen on the European side, 0:15:06.560 --> 0:15:11.320 I don't think that the inflationary effect will be that significant, 0:15:11.640 --> 0:15:16.760 so I would expect this dese inflation process to go 0:15:16.880 --> 0:15:21.520 on and our victory against inflation to be final if 0:15:21.520 --> 0:15:25.480 I may, because the tensions on the labor and good 0:15:25.560 --> 0:15:30.880 market in Europe are much spooler obviously, which means if 0:15:30.920 --> 0:15:34.080 I may somewhords about short term rates and long term rates, 0:15:34.120 --> 0:15:39.320 and using the very important difference you introduced on the 0:15:39.360 --> 0:15:42.160 short term rates, this is about monetary policy, so this 0:15:42.320 --> 0:15:47.680 is our responsibility for the ECB. We were the earliest 0:15:47.720 --> 0:15:53.400 one to cut last June. We are now the lowest one. 0:15:53.560 --> 0:15:56.400 We are three percent, while the FARED and the Bank 0:15:56.480 --> 0:16:01.200 of England are above four percent, and I would say 0:16:01.240 --> 0:16:04.640 that for the quarters to come, probably our task is 0:16:04.680 --> 0:16:09.440 the simplest, also due to the fact that we are 0:16:10.160 --> 0:16:14.080 vigilant but confident on this inflation, as I said, and 0:16:14.160 --> 0:16:17.240 we are still quite far of the neutral rate, which 0:16:17.320 --> 0:16:22.520 is probably estimated to be around two percent so seen 0:16:22.600 --> 0:16:25.680 from today, but it will be data to even to 0:16:25.800 --> 0:16:31.120 expect our policy rate to be around two percent by 0:16:31.200 --> 0:16:36.280 next time is a plausible scenario which could mean a decaupling. 0:16:36.480 --> 0:16:39.960 Let us be clear, between EASYB and FED, the decaupling 0:16:40.920 --> 0:16:43.920 is not an issue. Both of us are independent on 0:16:43.960 --> 0:16:47.400 both sides of the Atlantic. The question of long term 0:16:47.440 --> 0:16:48.680 interest rates, so we'll. 0:16:48.520 --> 0:16:51.760 See next summer the news person. That means in mean 0:16:51.880 --> 0:16:54.120 summer of twenty twenty five or summer of twenty twenty six. 0:16:54.160 --> 0:16:54.720 The market is. 0:16:56.680 --> 0:17:01.920 Story from my English ambiguity, because this summer twenty five, 0:17:01.960 --> 0:17:02.320 so one. 0:17:02.240 --> 0:17:04.640 Hundred basis points cut by the midsummer. 0:17:04.800 --> 0:17:08.040 We will see again. It's that a written I'm a 0:17:08.119 --> 0:17:12.119 pragmat testing, you are a journalist. I'm a central banker. 0:17:14.119 --> 0:17:17.080 But no on long term, on long term interest rates, 0:17:17.080 --> 0:17:20.960 this is a different story here. There are belovers. Obviously, 0:17:22.680 --> 0:17:26.120 there is also a very significant difference of levels. If 0:17:26.119 --> 0:17:28.879 you look at the ten year interest rates, it was 0:17:28.960 --> 0:17:31.680 yesterday about two point five in Germany and four point 0:17:31.720 --> 0:17:35.399 six in the US. But there is some kind of 0:17:35.520 --> 0:17:39.280 core movement or core rise in the last month. It's 0:17:39.280 --> 0:17:42.879 a partial core rise. But what explained this rise in 0:17:42.960 --> 0:17:47.200 the US perhaps a technical explanation which is important. As 0:17:47.200 --> 0:17:49.359 you know, when you look at long term interest rates, 0:17:49.440 --> 0:17:54.439 you can have two explanations. You can have monetary policy expectations, 0:17:55.000 --> 0:17:59.800 so the succession of short term interest rates forwarded, and 0:18:00.040 --> 0:18:05.119 then you have the term premier. What increased in the 0:18:05.200 --> 0:18:09.920 last four months is the term premier and this reflect 0:18:10.119 --> 0:18:16.200 increase uncertainty. It's about inflation fears, it's about two lax 0:18:16.480 --> 0:18:22.440 fiscal policy starting with the US, and it's about global uncertainty. 0:18:23.320 --> 0:18:25.720 To say it with other words, and I will conclude 0:18:25.720 --> 0:18:28.359 with that, but this is a very important point on 0:18:28.800 --> 0:18:32.679 the direction of interest rate. There is a risk that 0:18:33.200 --> 0:18:39.480 the benefits of this inflation and monetary easing is weighted 0:18:39.960 --> 0:18:47.480 or lost by increase uncertainty, economic fragmentation and a two 0:18:47.560 --> 0:18:51.000 lax fiscal policy, or to say it in other words, 0:18:51.880 --> 0:18:56.560 an economic policy in order to be efficient, including for growth, 0:18:56.960 --> 0:19:00.840 must be consistent and this is a very important for 0:19:01.000 --> 0:19:02.360 both sides of the Atlantic. 0:19:02.840 --> 0:19:06.440 That was Blomberg's uman and bestually hosting a panel entitled 0:19:06.760 --> 0:19:10.040 where interest Rates will Go at this year's meeting of 0:19:10.080 --> 0:19:13.760 the World Economic Forum in Davos. So how will the 0:19:13.880 --> 0:19:18.640 shift in international relations shake up the ECB's plans. I've 0:19:18.680 --> 0:19:23.120 been speaking to Bloomberg's ECB reporter Janna Randau, asking her 0:19:23.280 --> 0:19:27.360 how much of a factor Trumpomics will be in ECB 0:19:27.560 --> 0:19:29.080 policymaking going forwards. 0:19:30.040 --> 0:19:34.640 Well, frankly, it depends entirely on how it actually affects 0:19:34.680 --> 0:19:40.639 the era's an economy. We've learned already that election campaigning 0:19:40.800 --> 0:19:45.480 isn't governing and isn't running a government. So we'll we'll 0:19:45.520 --> 0:19:48.480 see how much of the threats that he's made over 0:19:48.520 --> 0:19:53.800 the past month's you know, running for office, how much 0:19:53.800 --> 0:19:58.520 of that will actually materialize. On tariffs, we know the 0:19:58.560 --> 0:20:03.879 sentiment seems to be bad for growth unclear you know 0:20:03.920 --> 0:20:07.080 what it will do to inflation. So there's there's a 0:20:07.080 --> 0:20:11.199 lot of uncertainty and that is surely going to stick around, 0:20:11.960 --> 0:20:14.040 which of course is never good for an economy that's 0:20:14.080 --> 0:20:18.080 already struggling, Which makes you know, the UCB stands for 0:20:18.560 --> 0:20:22.080 a data dependent meeting by meeting approach all you know, 0:20:22.240 --> 0:20:23.240 all the more reasonable. 0:20:23.680 --> 0:20:27.639 Yes, absolutely, President Chum saying only recently that the EU 0:20:27.720 --> 0:20:31.439 could be in for tariffs given how badly as he 0:20:31.600 --> 0:20:35.480 sees it, it treats the United States. So in terms 0:20:35.520 --> 0:20:40.000 of the punitive measures, what economists think that it risks 0:20:40.040 --> 0:20:42.800 in terms of the hit to growth versus a hit 0:20:42.840 --> 0:20:44.200 to inflation. 0:20:44.720 --> 0:20:49.040 Yeah, so so on growth, it seems pretty clear that 0:20:49.840 --> 0:20:54.040 the impact will be negative. What's more interesting is to 0:20:54.080 --> 0:20:57.359 look at inflation, just because there are different forces at play. 0:20:58.440 --> 0:21:01.320 Of course, you know, you're raised tears. They will push 0:21:01.400 --> 0:21:04.159 up prices and goods we import from the US. But 0:21:04.800 --> 0:21:08.240 the EU of course is not the only region, you know, 0:21:08.880 --> 0:21:12.960 facing facing those threats and facing tariffs. So if China, 0:21:13.040 --> 0:21:17.240 for example, becomes part of the part of the game, 0:21:17.760 --> 0:21:21.879 then we might see a redirection of Chinese exports that 0:21:22.080 --> 0:21:26.200 were once going to the US flooding into Europe. And 0:21:26.400 --> 0:21:31.200 we of course know that China is already facing deflationary 0:21:31.320 --> 0:21:36.480 risks that that producer prices there have have declined and 0:21:36.520 --> 0:21:40.159 have been weak, so that might actually bring some deflationary 0:21:40.200 --> 0:21:44.800 pressures into the Eurozone as well. So the balance is 0:21:44.840 --> 0:21:48.240 going to be interesting. And from where I am and 0:21:48.400 --> 0:21:51.000 from where policymakers are at the moment, it's next to 0:21:51.080 --> 0:21:53.040 impossible to tell. 0:21:53.800 --> 0:21:57.679 Yes, But traders are pricing in cuts for January and 0:21:57.880 --> 0:22:01.520 March solid of those and what is the picture beyond them? 0:22:01.640 --> 0:22:07.399 Those meetings, Yeah, January March, from from what we've heard 0:22:07.480 --> 0:22:10.560 over the past couple of days, seem to be almost 0:22:10.920 --> 0:22:16.000 a done deal. Even hawks like a Dutch governor a 0:22:16.080 --> 0:22:20.240 class not said he's fine with with you know, those 0:22:20.359 --> 0:22:24.240 those two meetings being being on the table for for 0:22:24.440 --> 0:22:27.200 rate cuts. After that it gets a lot more interesting, 0:22:28.320 --> 0:22:32.280 just because we're expecting for services to reprice. Don't forget 0:22:32.320 --> 0:22:35.919 services prices are still running at a four percent clip, 0:22:36.280 --> 0:22:39.880 so twice the ECB's target. We we should have more 0:22:39.920 --> 0:22:45.919 information by March about or by April about Trump's policies. 0:22:46.240 --> 0:22:49.000 We should be a bit smarter on how much of 0:22:49.040 --> 0:22:53.719 a spring revival the economy can can produce. Uh and 0:22:53.760 --> 0:22:55.879 so what we're seeing in markets, and also when you 0:22:55.920 --> 0:22:59.440 ask us some speak to some economists that April is 0:22:59.680 --> 0:23:01.760 is kind of a bit of a wild card. So 0:23:01.800 --> 0:23:04.919 the market is currently pricing three cards through June fourth. 0:23:05.280 --> 0:23:08.200 By the end of the year and and a lot 0:23:08.280 --> 0:23:11.280 will depend on the forecast that will come out, on 0:23:11.320 --> 0:23:13.800 the information that we receive until. 0:23:13.520 --> 0:23:17.720 Then, how well has the ECB done, how well has 0:23:17.760 --> 0:23:22.119 Europe done to get inflation, you know, back down towards 0:23:22.119 --> 0:23:26.120 the two percent target you mentioned services inflation, So on. 0:23:26.080 --> 0:23:28.880 The headline rate, we're not doing badly. We are at 0:23:28.920 --> 0:23:31.520 two point four percent right now. It was a bit 0:23:31.520 --> 0:23:34.600 of an optic at the end of last year, but 0:23:34.680 --> 0:23:38.119 that came as expected and policymakers said, don't be you know, 0:23:38.240 --> 0:23:41.879 don't be upset about that too much. The UCB forecasts 0:23:41.920 --> 0:23:45.520 show inflation reaching target this year and then kind of 0:23:45.520 --> 0:23:49.399 hovering around it. So they are reasonably confident that the 0:23:49.680 --> 0:23:52.600 that the target is inside. They haven't declared victory yet, 0:23:52.640 --> 0:23:55.080 and that's partly to do with those services prices, with 0:23:55.119 --> 0:23:59.360 domestic inflation, with core inflation, which is still a bit sticky. 0:24:00.280 --> 0:24:03.320 They expect that to change over the coming months, just because, 0:24:03.600 --> 0:24:06.760 for example, if you think of insurance prices, they get 0:24:06.840 --> 0:24:09.720 you know, contracts get repriced once a year, so a 0:24:09.760 --> 0:24:13.600 lot of movement is expected there in the next weeks 0:24:13.720 --> 0:24:17.760 and probably months, But that really needs to happen, and 0:24:17.840 --> 0:24:20.480 if that doesn't happen, and that's why we talk about April. 0:24:21.119 --> 0:24:23.760 That will be the moment when we know whether those 0:24:23.840 --> 0:24:27.760