Speaker 1: This is Bloomberg day Break Weekend, our global look at
Speaker 1: the top stories in the coming week from our day
Speaker 1: Break anchors all around the world, and straight ahead on
Speaker 1: the program. Fetchair. J Powell Headstick Capitol Hill. I'm Tom
Speaker 1: Busby in New York.
Speaker 2: I'm Gaily Liones in Washington, where Federal Reserve nominees will
Speaker 2: be appearing in a Senate hearing next week.
Speaker 3: I'm Caroline Hetkee here in London, where we're looking at
Speaker 3: the Bank of England's unenviable position at the June rate
Speaker 3: setting meeting.
Speaker 4: I'm Doug Christner. Prime Minister Narin Bermodi comes to the US.
Speaker 4: We look at the complicated relationship between the US and India.
Speaker 5: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
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Speaker 1: Good day to you. I'm Tom Busby. We begin today's
Speaker 1: program with the Federal Reserve, which paused its string of
Speaker 1: interest rate hikes this past week after ten rate increases
Speaker 1: in as many beatings, but policymakers signaled two more rate
Speaker 1: hikes may be coming this year and that rate cuts
Speaker 1: are still a long way off. And this week, Vetchair
Speaker 1: Jerome Powell heads to Capitol Hill for his semi annual
Speaker 1: testimony to Congress on the Central Bank's monetary policy report.
Speaker 1: For more about what's behind the Fed's latest action and
Speaker 1: what to expect this week, we turned to Bloomberg's Global
Speaker 1: Economics and Policy editor Michael McKee. Michael, thanks for being here.
Speaker 6: Happy to be here.
Speaker 1: Well, Fed policymakers would not have left rates unchanged without
Speaker 1: good reasons, encouraging economic data about jobs or retail spending, inflation, housing,
Speaker 1: energy prices. So what will we be watching for Chairman
Speaker 1: pal to say this week?
Speaker 6: I think people will want to know how serious the
Speaker 6: Fed is about doing two more rate increases. It seems
Speaker 6: that at least one is locked in, and that's what
Speaker 6: the markets are pricing. The dot plot suggested they would
Speaker 6: do too. What would it take for the Fed to
Speaker 6: decide it needed to raise another fifty basis points? Inflation
Speaker 6: going the wrong way. Is it inflation not moving, Is
Speaker 6: it some sign that the economy is collapsing? What are
Speaker 6: they looking for?
Speaker 1: But we have seen good data. We have seen jobs
Speaker 1: a little uneven there, but the inflation some of the
Speaker 1: key inflation statistics that they look at, those metrics have
Speaker 1: been pretty good. Housing prices have gone down, energy prices
Speaker 1: have stabilized, even declined a little bit. Retail spending we
Speaker 1: got a real surprise for may Well.
Speaker 6: It looks like the economy is doing what the Fed wants.
Speaker 6: It is slowing down gradually, and that's the scenario, the
Speaker 6: soft landing scenario that they want to have. The question
Speaker 6: is does it speed up its drop? Will we start
Speaker 6: to see things fall off a cliff? So far we haven't.
Speaker 6: As you noted that jobs numbers were still strong, even
Speaker 6: though unemployment rose, it's still three point seven percent. And
Speaker 6: we saw retail sales rise, which was something of a surprise.
Speaker 6: But in each category, I think only gasoline fell, but
Speaker 6: in each category the increases were smaller than they had
Speaker 6: been in previous months. So it does suggest that people
Speaker 6: are still spending, they're just not spending as much. And
Speaker 6: that's what the whole point of the fed's tightening campaign
Speaker 6: is about now.
Speaker 1: This past week, Chairman Powell told reporters we shouldn't call
Speaker 1: this pause, that he just made a skip, and he
Speaker 1: says the FED needs more time to make sure that
Speaker 1: they made the right move. So let's listen into what
Speaker 1: he told reporters.
Speaker 7: We don't know the full extent of the consequences of
Speaker 7: the banking turmoil that we've seen. It would be early
Speaker 7: to see those, but we don't know what the extent is.
Speaker 7: We'll have some more time to see that unfolding. It's
Speaker 7: just the idea that we're trying to get this right.
Speaker 7: And this is if you think of the two things
Speaker 7: as separate variables, and I think that the skip, I
Speaker 7: shouldn't call it a skip. The decision makes sense, all.
Speaker 1: Right, So not a skip? Okay, Michael. Does that give
Speaker 1: us any sense of what the FED might do at
Speaker 1: its next meeting in July or the three remaining meetings
Speaker 1: this year?
Speaker 6: Well, the skip language that he accidentally used, and then
Speaker 6: he kept saying that the July meeting is live. We're
Speaker 6: sort of being read as signals by the markets that
Speaker 6: the FED is planning to raise rates again at the
Speaker 6: July twenty sixth meeting. That brings us back to what
Speaker 6: we were talking about earlier about what does the market
Speaker 6: want to hear in terms of the FED and what
Speaker 6: it would take to get them to stop or to
Speaker 6: move forward or do fifty basis points instead of twenty
Speaker 6: five in July. The question then becomes what happens after
Speaker 6: that when they get to September? Do they have a
Speaker 6: rate increase in train? I guess we have to wait
Speaker 6: and see what the data show us. And to go
Speaker 6: back to your very first question, I'm sure that is
Speaker 6: a line that you'll hear from j.
Speaker 5: Powell.
Speaker 1: Yeah, data dependent, data dependent, But even until July, we
Speaker 1: get some pretty important data points. So what will we
Speaker 1: get before then?
Speaker 6: Well, we get another payrolls report the week of Friday
Speaker 6: after July fourth, and then we get another CPI report
Speaker 6: and another PCE inflation report. The interesting thing is between
Speaker 6: the March and May meetings we had between them, I'm sorry,
Speaker 6: between the March and June meetings there were two or
Speaker 6: three CPI reports, two jobs reports. Now before July there's
Speaker 6: only be one of each, so they will have a
Speaker 6: less robust data set to judge how much the economy
Speaker 6: has changed. One way or the other.
Speaker 1: And during the summer, I mean, anything could hapen happen
Speaker 1: with summer jobs lifting payrolls higher, but kids coming out
Speaker 1: of school, we really can.
Speaker 6: Well, it's interesting because of course, the the Bureau of
Speaker 6: Labor Statistics seasonally adjusts UH to sort of take the
Speaker 6: lumpiness out of things like summer jobs for kids or
Speaker 6: teachers coming off the payroll because in summertime. But since
Speaker 6: the pandemic, their seasonal adjustment efforts have been troubled. It's
Speaker 6: it's been difficult to do. So it'll be interesting to
Speaker 6: see what kind of numbers we get when we start
Speaker 6: to see the June We see the June payrolls number
Speaker 6: in July, because that's a month where the swimming pools
Speaker 6: open up the June in June, and you know, the
Speaker 6: the ice cream shops take on extra workers and stuff
Speaker 6: like that. We'll see how how that all plays out.
Speaker 1: Well, you make it sound so nice, I gotta tell you.
Speaker 1: All right, Well, you know, let's let's go back to
Speaker 1: the what's coming up this week Wednesday and Thursday. Chairman
Speaker 1: Palse testimony to Congress. Now, some say that a lot
Speaker 1: of these people on the committees have less of a
Speaker 1: monetary agenda, more of a political agenda with the Chairman
Speaker 1: Powell and with the Fed. But Chairman pal has been,
Speaker 1: you know, there with a Republican president, now with the
Speaker 1: Democratic president. He has seen it all. Let's talk about
Speaker 1: what he can expect to hear from people like Massachusetts
Speaker 1: Senator Elizabeth Warren on the Senate Banking Committee. She's been
Speaker 1: very critical of the FED, very critical of the banking system,
Speaker 1: very critical of corporations, and very critical of, you know,
Speaker 1: the record setting profits that we've made. What can we
Speaker 1: expect to hear from her and others like her?
Speaker 6: Well, you know that Elizabeth Warren, and this is just
Speaker 6: based on past performance, is going to lecture Jay Powell
Speaker 6: on the evils of tightening too much because then people
Speaker 6: lose their jobs, unemployment goes up to which his answer
Speaker 6: can be, we're very sensitive to that and three point
Speaker 6: seven percent unemployment.
Speaker 5: Yeh.
Speaker 6: By the way, we're not doing that to you yet,
Speaker 6: but you could expect that from her. Others will be
Speaker 6: talking trying to talk about the debt, the US national debt,
Speaker 6: and the deficits and how much money we're spending. You
Speaker 6: can expect that from the Republicans. They usually try to
Speaker 6: get him to say that we need to have budget discipline,
Speaker 6: and he will try to stay out of those arguments.
Speaker 1: Ye, not my job, job as much as possible. Yes,
Speaker 1: well let's get back to more of those failed banks,
Speaker 1: because that's going to come up with him. It was
Speaker 1: just starting the last time he spoke. He did this
Speaker 1: monetary policy in March, but then it became a crisis.
Speaker 1: But things have settled down. So how will that play in,
Speaker 1: do you think to the testimony this week.
Speaker 6: Well, he will repeat what he said at the press
Speaker 6: conference this past week that the FED anticipates there will
Speaker 6: be some credit impacts from the bank situation. And there's
Speaker 6: certainly a lot of people out there who think that
Speaker 6: we're going to see more banks fail and we're going
Speaker 6: to see more problems. The data don't support that at
Speaker 6: the moment. This is a little wonky, but everybody's been
Speaker 6: watching this new funding lending program that the FED set
Speaker 6: up for banks, and it's still rising, and so people
Speaker 6: are thinking, well, the banks are still troubled, but there's
Speaker 6: another measure that accounts for all of the banks borrowings,
Speaker 6: not just from that, and it seems that the banks
Speaker 6: borrowed a lot from the federal home loan banks. They're
Speaker 6: paying those off and going to the Fed facility. So
Speaker 6: when you look at the overall borrowing by banks, it
Speaker 6: has come down some and it does appear that things have,
Speaker 6: as you said, settled down quite a bit.
Speaker 1: Got it so July again. The money right now on
Speaker 1: Wall Street is we're looking at perhaps a twenty five
Speaker 1: basis point increase. Yes, whispers of a fifty basis point.
Speaker 6: Well, it's just math. They said they would do two more, which,
Speaker 6: since they do twenty five at a time, is a
Speaker 6: total of fifty. So you could do fifty at once.
Speaker 6: If you figure you need to get to that level,
Speaker 6: you might as well do it right away. But then
Speaker 6: that begs the question of why they didn't do it
Speaker 6: last week. So we'll see. It's more likely, given the
Speaker 6: way Powell has framed this as an exercising caution to
Speaker 6: see the lagged impacts of the moves they've already made
Speaker 6: and what impact they're going to have on the economy
Speaker 6: going forward, that they don't want to go too high,
Speaker 6: too fast, and if they just do twenty five, that
Speaker 6: is a cautious kind of move.
Speaker 5: All right.
Speaker 1: Bloomberg's Global Economic policy editor, Michael McKee. Thanks for joining
Speaker 1: us again. Coming up on Bloomberg day Break weekend, the
Speaker 1: Bank of England and all the political economic pressure there
Speaker 1: Right now, I'm Tom Busby and this is Bloomberg. This
Speaker 1: is Bloomberg day Break Weekend, our global look ahead at
Speaker 1: the top stories for investors in the coming week. I'm
Speaker 1: Tom Busby in New York. Up later in the program,
Speaker 1: India's Prime Minister heads to the White House. But first,
Speaker 1: the Bank of England out with a rate decision in
Speaker 1: the coming week, and it hits us at a time
Speaker 1: of continued economic and political pressure in the UK. For more,
Speaker 1: let's head to London and bring in Bloomberg Daybreak Europe
Speaker 1: banker Caroline Hepger.
Speaker 3: Tom, the UK has an inflation problem. Price rises worth
Speaker 3: a four decade high last year, and although the figures
Speaker 3: have come down from eleven point one percent to eight
Speaker 3: point seven percent now, it has remained stronger than the
Speaker 3: Bank of England, and of course most economists had expected.
Speaker 3: For more on this, I'm joined by Bloomberg's UK correspondent
Speaker 3: Lizzie Burden. Lizzie, the Bank of England has a very
Speaker 3: difficult job on its hands.
Speaker 8: Yeah, we saw in that Hot jobs data. The economy
Speaker 8: is resilient, and also saw that in the GDP data,
Speaker 8: But the flip side is it's going to spur inflation.
Speaker 8: So Bloomberg Economics as a result changed its call. It
Speaker 8: did just see a rate hike in June, now it
Speaker 8: sees one in August as well. Markets have ramped up
Speaker 8: their bets for where the Bank of England's peak rate
Speaker 8: will be. Increasingly it looks like six percent and it's
Speaker 8: nearing the levels that they saw in the aftermath of
Speaker 8: the Liztrus's mini budget. So for the June meeting on Thursday,
Speaker 8: it's not really a question of whether they'll hike or not.
Speaker 8: Now it's becoming a question of will it be by
Speaker 8: a quarter point or by a half point and crucial
Speaker 8: to that will be the latest inflation data. Yeah.
Speaker 3: Absolutely, Well, you mentioned the growth and the labor data
Speaker 3: that we've had out in the last few days. So
Speaker 3: the UK's finally joined other G seven economies in regaining
Speaker 3: the GDP that it lost during the pandemic. Took a
Speaker 3: long time. Output rows by two tenths of one percent
Speaker 3: in March, so now we are back up with three
Speaker 3: tenths of one percent larger in terms of the GDP
Speaker 3: than we were pre pandemic levels. In terms of the
Speaker 3: reaction to that, his Blueberg's Senior UK economist Dan Hanson discussing, I.
Speaker 9: Mean, I think it came in broadly as expected. It
Speaker 9: was a little bit weaker than we thought it would be,
Speaker 9: but I think it's broadly in line. I mean that
Speaker 9: the big picture from the GDP data is that it's
Speaker 9: just holding up much better than anyone I'd expected, even
Speaker 9: sort of six months ago. And there are sort of
Speaker 9: lots of reasons. So that one is the labor market.
Speaker 9: There's energy, lower energy prices that's helping the global economy
Speaker 9: generally is probably doing a little bit better than people
Speaker 9: have expected.
Speaker 3: So that was Dan Hanson, bloomberg'st Senior UK Economics so
Speaker 3: reacting to the latest data, I mean, yes, it does
Speaker 3: put the UK in a difficult position.
Speaker 8: It does for the Bank of England, as I say,
Speaker 8: it's going to spur inflation probably which means more hikes.
Speaker 8: Further down the line, those hikes might mean that Britain
Speaker 8: enters a recession. I know you're speaking to Karen Ward
Speaker 8: of JP Morgan Asset Management, who's also as a side
Speaker 8: hustle an economic advisor to the Chancellor Jeremy Hunt. She
Speaker 8: thinks that a recession maybe likely, and that was even
Speaker 8: before we saw this job data. Also, I have to say,
Speaker 8: zero point two percent growth, it's pretty anemic, isn't it.
Speaker 10: Yeah.
Speaker 3: Absolutely, it's not that much to shout about, I suppose,
Speaker 3: and yet of course the government will want to show
Speaker 3: that it's positive. And when it comes to that, Richie
Speaker 3: Sunac has pledged to half inflation, one of his big
Speaker 3: five pledges, which are largely economic in focus. Of course,
Speaker 3: given the turnover that we've had in prime ministers in
Speaker 3: the UK, this was you know, this is his big
Speaker 3: kind of flagship bid for voters. And then Mervin King
Speaker 3: in recent days has come out and said very publicly
Speaker 3: in the national media that actually he thinks that that
Speaker 3: sort of pledge is a bad idea.
Speaker 8: Yeah, so this is in an interview with LBC's Andrew Marr.
Speaker 8: I have to say, policymakers and actually even Tory politicians
Speaker 8: behind the scenes when I speak to them, have said
Speaker 8: that this is a bad idea. Look, she's Sunak. The
Speaker 8: thinking is, I hear felt like lots of people blamed
Speaker 8: liss Trust for higher inflation. So when he came in,
Speaker 8: he felt like he needed to grip the issue. And
Speaker 8: even though it's really the Bank of England's job to
Speaker 8: reduce inflation, he's taking responsibility for him. But there's a
Speaker 8: difference between actively reducing inflation and not doing anything to
Speaker 8: add to it, right, So he's in a risky position
Speaker 8: when inflation is proving stickier and stickier as the months
Speaker 8: go on. And I thought it was very interesting listening
Speaker 8: to him at Prime Minister's Questions on Wednesday. He didn't
Speaker 8: really talk about halving inflation by the end of the
Speaker 8: year so much as reducing it. So is he shifting
Speaker 8: the goalposts?
Speaker 1: Yeah?
Speaker 3: Absolutely, And the former Bank of Governor Andrew Mervin king
Speaker 3: talking about how it's not bad to claim credit for
Speaker 3: it once it's actually happens, you know, but not before perhaps,
Speaker 3: And so too the relationship between government and business, which
Speaker 3: is the other big struggle I think for issues and
Speaker 3: for the Cabinet. In our reporting around whether the UK
Speaker 3: is a drift or not, we've had a number of
Speaker 3: interviews with disgruntled, even despairing business leaders about this issue,
Speaker 3: including with Archie Norman, who's the chairman of Marx and Spencer.
Speaker 3: He spoke to me at length about why the UK
Speaker 3: needs a broader industrial strategy, a real plan for the economy,
Speaker 3: a skills agenda, so that the UK, although it's under
Speaker 3: a great deal of pressure, can actually compete globally. Have
Speaker 3: a listen to what he said.
Speaker 10: An industrial strategy has to be profound, and it's not
Speaker 10: just about our atsues where we want to compete, It's
Speaker 10: about what skills do we want to have. Government plays
Speaker 10: a very big part in creating skills. We have something
Speaker 10: called the Apprenticeship Levy, which is a tax on skills
Speaker 10: and a tax on training. A large part of that
Speaker 10: tax is taken by the treasury and not recent spent.
Speaker 10: Other countries are saying, no, we need laboratory as systems,
Speaker 10: No we need more coders, No we we need more
Speaker 10: data scienttists. We seem to be agnostic. We don't know
Speaker 10: what we need, and that's not good enough. When France
Speaker 10: and Singapore and Canada and the US have a point
Speaker 10: of view, we have to have a point of view too,
Speaker 10: So you've got to start planning ahead. The footprint of
Speaker 10: government is too big in the economy to say we're
Speaker 10: just hands off, that we let the market decide because
Speaker 10: government does create and shape the future direction. A competitive
Speaker 10: economy is one where the public and private sector work together.
Speaker 10: That doesn't mean in an old fashioned sense of taxpayers
Speaker 10: money going into owning company or anything like that. It
Speaker 10: means we're working together on regulation, on trade, on investment
Speaker 10: in skills, on how government supports entrepreneurs, how we shape
Speaker 10: the tax system. At the moment that's come slightly adrift
Speaker 10: post Brexit. So there used to be a good hand
Speaker 10: in hand working relationship that was all swept away in
Speaker 10: the sort of Boris Johnson era and now we need
Speaker 10: to rebuild it again.
Speaker 3: So that was Archie Norman there saying we need an
Speaker 3: industrial strategy in the UK. So then let's wrap it
Speaker 3: all together as we think about the coming few days
Speaker 3: and you know what Andrew Bailey is going to do
Speaker 3: about UK rates.
Speaker 8: It's a really difficult position to be in for the
Speaker 8: governor looking at the data that has just come and
Speaker 8: as I say, we'll get more on inflation just before
Speaker 8: this BOE decision, but then thinking about the forecasts and
Speaker 8: what lies ahead when you've got members of the Monetary
Speaker 8: Policy Committee like Swatti Dingra warning about this lag in
Speaker 8: money Tree transmission eighteen months to two years. It seems
Speaker 8: to take four rates to pass through to the economy
Speaker 8: because of so many people having fixed rate mortgages. It's
Speaker 8: a divided committee. It looks like it's going to be
Speaker 8: between twenty five basis points and fifty basis points. But
Speaker 8: we'll be watching our clues for what happens the rest
Speaker 8: of the year. Will there be a pause in August?
Speaker 8: When will the cuts come? It looks like the Bank
Speaker 8: of England may have been first to the rate hiking party,
Speaker 8: but it's going to be the last to leave and
Speaker 8: take longer than the ECB and the FED to get
Speaker 8: to the pivot.
Speaker 3: Okay, Lizzie, thank you so much for being with me.
Speaker 3: You'll be with me throughout the coming days, of course,
Speaker 3: to cover all things UK economy. Bloomberg's UK correspondent, Lizzie Burden.
Speaker 3: I'm Caroline Hebger here in London and you can catch
Speaker 3: us every weekday morning for Bloomberg Daybreak you at beginning
Speaker 3: at six am in London. That's one am on Wall Street.
Speaker 6: Tom.
Speaker 1: Thank you, Caroline. That was Bloomberg Daybreak Europepost Caroline Hepgar
Speaker 1: and coming up on Bloomberg day Break weekend, India's Prime
Speaker 1: Minister comes to the US to meet with President Biden.
Speaker 1: I'm Tom Busby and this is.
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Speaker 1: I'm Tom Busby in New York with your global look
Speaker 1: ahead at the top stories for investors in the coming week.
Speaker 1: President Biden will host India's Prime Minister, Narendra Mody in
Speaker 1: a state dinner in the coming week. And for more,
Speaker 1: let's go to Hong Kong and Bloomberg Daybreak Asia host
Speaker 1: Doug Prisner.
Speaker 4: Tom The Biden administration recently characterized the relationship with India
Speaker 4: as the most important for the US in the world.
Speaker 4: India is viewed as a vital partner in the US
Speaker 4: effort to push back against China's expanding influence.
Speaker 1: In the world.
Speaker 4: We want to take a closer look now with Bloomberg's
Speaker 4: Rebecca Chung Wilkins. She is our Asia Government and Politics correspondent. Rebecca,
Speaker 4: it's always a pleasure. I think we have to begin
Speaker 4: with the fact that this relationship with the US is
Speaker 4: somewhat complicated, and you have to look no further than
Speaker 4: India's failure to criticize Russia's invasion of Ukraine. Can Prime
Speaker 4: Minister Mody be counted on as a reliable partner for
Speaker 4: the US or will India kind of go its own
Speaker 4: way without a strong alignment? What do you think?
Speaker 11: Well, listen, I don't want to go too far back,
Speaker 11: but India, the very basis of its foreign policy goes
Speaker 11: back to sort of the Cold War when it essentially
Speaker 11: decided to set up this non aligned country framework. So
Speaker 11: it's important to sort of understand that India from the outset,
Speaker 11: since its independent has approached foreign relations with this idea
Speaker 11: of always being somewhat a neutral figure, somewhat a middle man.
Speaker 11: And of course, you know, again during the Cold War
Speaker 11: that really was about striking a balance between the US
Speaker 11: and Russia, and while refraining from being a full on partner,
Speaker 11: a full on ally still developing relationships with both those
Speaker 11: countries that benefit them. Now, India and the US have
Speaker 11: grown much closer over the recent years, and it's really
Speaker 11: particularly accentuated by the fact that India increasingly views China's
Speaker 11: military aggression over disputed territory with India and whatnot as
Speaker 11: sort of an increasing threat. And so as a result,
Speaker 11: we have seen these closer ties between India and the US.
Speaker 11: So Biden is now welcoming Mody, and Mody very much
Speaker 11: wants to be a participant in that. But I think
Speaker 11: it's unlikely that we see any kind of explicit criticism
Speaker 11: on Modi or India's part of Russia. And that's in
Speaker 11: part because it has these very close defense ties to
Speaker 11: Russia and also has been purchasing crude oil from it.
Speaker 4: Yeah, we've heard from the oil minister in India saying
Speaker 4: his country intends to continue doing so. So we know
Speaker 4: given the war in Ukraine, that the West has isolated
Speaker 4: Russia over that conflict, although Moscow has the support of Beijing,
Speaker 4: and I'm curious about the relationship between presidents Putin and
Speaker 4: Chi and how Moody may view that well.
Speaker 11: That is a complicating factor, and much has been made
Speaker 11: of the so called no limits friendship between Vladimir Putin
Speaker 11: and Presidency Dimping. I think we have started to see, however,
Speaker 11: the limits of that. I mean, China has been quite
Speaker 11: vocal about the need for the conflict to avoid any
Speaker 11: kind of nuclear aspect, and it does seem that China
Speaker 11: has become somewhat more public about not explicit criticism in
Speaker 11: any way of Moscow, but at least about the need
Speaker 11: to try and find some kind of peaceful resolution. Chin
Speaker 11: of course has put forward its own so caused a
Speaker 11: peace proposal or a blueprint, but that has been received
Speaker 11: by much skepticism, partly because of season things very cozy
Speaker 11: ties with Putin and also because it's ultimately an agreement
Speaker 11: that favors Moscow.
Speaker 4: Now India doesn't support the Western sanctions on Russia, and
Speaker 4: India continues to place orders for Russian made military weapons.
Speaker 4: How is the US going to navigate that territory? Do
Speaker 4: you have a sense of that?
Speaker 11: Yeah, I mean it's interesting. My colleague Ian Marlow had
Speaker 11: an excellent story citing US senior US defense officials really
Speaker 11: explaining how the US is going to navigate this On
Speaker 11: the one hand, we've sort of seen them staying quiet
Speaker 11: on issues around human rights and civil rights and whatnot
Speaker 11: in India. But the expectation does seem that they're not
Speaker 11: going to be sort of too overtly critical because of
Speaker 11: how important it is for them to win over India
Speaker 11: when it comes to kind of trying to contain nor
Speaker 11: curb China's rise. So we are going to expect to
Speaker 11: see the US sort of rolling out the red carpet
Speaker 11: for India and staying away somewhat from these tricky topics.
Speaker 11: It is worth stressing though, too, like the reason why
Speaker 11: India and Russia that relationship persists, from Modi's point of view,
Speaker 11: is in part because of Chinese military aggression. So India,
Speaker 11: for example, relies on some of those defense supplies to
Speaker 11: actually push back against Chinese military aggression on some of
Speaker 11: those disputed territories in the Himalayan border, for example.
Speaker 4: Well, speaking of rolling out the red carpet, while the
Speaker 4: Prime Minister is in the US, he will reportedly be
Speaker 4: meeting with the CEOs of twenty of the top American firms.
Speaker 4: Now we know that since the pandemic, many of these
Speaker 4: global companies have been reevaluating their supply chains and their
Speaker 4: reliance on exposure to China. So I guess you could
Speaker 4: call it diversifying away from China and towards India. Is
Speaker 4: that enough to entire Modi into changing some of his
Speaker 4: behavior or maybe not?
Speaker 11: I mean, we have certainly seen both China and the
Speaker 11: US sort of try and rival one another to actually
Speaker 11: be India's top trading partner, so US again sort of
Speaker 11: inching out now, And that I think is in part,
Speaker 11: as you say, because India is this very attractive so
Speaker 11: called third country and alternative to China for companies that
Speaker 11: are seeking to diversify. I think it is certainly to
Speaker 11: Modi's advantage, and we have seen that that sort of
Speaker 11: advantage rather than let's say, values based motivations, really driving
Speaker 11: a lot of his decision making when it comes to
Speaker 11: sort of closer ties, forging closer ties with China versus
Speaker 11: the US.
Speaker 4: Do you think that for Beijing the government is a
Speaker 4: little irritated that India has become this other destination point
Speaker 4: for manufacturing of certain types of goods made by Western companies.
Speaker 11: I mean, perhaps to a certain extent. I think the
Speaker 11: bigger concern really for Beijing is this fear that India
Speaker 11: has the ability to tip that balance of power, and
Speaker 11: that as the US tries to kind of form this
Speaker 11: more formal and closer allegiance of countries that are trying
Speaker 11: to contain China, particularly when it comes to strategic tech
Speaker 11: and whatnot, that India can play a pivotal role. And
Speaker 11: of course this shift to the Indo Pacific again in
Speaker 11: terms of sort of military strength, India again plays a
Speaker 11: sort of critical role there as well. So I think
Speaker 11: there is some concern domestic concern for China that it
Speaker 11: really does need to get its economy back up and running,
Speaker 11: and that does of course involve encouraging foreign companies in
Speaker 11: particular to stay in China, to continue expanding in China.
Speaker 11: So any threat to that, of course is somewhat sort
Speaker 11: of undermines that agenda. But I think the bigger issue
Speaker 11: is how the sort of geopolitics is shifting and where
Speaker 11: India ultimately comes out. And we've seen since about twenty
Speaker 11: seventeen India has sort of more closely to the US.
Speaker 4: When you look at the India China relationship, they do
Speaker 4: share a disputed border of more than two thousand miles.
Speaker 4: Can you help me understand how significant this is in
Speaker 4: just the overall relationship.
Speaker 11: Absolutely, it's a really critical part of why India views
Speaker 11: China as such a big threat. And China has tried
Speaker 11: to separate this issue away from, for example, is economic
Speaker 11: and trade issues with India, but India has maintained this
Speaker 11: is really a critical sticking point. And essentially, since twenty twenty,
Speaker 11: China India have been locked in their deadliest border conflict
Speaker 11: in about four decades. Both countries have had fatalities, and
Speaker 11: both countries have tried to increasingly militarize the areas around
Speaker 11: that border, bringing in more soldiers, bringing in more artillery, guns,
Speaker 11: fighter jets and so on. So that really is a
Speaker 11: big sticking point for Mody and seedsmping.
Speaker 4: Rebecca, thank you so much for helping us understand this
Speaker 4: complicated relationship between the US and India as the US
Speaker 4: prepares for the state visit of Prime Minister Narendra Modi
Speaker 4: in the coming week. By the way, he's also been
Speaker 4: invited to address a joint meeting of Congress. Bloomberg's Rebecca
Speaker 4: Chung Wilkins. She is our Asia Government and Politics correspondent.
Speaker 4: I'm Doug Prisner. You can join us weekdays here from
Speaker 4: Bloomberg day Break Asia beginning at six am in Hong Kong,
Speaker 4: six pm on Wall Street.
Speaker 1: Tom, thank you, Doug, and you can hear hosts Doug
Speaker 1: Prisner and colleagues on Bloomberg day Break Asia Sunday through
Speaker 1: Thursday Evening's Wall Street Time and coming up here on
Speaker 1: Bloomberg day Break Weekend, we turn our attention back to
Speaker 1: the Fed because a key Senate committee has scheduled the
Speaker 1: nomination hearing for a number of FED positions. I'm Tom Busby,
Speaker 1: and this is Bloomberg. This is Bloomberg day Break Weekend,
Speaker 1: our global look ahead at the top stories for investors
Speaker 1: in the coming week. I'm Tom Busby in New York.
Speaker 1: A key Senate committee a scheduled a nomination hearing for
Speaker 1: a number of Federal Reserve positions. Talking about the Senate
Speaker 1: Committee on Banking, Housing and Urban Affairs and for more,
Speaker 1: Let's head to our Bloomberg ninety nine one newsroom in
Speaker 1: Washington and Bloomberg Sound On. Co host Kaylee Lines.
Speaker 2: Yeah, Tom, that's right. The Senate Banking Committee will hold
Speaker 2: a hearing this coming Wednesday to consider the nominations of
Speaker 2: Philip Jefferson who's a current board member to be promoted
Speaker 2: to vice chair, and Lisa Cook and Audrena Kogler to
Speaker 2: be FED governors. Cook of course, already became a governor
Speaker 2: last year, but filled a seat with a term that
Speaker 2: ends in January, so she's been renominated to serve another
Speaker 2: full fourteen year term. So the question is will they
Speaker 2: sail through this process or could we see this get political?
Speaker 2: Joining me now as Kate Davidson, who leads our FED
Speaker 2: coverage here in Washington. So, Kate, are we expecting these
Speaker 2: confirmations to be politically difficult at all? Obviously we've seen
Speaker 2: this in the past. Everybody remembers what happened with Sarah
Speaker 2: Bloom Raskin, for example. But if Jefferson and Cook already
Speaker 2: are in the seats, does that make it easier?
Speaker 12: I mean, it's certainly that would be the expectation, right, So,
Speaker 12: Phil Jefferson, he was confirmed I think ultimately ninety seven
Speaker 12: to three I think was the vote.
Speaker 8: It was.
Speaker 12: It was very bipartisan, and he's expected to get a
Speaker 12: lot of supporting and this is a promotion for him.
Speaker 12: He's in a he'll be in a bigger, kind of
Speaker 12: more influential role. You know, the FED Vice chair is
Speaker 12: typically like the right hand man, right or woman of
Speaker 12: the FED chair. You know, he plays a big role
Speaker 12: in getting out the message of the committee and sort
Speaker 12: of reinforcing or amplifying what Chair j Powell wants to communicate.
Speaker 12: I mean typically, right, Leil Brainerd, who was in the
Speaker 12: job before, had a little bit you know, different stuff.
Speaker 12: I mean she you'd occasionally hear her sounded a different
Speaker 12: note on some things, but for the most part that's
Speaker 12: you know, it's an important job. So for sure, I
Speaker 12: think we can expect that he'll get some tough questions
Speaker 12: from members on both sides, and I would imagine that
Speaker 12: you know, Senator Elizabeth Warren, for example, she's been very
Speaker 12: tough on Powell. I'm sure she's going to push Jefferson
Speaker 12: to commit to, you know, backing off of the raid
Speaker 12: hiking campaign, which which of course he won't do. I
Speaker 12: think he'll probably just say what we've heard other FED
Speaker 12: officials say, which is that their data dependent and it
Speaker 12: depends on how the economy evolves. So I think that
Speaker 12: ultimately he'll probably be fine. Lisa Cook, it's a little
Speaker 12: bit less certain. She faced a difficult, difficult confirmation there
Speaker 12: was a lot of pushback from Republicans who had a
Speaker 12: lot of different arguments that you know, frankly, some folks
Speaker 12: said were kind of unfair and we're you know, not
Speaker 12: arguments that some of her colleagues or other people who
Speaker 12: are nominated at the time were facing. But you know,
Speaker 12: things like she she didn't have, you know, the proper experience,
Speaker 12: she wasn't qualified. I mean, obviously she she got widespread
Speaker 12: support from the economic community, so she eventually did get through.
Speaker 12: We haven't heard that same kind of chatter this time around.
Speaker 12: She's on the board now. She made it through, so
Speaker 12: I think we can expect that she'll be fine. You know,
Speaker 12: Democrats still control the Senate, so there are more of them.
Speaker 12: I don't think it will be a problem, but again,
Speaker 12: you could you know, there could be I wouldn't say fireworks,
Speaker 12: but definitely, you know, perhaps a tough line of questioning
Speaker 12: of her and the decision she's made. Since she's been
Speaker 12: on the board, things that she's said. She's kept a
Speaker 12: pretty low profile, so that could also help her. But
Speaker 12: then we do have a third third nominee, Adriana Kougler,
Speaker 12: who was new so that's sort of the big question Mark,
Speaker 12: I think.
Speaker 2: And finally, if all of them were to be confirmed,
Speaker 2: how could FED policy look different under them? So I
Speaker 2: don't think it will.
Speaker 12: Look too different, because, as we've been saying, you know,
Speaker 12: two of them are already on the board, but that third,
Speaker 12: you know, that third official Coogler, I mean she she's
Speaker 12: being nominated by the by the Biden administration, by President Biden,
Speaker 12: so it's fair to expect that probably her views will
Speaker 12: align with, you know, what he would like to see.
Speaker 12: The White House is always pretty careful to not weigh
Speaker 12: in directly on what the FED is doing, but I
Speaker 12: think they recognize inflation is still too high and needs
Speaker 12: to be brought out under control. But also you don't
Speaker 12: want to do too much to undercut the labor market.
Speaker 12: So I would expect that she would hue pretty closely
Speaker 12: to that. That message what we're hearing from from other
Speaker 12: FED officials who were nominated by this administration and are
Speaker 12: currently on the board.
Speaker 2: All right, Kate Davidson, who leads our FED coverage here
Speaker 2: at Bloomberg, thank you so much, and Tom, we'll look
Speaker 2: forward to Wednesday.
Speaker 1: Thank you, Kaylee. That was Bloomberg's SOUNDWN co host Kaylee
Speaker 1: Lines reporting from our Bloomberg ninety nine one newsroom in Washington,
Speaker 1: and you can hear sound on weekdays one to three
Speaker 1: pm on Bloomberg Radio. And that does it for this
Speaker 1: edition of Bloomberg day Break Weekend. Join us again Monday
Speaker 1: morning at five am Wall Street Time for the latest
Speaker 1: on the markets, overseas and the news you need to
Speaker 1: start your day. I'm Tom Buzzby. Stay with us top
Speaker 1: stories and global business headlines. You're coming up right now.