WEBVTT - Bloomberg Daybreak Weekend: Stress Tests, PBOC, Sintra 0:00:02.360 --> 0:00:04.960 This is Bloomberg Daybreak Weekend, our global look at the 0:00:04.960 --> 0:00:07.640 top stories in the coming week from our Daybreak anchors 0:00:07.640 --> 0:00:10.160 all around the world, and straight ahead on the program, 0:00:10.440 --> 0:00:12.680 Time for another big round of stress tests for the 0:00:12.760 --> 0:00:15.560 nation's big banks. I'm Tom Busby in New York. 0:00:15.640 --> 0:00:17.759 I'm Stephen Carolyn London, who we're looking ahead at the 0:00:17.800 --> 0:00:20.520 gathering of many of the world's top central bankers in 0:00:20.560 --> 0:00:22.680 the Portuguese Hilltop ten of Centro. 0:00:22.960 --> 0:00:25.800 I'm Brian Curtis in Hong Kong. What will it take 0:00:25.920 --> 0:00:28.480 to revive the animal spirits in China? 0:00:28.720 --> 0:00:30.880 I'm palely Lyones in Washington, where the end of the 0:00:30.920 --> 0:00:34.600 second fundraising quarter is rapidly approaching for presidential candidates. 0:00:35.440 --> 0:00:39.440 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 0:00:39.479 --> 0:00:43.280 Eleve Them three own New York, Bloomberg ninety nine to one, Washington, DC, 0:00:43.600 --> 0:00:47.040 Bloomberg one O six one, Boston, Bloomberg nine sixty, San 0:00:47.080 --> 0:00:51.680 Francisco DAB Digital Radio, London, Sirius XM one nineteen and 0:00:51.760 --> 0:00:54.680 around the world on Bloomberg Radio dot com and via 0:00:54.720 --> 0:00:55.960 the Bloomberg Business app. 0:01:00.000 --> 0:01:02.080 If I'm Tom Busby, and we begin today's program with 0:01:02.120 --> 0:01:06.200 the nation's banks still emerging from this spring's banking crisis 0:01:06.240 --> 0:01:08.600 and the stress test they're about to face this week, 0:01:08.640 --> 0:01:11.240 and joining us now to talk about those tests and 0:01:11.440 --> 0:01:16.240 all things bank related. Bloomberg Wall Street reporter Shanali Basik. Now, Shanali, 0:01:16.400 --> 0:01:18.840 let's start by walking us through the history of these tests, 0:01:18.880 --> 0:01:22.679 when they started, how they started, and why they're being done. 0:01:23.280 --> 0:01:25.560 The really important thing about these tests is that they 0:01:25.640 --> 0:01:27.920 started in the wake of the two thousand and eight 0:01:27.959 --> 0:01:30.760 financial crisis, and they were set up as a way 0:01:30.800 --> 0:01:33.760 for bank regulators to really test the health of the 0:01:33.800 --> 0:01:38.640 financial system. And these are the big globally systemic financial institutions, 0:01:38.880 --> 0:01:41.120 the big banks that had to take bailout money in 0:01:41.120 --> 0:01:43.679 the wake of the financial crisis, as well as a 0:01:43.720 --> 0:01:48.240 broader array of financial institutions, you know, mid size banks 0:01:48.280 --> 0:01:52.040 really up to two hundred and fifty billion in assets 0:01:52.160 --> 0:01:55.680 or more that have to go through these tests to 0:01:55.760 --> 0:01:58.240 make sure that the financial system is safe and sound. 0:01:58.280 --> 0:01:59.760 And how is the financial system. 0:02:00.440 --> 0:02:04.280 Well, it's an interesting year, isn't it, because a lot 0:02:04.320 --> 0:02:09.520 of these tests were really formulated before the failure of 0:02:09.680 --> 0:02:12.359 three major banks in the United States, three major mid 0:02:12.400 --> 0:02:15.000 size banks in the United States, now all of those 0:02:15.040 --> 0:02:17.360 banks were in and around that two hundred and fifty 0:02:17.400 --> 0:02:21.720 billion dollars threshold and ended up failing for reasons that 0:02:21.760 --> 0:02:25.240 were much different than what was in the stress test themselves. 0:02:25.600 --> 0:02:28.240 So it shows you that while the stress tests have 0:02:28.440 --> 0:02:31.239 really done a lot to make sure that most of 0:02:31.280 --> 0:02:34.280 the banking system is saving money, putting capital aside to 0:02:34.360 --> 0:02:37.440 cover any potential losses in the future, it's also showing 0:02:37.480 --> 0:02:40.240 you that there are certain things that the Federal Reserve 0:02:40.360 --> 0:02:43.080 has not tested for and just has not really seen 0:02:43.160 --> 0:02:44.880 as an issue until more recently. 0:02:45.280 --> 0:02:48.040 So the question is with Silicon Valley Banks, Signature Bank, 0:02:48.080 --> 0:02:50.000 First Republic, what has the FED learned? 0:02:50.520 --> 0:02:52.400 Well, a few things, and it's not just the Fed. 0:02:52.480 --> 0:02:55.800 The market has also learned that everyone thought that deposits 0:02:55.800 --> 0:02:58.120 were very, very sticky, that when people put money in 0:02:58.160 --> 0:03:00.240 the bank, that they would keep it there. And for 0:03:00.400 --> 0:03:02.840 a lot of history that was true, wasn't it. You 0:03:03.000 --> 0:03:05.880 enter your local bank, you put in your savings, you 0:03:05.960 --> 0:03:07.920 left it there and you didn't think about it. But 0:03:08.440 --> 0:03:11.840 in the age of mobile banking, we saw tens of 0:03:11.840 --> 0:03:15.560 billions of dollars leave these banks essentially overnight. When people 0:03:15.560 --> 0:03:18.440 were worried about the strength of their banks, and that 0:03:18.639 --> 0:03:21.440 is one problem. The other problem is how these banks 0:03:21.440 --> 0:03:24.440 have managed their interest rate risk. In most of these 0:03:24.480 --> 0:03:29.799 FED stress test scenarios, you see interest rates eventually decline, 0:03:30.160 --> 0:03:33.040 and the reason is in a time of severe stress, 0:03:33.600 --> 0:03:37.280 you would see the Federal Reserve lower interest rates to 0:03:37.320 --> 0:03:40.520 meet a market shock, not raise interest rates, Whereas in 0:03:40.560 --> 0:03:43.320 the last year we have seen a tremendous rise in 0:03:43.320 --> 0:03:46.200 interest rates that has impacted these banks and has caused 0:03:46.240 --> 0:03:48.560 some severe stresses on the banking system. 0:03:48.560 --> 0:03:51.000 And that was not accounted for in these tests before 0:03:51.120 --> 0:03:53.680 to go up five percent in fifteen months. 0:03:53.920 --> 0:03:56.640 Exactly, and in many cases just the opposite. There's only 0:03:56.680 --> 0:03:59.280 a few scenarios in which the FED has tested interest 0:03:59.320 --> 0:04:02.560 rates in this manner, and it is something that has 0:04:02.600 --> 0:04:05.320 been seen of something of a blind spot for regulators. 0:04:06.240 --> 0:04:09.720 Now it means clearly that the FED has to make 0:04:09.760 --> 0:04:10.880 these tests a little tougher. 0:04:11.440 --> 0:04:14.600 Well, this is interesting. There's a lot of debate around this. 0:04:14.600 --> 0:04:19.400 This year's tests are tougher. You have GDP falling in 0:04:19.480 --> 0:04:22.680 a scenario that is much more severe than what you 0:04:22.680 --> 0:04:25.080 saw last year. In the scenario that the FED is 0:04:25.120 --> 0:04:28.440 posing to the banks, you're also seeing home prices fall 0:04:28.480 --> 0:04:31.760 pretty significantly. So there are certain things about this stress 0:04:31.800 --> 0:04:36.840 test that are showing you that there could be you know, 0:04:36.920 --> 0:04:40.040 severe stresses that these banks undergo, and the question is 0:04:40.080 --> 0:04:42.040 whether they are able to make it through those stresses. 0:04:42.040 --> 0:04:45.080 But like I said, there's other stresses, like those deposit 0:04:45.160 --> 0:04:48.080 runs that are not included in these stress tests, and 0:04:48.160 --> 0:04:51.320 so there's a lot of question about whether they're testing 0:04:51.320 --> 0:04:53.239 all the right things and all the right banks. 0:04:53.600 --> 0:04:56.400 And one thing that came up this year an exploratory 0:04:56.680 --> 0:05:00.840 market shock they're testing for what so fighting. 0:05:00.640 --> 0:05:03.200 It doesn't it doesn't it? Well, remember back in two 0:05:03.240 --> 0:05:05.719 thousand and eight, it was really the big trading desks 0:05:05.920 --> 0:05:10.080 that had ran into trouble. And now what the firms 0:05:10.080 --> 0:05:12.120 are doing here is they're trying to test the big 0:05:12.160 --> 0:05:15.480 investment banks in a harder way. Now, these are not 0:05:15.720 --> 0:05:20.000 tests that are likely going to you know, slap them 0:05:20.000 --> 0:05:23.120 with much higher rules after coming out of this exploratory 0:05:23.120 --> 0:05:25.840 market shock. It is a brand new test and it 0:05:25.920 --> 0:05:27.719 is not part of kind of the core things that 0:05:27.720 --> 0:05:30.960 the FED is testing for. But what the implication is 0:05:31.000 --> 0:05:34.279 here is that the FED will most likely start to 0:05:34.360 --> 0:05:37.960 test these trading desks more and more in the future. 0:05:38.279 --> 0:05:40.880 Remember this is all happening in the backdrop of FED 0:05:41.000 --> 0:05:45.360 Chair Powell speaking to Congress and telling them that there 0:05:45.560 --> 0:05:49.239 will be bigger rules, much bigger rules for the biggest banks. 0:05:49.480 --> 0:05:53.480 He wants to raise capital requirements by maybe twenty percent 0:05:53.560 --> 0:05:56.480 for the eight biggest banks, and he wants to potentially 0:05:56.560 --> 0:05:59.640 test those trading desks more rigorously in the future. But 0:05:59.680 --> 0:06:01.680 those are all things that will come up for public 0:06:01.680 --> 0:06:04.679 comment and it won't really be implemented at a greater 0:06:04.760 --> 0:06:06.279 scale for years to come. 0:06:06.560 --> 0:06:10.080 Well, those capital requirements, as you said, he said, Chairman Powell, 0:06:10.640 --> 0:06:13.159 the eight biggest banks, but there are twenty three banks 0:06:13.160 --> 0:06:15.479 being tested, so some of them are not going to 0:06:15.480 --> 0:06:18.679 face that same kind of scrutiny. But will they also 0:06:18.760 --> 0:06:21.200 have to see their capital requirements rise. 0:06:21.360 --> 0:06:24.080 It's not even just that they may potentially see capital 0:06:24.120 --> 0:06:27.440 requirements rise, it's also that there is likely to be 0:06:27.480 --> 0:06:30.119 a greater set of banks in the future. If you remember, 0:06:30.160 --> 0:06:32.200 I was talking about that two hundred and fifty billion 0:06:32.200 --> 0:06:34.960 dollars limit when it came to the asset base that 0:06:35.000 --> 0:06:37.440 the FED was testing for two fifty billion and above. 0:06:37.880 --> 0:06:39.680 Now the FED is saying that they want to really 0:06:39.680 --> 0:06:42.000 lower that bar to about one hundred billion and so 0:06:42.360 --> 0:06:45.440 that will include a much wider array of banks. Now 0:06:45.520 --> 0:06:47.800 let's put that into the contacts. That's not happening this year. 0:06:47.960 --> 0:06:50.680 But if you look at what Mike Mayo saying, for example, 0:06:50.960 --> 0:06:54.599 the outcome that you'll see here is that the moving 0:06:54.680 --> 0:06:58.520 parts here, you'll see the jesups, these big globally systemic 0:06:58.520 --> 0:07:00.960 financials issutions, those eight big banks, they're likely to come 0:07:01.000 --> 0:07:05.200 out of this just fine and keep buybacks pretty robust 0:07:05.279 --> 0:07:09.000 and really reward Wall Street Bank investors. They'll be just fine, essentially. 0:07:09.360 --> 0:07:12.880 But it's the regional banks that Mike Mayo believes may 0:07:12.880 --> 0:07:15.480 need to hold off on buybacks given the degree of 0:07:15.560 --> 0:07:19.480 uncertainty about the rules. And he's saying that and not 0:07:19.560 --> 0:07:22.800 expecting these banks to fail, but he is expecting the 0:07:22.880 --> 0:07:27.240 rules to disproportionately impact the mid size banks that are 0:07:27.280 --> 0:07:31.440 currently in the process. And regulators are worried, and frankly, 0:07:31.520 --> 0:07:34.680 a lot of frankly more Republican lawmakers are very worried 0:07:34.960 --> 0:07:37.440 that putting more rules on these smaller and mid size 0:07:37.480 --> 0:07:40.720 banks will really constrain those banks in the future to 0:07:40.800 --> 0:07:43.120 do things like buybacks as well as lend more into 0:07:43.120 --> 0:07:44.200 the economy, and. 0:07:44.160 --> 0:07:46.320 Will they have to issue more debt some of these banks. 0:07:46.440 --> 0:07:49.000 That's the other thing. And the worry from Wall Street 0:07:49.080 --> 0:07:51.960 then becomes, if the banks have to issue more debt, 0:07:52.320 --> 0:07:54.960 then does their cost of capital start to rise? 0:07:55.000 --> 0:07:55.720 Do they have to. 0:07:55.640 --> 0:07:59.440 Pay more to bring more money in? It's a complicated 0:07:59.600 --> 0:08:00.520 equation here. 0:08:00.640 --> 0:08:04.280 Now, another thing that has changed greatly is mobile banking. 0:08:05.800 --> 0:08:08.200 You hinted before that, you know when First Republic, within 0:08:08.320 --> 0:08:12.160 minutes of the troubles there, one quarter of their deposits 0:08:13.000 --> 0:08:16.480 on people's phones was just removed gone. I mean, has 0:08:16.520 --> 0:08:19.320 the Fed kept up with that evolution in banking? Do 0:08:19.360 --> 0:08:20.240 you think it's. 0:08:20.120 --> 0:08:23.080 Interesting that you asked that too, because we were just 0:08:23.120 --> 0:08:25.440 talking about how the stress test doesn't really account for, 0:08:25.760 --> 0:08:30.040 you know, mass deposit flight, and you know, you don't 0:08:30.120 --> 0:08:33.720 really often see it either. I mean even some of 0:08:33.840 --> 0:08:37.079 the banks that investors were worried about, yes they saw 0:08:37.080 --> 0:08:41.319 a deposit flight, but that deposit flight was not necessarily 0:08:41.360 --> 0:08:45.560 this deposit flight that came from scares of bank runs. 0:08:46.679 --> 0:08:48.760 You know, I all use Jim Bianco, who is a 0:08:48.760 --> 0:08:51.360 research jannalyst that we speak to a lot here at Bloomberg. 0:08:52.240 --> 0:08:55.760 He always called it a deposit walk, not a deposit run, 0:08:56.200 --> 0:08:59.640 because when interest rates started rising, people did start pulling 0:08:59.640 --> 0:09:03.200 their mind from banks and putting into higher yielding places 0:09:03.200 --> 0:09:06.680 like money market funds, and so you did see deposits slowly, 0:09:06.720 --> 0:09:10.160 slowly moving Internet or no Internet, right, they were moving 0:09:10.200 --> 0:09:13.520 because of the economics. But then you saw that crash 0:09:13.600 --> 0:09:17.600 with Silicon Valley Bank, with that sharp deposit flight, and 0:09:17.679 --> 0:09:20.040 so you can argue it in a lot of ways. 0:09:20.200 --> 0:09:22.440 Probably the Internet made it a lot faster and easier 0:09:22.440 --> 0:09:25.640 to move your money. But also people would have moved 0:09:25.640 --> 0:09:26.480 their money anyways. 0:09:26.640 --> 0:09:29.720 Yeah, they would have, and what it could have should 0:09:29.720 --> 0:09:32.360 have been. So much of this really is backward looking, though, 0:09:32.400 --> 0:09:32.760 isn't it. 0:09:33.160 --> 0:09:35.840 Yeah, it is very backward looking, And I think that 0:09:36.000 --> 0:09:39.400 is always the big fear when it comes to these 0:09:39.400 --> 0:09:44.079 stress tests. But I will say this, while people do 0:09:44.360 --> 0:09:47.720 argue about the scope and the scale of the stress tests, 0:09:48.040 --> 0:09:51.680 even bankers themselves believed that the stress tests overall were 0:09:51.760 --> 0:09:55.000 not positive to the banking system because at the end 0:09:55.000 --> 0:09:57.360 of the day, what it did was it forced a 0:09:57.400 --> 0:10:00.720 more prudent way to operate, and it forced regulators and 0:10:00.720 --> 0:10:02.440 the banks to step back and take a look at 0:10:02.440 --> 0:10:06.080 everything they're doing at all points in time across many 0:10:06.080 --> 0:10:10.240 different scenarios. In a systematic way. You will have some 0:10:10.280 --> 0:10:12.160 of the biggest bankers in the world tell you they're 0:10:12.200 --> 0:10:15.160 happy they're there, they just don't need more of it. 0:10:16.480 --> 0:10:21.200 And going into this week, is there a good feeling 0:10:21.240 --> 0:10:22.640 among the biggest banks. 0:10:23.080 --> 0:10:26.040 There's a frustration knowing that these rules are going to 0:10:26.080 --> 0:10:29.760 get more stringent, especially because there are other rules that 0:10:29.800 --> 0:10:33.440 are also changing for the banks, like the FDIC, for example, 0:10:33.760 --> 0:10:36.400 Since the Federal Deposit Insurance Corporation have lost so much 0:10:36.480 --> 0:10:39.120 money with these bank failures, there's a sense that these 0:10:39.160 --> 0:10:40.880 banks are going to have to pay more already to 0:10:40.920 --> 0:10:43.800 the Deposit Insurance Fund, particularly the biggest banks that will 0:10:43.800 --> 0:10:44.680 have to pay the most. 0:10:44.800 --> 0:10:48.040 Thank you very much, Bloomberg Wall Street reporter Shanali bask 0:10:48.160 --> 0:10:51.240 And coming up on Bloomberg Daybreak weekend, here comes that 0:10:51.360 --> 0:10:55.160 big annual forum of European Central bankers. I'm Tom Busby 0:10:55.320 --> 0:11:11.040 and this is Bloomberg. This is Bloomberg day Break weekend, 0:11:11.080 --> 0:11:13.640 our global look ahead at the top stories for investors 0:11:13.640 --> 0:11:16.160 in the coming week. I'm Tom Busby in New York. 0:11:16.720 --> 0:11:20.040 Up later in our program, China's economy hits a rough patch, 0:11:20.160 --> 0:11:23.319 but first central bankers from all around the world will 0:11:23.320 --> 0:11:25.760 be heading to the Portuguese town of CenTra in the 0:11:25.800 --> 0:11:29.000 coming days for the annual forum hosted by the European 0:11:29.040 --> 0:11:32.200 Central Bank. It's happening at a time when policymakers are 0:11:32.200 --> 0:11:36.280 contemplating an end to their monetary tightening. For more, let's 0:11:36.280 --> 0:11:40.080 head to London and bring in Bloomberg Daybreak eurobanker Stephen Carroll. 0:11:39.880 --> 0:11:42.480 Tom It's a fairytale setting for one of the most 0:11:42.520 --> 0:11:45.920 important global gatherings of central bankers. The town of CenTra 0:11:46.040 --> 0:11:49.360 and the hilltops outside Lesbon is dotted with brightly colored 0:11:49.440 --> 0:11:53.079 palaces worthy of a Disney film. The discussions, though, will 0:11:53.120 --> 0:11:56.440 be much more grounded, as the world's top monetary policymakers 0:11:56.520 --> 0:11:59.520 discuss their efforts to bring down inflation. For more on 0:11:59.640 --> 0:12:02.320 this joined biour Economics needs to be reporter yan Orando, 0:12:02.800 --> 0:12:06.280 who's in Frankfurt ahead of the trip to Portugal. Yana, 0:12:06.360 --> 0:12:07.959 great to have you with us before we get to 0:12:08.040 --> 0:12:09.800 the very serious matters at hand, and I don't want 0:12:09.840 --> 0:12:11.480 to play them down, but I do want to talk 0:12:11.520 --> 0:12:14.559 a little bit about Cintra as a place. Can you 0:12:14.720 --> 0:12:17.800 describe it for us? I've tried my best. How would 0:12:17.840 --> 0:12:19.000 you describe CenTra? 0:12:19.880 --> 0:12:23.719 Oh, it's gorgeous. I had the pleasure of spending a 0:12:23.800 --> 0:12:27.599 couple of days there last year, and let me tell you, 0:12:27.679 --> 0:12:31.000 it's definitely worth a trip. You have whimsical palaces, you 0:12:31.160 --> 0:12:34.520 have extravagant villas, you have ruins of a Moorish castle 0:12:34.600 --> 0:12:37.040 that go way back to the eighth, ninth or tenth 0:12:37.080 --> 0:12:42.720 century for good. But it's just it's colorful, it's mysterious, 0:12:43.600 --> 0:12:47.240 and you know, there is a reason why the Portuguese 0:12:47.320 --> 0:12:50.559 kings chose shows that place as their summer retreat. And 0:12:51.160 --> 0:12:53.120 you know, while we're at it, I have to say 0:12:53.200 --> 0:12:56.720 what's also royal about Cintra is the view from cabud Rocca, 0:12:57.160 --> 0:13:00.400 which is the western most point of mainland. It's not 0:13:00.440 --> 0:13:03.800 far from CenTra. It's definitely worth going and and you know, 0:13:04.640 --> 0:13:07.400 it's it's certainly a nice view. So for those of 0:13:07.480 --> 0:13:10.480 you who of those of our listeners who haven't, who 0:13:10.559 --> 0:13:14.160 haven't gone, it's worth easy easy be retreat or not, 0:13:15.080 --> 0:13:17.679 you know, you should go. You should put it on 0:13:17.800 --> 0:13:18.200 your list. 0:13:18.520 --> 0:13:20.599 It's always a good time to visit CenTra anyway. The 0:13:20.679 --> 0:13:23.160 theme of this year's EASYB Forum, taking place in Cinra 0:13:23.360 --> 0:13:27.959 is macroeconomic stabilization and a volatile inflation environment. It's quite 0:13:27.960 --> 0:13:29.920 a mouthful. What are the big themes that you'll be 0:13:30.000 --> 0:13:30.599 watching out for. 0:13:31.040 --> 0:13:34.280 Yeah, it's certainly an agenda that's featuring many of the 0:13:34.400 --> 0:13:39.040 challenges central banks face today. So they have some really 0:13:39.120 --> 0:13:43.400 interesting papers they'll be discussing on, for example, inflation expectations 0:13:43.440 --> 0:13:47.280 and an economy facing supply shocks, obviously, you know, very 0:13:47.640 --> 0:13:51.599 very very relevant today, on the cost of inflation, on 0:13:51.720 --> 0:13:55.199 the future size of central bank balance sheets, on the 0:13:55.280 --> 0:13:58.880 optimal mix between monetary and fiscal policy. There will be 0:13:58.960 --> 0:14:04.559 discussions on energy markets, on lessons learned from forecasting mistakes, 0:14:04.960 --> 0:14:08.200 so all of that highly highly relevant to the policy 0:14:08.280 --> 0:14:11.480 debate now. And of course the highlight of each CINRA 0:14:12.559 --> 0:14:18.000 conference is the policy panel that features the Governor of 0:14:18.120 --> 0:14:22.240 the Bank of England, the FED chair, the Governor of 0:14:22.280 --> 0:14:24.920 the Bank of Japan, and of course the ECB President 0:14:25.400 --> 0:14:26.240 Christine Lagarde. 0:14:26.720 --> 0:14:29.200 Yeah, of course, it's a really fascinating moment to be 0:14:29.320 --> 0:14:32.600 discussing monetary policy as well, as we have global central 0:14:32.680 --> 0:14:35.840 banks shifting in many cases towards the end of their 0:14:35.960 --> 0:14:40.520 hiking cycle, or at least that's the current expectations the ECB, 0:14:40.760 --> 0:14:43.440 of course, given that they're the hosts out in force 0:14:43.680 --> 0:14:46.760 at this event. Are the Hawks and the Doves getting 0:14:46.760 --> 0:14:48.480 an equal share of time? Do you think here? 0:14:49.280 --> 0:14:51.280 Well, we've certainly invited all of them to join us 0:14:51.360 --> 0:14:53.760 on TV for interviews, so it's. 0:14:53.440 --> 0:14:56.360 Up to them, and they're WELLcom on radio as well well. 0:14:56.480 --> 0:15:00.360 I will make sure to tell them. But jokes side, 0:15:00.720 --> 0:15:03.840 all of the ECB board members will make an appearance 0:15:04.400 --> 0:15:08.680 during the panel discussions and during the conference, and of 0:15:08.800 --> 0:15:12.119 course lots of Governing Council members will be in attendance. 0:15:12.600 --> 0:15:15.800 They are known to ask questions during the sessions, so 0:15:15.920 --> 0:15:17.800 we will hear from from a fair share of them, 0:15:17.840 --> 0:15:20.440 and I'm certainly looking forward to catching up with them, 0:15:20.920 --> 0:15:24.680 you know, one by one and in big groups. It's 0:15:24.720 --> 0:15:27.160 a nice atmosphere there. You really get to spend some 0:15:27.280 --> 0:15:28.240 time with them and. 0:15:28.280 --> 0:15:31.400 Get insights, of course, into those all important decisions coming 0:15:31.480 --> 0:15:35.240 up for central banks. The ECB's next meeting is in July. 0:15:35.560 --> 0:15:38.640 What's the current thinking about where the ECB is on 0:15:38.840 --> 0:15:40.760 its rate tightening path. 0:15:41.840 --> 0:15:46.880 Well, certainly inflation is not going in the direction that 0:15:47.000 --> 0:15:49.320 the ECB wants to see it go, or at least 0:15:49.400 --> 0:15:53.840 not fast enough. They did revise up their inflation outlook 0:15:54.480 --> 0:15:57.920 at the last meeting, and that's certainly not you know, 0:15:58.000 --> 0:16:01.720 what you want to do in this situation. So they 0:16:02.200 --> 0:16:08.320 have been very determined in suggesting or even almost pre 0:16:08.480 --> 0:16:12.800 announcing that raids will will rise again in July, that 0:16:12.960 --> 0:16:15.400 at least one more rate hike is coming. We are 0:16:15.560 --> 0:16:18.760 hearing from a lot of Governing Council members now about 0:16:18.840 --> 0:16:22.080 September whether that, you know, should be on the table, 0:16:22.200 --> 0:16:25.040 whether that should already be considered sort of a done deal. 0:16:25.960 --> 0:16:28.360 So so it's going to be very interesting to see 0:16:29.920 --> 0:16:33.600 where where they see monetary policy heading, but also where 0:16:34.480 --> 0:16:38.800 you know, how they see the monetary tightening in place 0:16:39.240 --> 0:16:43.800 already since since last July, actually how that is reaching 0:16:43.880 --> 0:16:47.200 the economy. And you know, we've we've seen some transmission 0:16:47.280 --> 0:16:51.360 problems because of labor market strength and and a shortage 0:16:51.400 --> 0:16:55.080 of workers there. So they're really dealing with the situation 0:16:55.240 --> 0:16:58.280 they they haven't they haven't seen before. There is no 0:16:58.480 --> 0:17:01.600 textbook example of how to deal with their challenges we're facing, 0:17:01.920 --> 0:17:05.040 and that's interesting. So it's about where rates are heading 0:17:05.440 --> 0:17:10.000 and and but also how how you how you go 0:17:10.200 --> 0:17:12.719 beyond uh you know, once you're freege to peak, how 0:17:12.880 --> 0:17:14.440 how policy pans out after that? 0:17:15.040 --> 0:17:16.359 Yeah, you want to stay with us. I want to 0:17:16.400 --> 0:17:18.600 get bring us in some of the market's perspective on 0:17:18.720 --> 0:17:21.080 this too. And a conversation that we had on Bloomberg 0:17:21.160 --> 0:17:22.960 Radio in the past few days with Sonia Martin is 0:17:23.040 --> 0:17:25.680 chief f extrastist at DZ Bank. We asked her about 0:17:25.880 --> 0:17:30.160 about her expectations for euro dollar given this shifting point 0:17:30.359 --> 0:17:33.000 in central bank policies on both sides of the Atlantic. 0:17:33.280 --> 0:17:33.639 I think the. 0:17:33.680 --> 0:17:36.359 Market's some overreacted to the c B a little bit. 0:17:36.480 --> 0:17:38.880 I mean, yes, they were hawkish, but so was the Fed. 0:17:38.960 --> 0:17:41.480 To be honest, if anything, and just really short term, 0:17:41.560 --> 0:17:43.200 I think there's a risk that we're going to see 0:17:43.240 --> 0:17:46.480 your doll trading lower again. I think the big turnaround 0:17:46.600 --> 0:17:49.360 has to come from the fundamentals. You know, when US 0:17:49.440 --> 0:17:52.200 goes into a recession and your zone performs better, which 0:17:52.240 --> 0:17:54.560 is like to happen as we move into the autumn. 0:17:54.840 --> 0:17:56.400 I think that's going to be the point where your 0:17:56.440 --> 0:17:59.479 dollar has the potential to really go above one ten 0:17:59.600 --> 0:18:02.399 and move hired to support one fifteen is sort of 0:18:02.440 --> 0:18:04.720 our target, but I don't think the timing is right yet. 0:18:05.160 --> 0:18:06.720 Which of the major center banks do you think is 0:18:06.760 --> 0:18:09.119 most at risk of a policy mistake. Then, given that 0:18:09.680 --> 0:18:12.399 delicate position therein that you outlined. 0:18:12.240 --> 0:18:15.320 Well, there's always been just because of who's to judge 0:18:15.320 --> 0:18:17.120 whether it was a mistake or not, because we will 0:18:17.160 --> 0:18:20.120 never know what the alternative was. There's certainly a risk 0:18:20.200 --> 0:18:22.119 over shooting, I think definitely. When we're looking at the 0:18:22.160 --> 0:18:24.520 banks of England right now, I think ultimately the mistake 0:18:24.640 --> 0:18:26.680 or not will be determined by the ability of the 0:18:26.760 --> 0:18:30.080 central banks to then reverse course once the timing is right. 0:18:30.160 --> 0:18:32.720 I mean, you may have hiked once so many times, 0:18:32.840 --> 0:18:34.800 that's not really going to hurt the economy and massively, 0:18:35.480 --> 0:18:37.840 I think to get the timing right to change course 0:18:37.880 --> 0:18:40.440 when inflation will still be kind of persistently high, that's 0:18:40.480 --> 0:18:42.800 going to be the real the real skill, and that's 0:18:42.920 --> 0:18:44.520 you know, that's not going to happen till next year. 0:18:44.560 --> 0:18:47.680 I think that Sony Martin from DZ Bank jan Arande 0:18:47.840 --> 0:18:48.439 is still with us. 0:18:48.520 --> 0:18:48.800 Jana. 0:18:48.960 --> 0:18:50.840 You mentioned there are some of the special guests at 0:18:50.920 --> 0:18:53.960 this ECB event in CenTra Jerome pal from the Fed, 0:18:54.080 --> 0:18:56.199 Casure Away from the Bank of Japan, Andrew Bailey from 0:18:56.240 --> 0:18:58.920 the Bank of England. How much do these central bankers 0:18:59.240 --> 0:19:01.960 share the same challenges as the ECB When. 0:19:01.840 --> 0:19:03.960 You look at the FED at the in the US, 0:19:04.359 --> 0:19:07.960 most of their problems are demand driven. So we had 0:19:08.560 --> 0:19:12.800 massive fiscal stimulus following the pandemic. A lot of a 0:19:12.880 --> 0:19:15.160 lot of what we see in the US is really 0:19:15.240 --> 0:19:18.119 demand driven, So in that sense, there is something the 0:19:18.160 --> 0:19:21.240 FED can do about about it with rate increases. When 0:19:21.280 --> 0:19:23.160 you look at the Bank of England, on the other hand, 0:19:24.359 --> 0:19:27.560 their problems have a lot to do with supply, and 0:19:27.760 --> 0:19:31.440 one factor that plays into the cards here is Brexit. 0:19:31.520 --> 0:19:34.840 Of course massive impact on the labor market, but also 0:19:34.920 --> 0:19:38.760 on trade. So there the Bank of England really is 0:19:38.800 --> 0:19:42.440 in a tough position. And you know, with rates potentially 0:19:42.880 --> 0:19:44.760 having to go up all the way to six percent, 0:19:45.119 --> 0:19:47.920 there was certainly a big risk that it would crush 0:19:47.960 --> 0:19:50.560 the economy. So it's going to be very very interesting 0:19:50.680 --> 0:19:54.320 to have all these central bankers on one podium, having 0:19:54.359 --> 0:19:56.960 them respond and discuss. I'm certainly looking forward to that. 0:19:57.480 --> 0:20:00.960 Yeah, some fascinating conversations ahead. Thank you Toomberg's ECB reporter 0:20:01.080 --> 0:20:03.760 Jana Randew and Yano're bringing us coverage of the CenTra 0:20:03.920 --> 0:20:08.000 ECB forum on Bloomberg Radio as well. I'm Stephen Carroll 0:20:08.040 --> 0:20:10.159 in London. You can catch us every weekday morning. Here 0:20:10.200 --> 0:20:12.760 for Bloomberg Daybreak Europe. Begetting at six am in London 0:20:12.960 --> 0:20:14.480 and one am on Wall Street. 0:20:14.760 --> 0:20:17.520 Tom, thank you Steven, And coming up on Bloomberg day 0:20:17.520 --> 0:20:20.720 Break weekend to look at China's economy, at prospects for 0:20:20.880 --> 0:20:24.760 stimulus amid some key economic data. I'm Tom Busby, and 0:20:25.000 --> 0:20:26.679 this is Bloomberg. 0:20:31.200 --> 0:20:35.680 Broadcasting live from the Bloomberg Interactive Brokers Studio in New York. 0:20:35.800 --> 0:20:38.880 Bloomberg elemon three to oh to Washington, d C, Bloomberg 0:20:38.960 --> 0:20:41.800 ninety nine to one to Boston, Bloomberg one O six 0:20:41.920 --> 0:20:45.159 one to San Francisco, Bloomberg nine sixteen to the Country, 0:20:45.240 --> 0:20:49.520 Serrius XM channel one to nineteen to London DAB Digital Radio, 0:20:49.640 --> 0:20:52.760 and around the globe the Bloomberg Business app in Bloomberg 0:20:52.840 --> 0:20:56.360 Radio dot Com. This is Bloomberg Daybreak Weekend. 0:21:02.240 --> 0:21:04.280 I'm Tom Busby in New York with your global look 0:21:04.280 --> 0:21:06.600 ahead at the top stories for investors in the coming week. 0:21:07.160 --> 0:21:10.200 You know all the talk about how China's economy would 0:21:10.200 --> 0:21:14.560 come roaring back post pandemic, after all the COVID shutdowns eased. Well, 0:21:15.040 --> 0:21:17.480