WEBVTT - Daybreak Weekend: Fed Meeting, BOE Decision, Tech Earnings 0:00:00.120 --> 0:00:06.760 Bloomberg Audio Studios, podcasts, radio news. 0:00:09.840 --> 0:00:12.400 This is Bloomberg Daybreak Weekend, our global look at the 0:00:12.400 --> 0:00:15.080 top stories in the coming week from our Daybreak anchors 0:00:15.080 --> 0:00:17.560 all around the world, and straight ahead on the program, 0:00:17.560 --> 0:00:19.759 a look ahead to tech earnings from some of the 0:00:19.800 --> 0:00:23.599 Magnificent Seven. Also a monetary policy decision from the Fed. 0:00:24.239 --> 0:00:25.840 I'm Tom Busby in New York. 0:00:26.040 --> 0:00:28.680 I'm Calline Hecker heavy London, where we're assessing what is 0:00:28.720 --> 0:00:32.000 at stake at the next Bank of England policy meeting. 0:00:32.400 --> 0:00:35.680 I'm dek Prisner looking ahead to earnings from Apple and 0:00:35.800 --> 0:00:39.760 Samsung and what these companies will say about artificial intelligence. 0:00:42.479 --> 0:00:46.440 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 0:00:46.479 --> 0:00:48.960 E Loove Them three own New York, Bloomberg ninety nine 0:00:49.000 --> 0:00:52.400 to one, Washington, DC, Bloomberg one O six one, Boston, 0:00:52.479 --> 0:00:57.280 Bloomberg nine sixty, San Francisco, DAB Digital Radio, London, Sirius 0:00:57.400 --> 0:01:00.680 XM one nineteen and around the world on Blue Bomberg Radio, 0:01:00.760 --> 0:01:03.000 dot com and via the Bloomberg Business app. 0:01:07.000 --> 0:01:08.800 Good day to you. I'm Tom Busby, and we begin 0:01:08.880 --> 0:01:12.120 today's program with the Federal Reserve FED officials holding a 0:01:12.160 --> 0:01:15.720 two day policy meeting this week, issuing a monetary decision 0:01:16.040 --> 0:01:18.880 on Wednesday. Now this coming Friday, we also get the 0:01:18.959 --> 0:01:21.360 job data in the US for the month of July, 0:01:21.440 --> 0:01:24.520 is something that could impact Fed policy moving forward. For 0:01:24.560 --> 0:01:27.000 more on what to expect, we're joined by Michael McKee, 0:01:27.040 --> 0:01:32.400 Bloomberg International Economics and Policy correspondent Michael seven meetings in 0:01:32.440 --> 0:01:35.440 a row the Federal Open Markets Committee, leaving rates unchanged. 0:01:35.720 --> 0:01:38.119 What do you expect to see on Wednesday? 0:01:38.360 --> 0:01:40.840 Well, happy anniversary. By the way, it was July of 0:01:40.880 --> 0:01:45.319 twenty twenty three when the FED finally stopped raising interest rates. 0:01:45.680 --> 0:01:48.840 So we've been higher for longer? Is it for long enough? 0:01:49.400 --> 0:01:52.400 Probably not this week. The Fed has not given us 0:01:52.440 --> 0:01:55.160 an indication that they're going to cut rates this week, 0:01:55.320 --> 0:01:58.360 so there is no reason to think that they will 0:01:58.360 --> 0:02:01.200 because they don't like to surprise them Mark. However, the 0:02:01.240 --> 0:02:05.200 big expectation is for them to signal a September rate 0:02:05.240 --> 0:02:07.880 cut in the statement and then Jay Powell to follow 0:02:07.920 --> 0:02:12.000 it up in his news conference, and that would probably 0:02:12.040 --> 0:02:14.080 produce much the same as a rate cut, in the 0:02:14.120 --> 0:02:17.160 sense that the markets will then start discounting a rate cut, 0:02:17.880 --> 0:02:21.440 Yields will go down, and it's it's sort of the 0:02:21.480 --> 0:02:22.519 same effect. 0:02:23.000 --> 0:02:25.840 Even if they don't cut rates this time, it's like 0:02:26.160 --> 0:02:29.120 a dec in hockey. Now, the hopes, the bets for 0:02:29.240 --> 0:02:32.920 September rate cut obviously being bolstered by some pretty encouraging data. 0:02:33.000 --> 0:02:35.440 Let's talk about that. On Friday, the PCE. 0:02:36.080 --> 0:02:40.160 Yeah, Friday, we got the PCE inflation numbers which showed 0:02:40.320 --> 0:02:44.320 a sort of ongoing decline. The core rate didn't change 0:02:44.360 --> 0:02:46.600 on a year over year basis two point six percent, 0:02:46.960 --> 0:02:49.639 but we just did see the headline number go down 0:02:49.639 --> 0:02:51.960 to two point five percent, and that puts you in 0:02:52.040 --> 0:02:56.800 the within range of the two percent target. And remember 0:02:56.840 --> 0:02:59.280 that j Powell and others on the Fed have said 0:02:59.280 --> 0:03:02.240 they don't want to wait to start cutting rates until 0:03:02.280 --> 0:03:04.640 they get to two percent, and he had sort of 0:03:04.680 --> 0:03:07.920 suggested at his last press conference that it was a 0:03:08.040 --> 0:03:09.520 range of two to two and a half. 0:03:09.600 --> 0:03:11.160 So so we're in that ring. 0:03:11.240 --> 0:03:13.320 We're sort of in that range right now. 0:03:13.760 --> 0:03:16.680 That's good. And earlier this past week, second quarter GDP 0:03:17.080 --> 0:03:19.079 grew by much larger than expected. 0:03:19.440 --> 0:03:22.040 There were a number of people going into the week 0:03:22.680 --> 0:03:25.760 and during the week who were suggesting maybe the Fed 0:03:25.840 --> 0:03:28.520 needed to cut rates in July because otherwise they'd be 0:03:28.560 --> 0:03:31.600 behind the curve, but the stronger that expected GDP numbers 0:03:31.639 --> 0:03:35.560 two point eight percent, a big increase from the first quarter, 0:03:36.160 --> 0:03:40.680 sort of reassure them that they are they don't have 0:03:40.720 --> 0:03:44.080 to rush, that the economy is not on the brink 0:03:44.480 --> 0:03:47.640 or the precipice of recession. That's not to say things 0:03:47.640 --> 0:03:51.760 can't get worse. This coming Friday, after the FED meeting, 0:03:51.760 --> 0:03:53.680 we get the jobs report, which is too bad for 0:03:53.720 --> 0:03:56.480 the Fed. I'm sure they'd like it beforehand. But the 0:03:56.600 --> 0:04:00.600 unemployment rate there is if it's for it's point one percent, 0:04:00.640 --> 0:04:02.320 now it goes up to four point two percent, then 0:04:02.320 --> 0:04:05.200 that triggers the famous Sam rule that suggests that we're 0:04:05.200 --> 0:04:09.680 getting close to a recession, and that will scare the markets. 0:04:09.760 --> 0:04:12.160 That will scare the horses, and we may get a 0:04:12.160 --> 0:04:13.080 reaction in the markets. 0:04:13.200 --> 0:04:14.880 That's the barometer four point two percent. 0:04:15.200 --> 0:04:18.159 Well it's not four point two percent, it's it's a 0:04:18.160 --> 0:04:22.800 bit complicated, but basically the three month moving average. Subtract 0:04:22.839 --> 0:04:27.279 from that the lowest three month moving average of the 0:04:27.279 --> 0:04:30.040 past twelve months, and you get a number, and then 0:04:30.240 --> 0:04:34.680 if it's greater than half a percent, then it has 0:04:34.800 --> 0:04:38.359 always forecast recession in the past. Now and it would 0:04:38.360 --> 0:04:40.919 only take going to four point two percent to get 0:04:40.960 --> 0:04:41.599 that rate. 0:04:42.160 --> 0:04:44.640 Well, let's stay on it on the jobs report this Friday. 0:04:44.680 --> 0:04:48.160 So now in June a little softer but still pretty solid, 0:04:48.200 --> 0:04:50.719 two hundred and six thousand jobs. What do you expect 0:04:50.720 --> 0:04:51.320 to see then in. 0:04:51.320 --> 0:04:54.680 July, Well, the forecast is for one hundred and seventy 0:04:54.680 --> 0:04:58.080 five thousand, But the last three four months we have 0:04:58.200 --> 0:05:01.000 had forecasts in that range and they've come in stronger 0:05:01.040 --> 0:05:04.920 than that. So I don't know if you're a trend 0:05:04.960 --> 0:05:08.520 better or not, but you might. You might think that 0:05:09.080 --> 0:05:11.040 it's going to at some point it has to start 0:05:11.080 --> 0:05:13.480 slowing down, but it hasn't yet. The big number, though, 0:05:13.520 --> 0:05:15.480 is they say is going to be unemployment. It's forecast 0:05:15.560 --> 0:05:18.719 to remain unchanged at four point one percent, but of 0:05:18.760 --> 0:05:20.880 course a lot of you get into the three digits 0:05:21.240 --> 0:05:23.680 and you can get rounding and it could go up 0:05:23.680 --> 0:05:25.520 to four point two percent. So there'll be a lot 0:05:25.520 --> 0:05:27.880 of focus on that because of this some rule thing. 0:05:28.320 --> 0:05:31.440 But it does look like at this point that wages 0:05:31.480 --> 0:05:35.200 are slowing down. They slowed down in the PCE numbers, 0:05:35.800 --> 0:05:39.040 and they've been slowing on a month over a month 0:05:39.080 --> 0:05:42.719 basis in the employment numbers. Then we get on Wednesday, 0:05:42.760 --> 0:05:45.520 ahead of the Fed, we get the Employment cost Index. 0:05:45.839 --> 0:05:47.760 That's something they'll be looking at to see what wages 0:05:47.800 --> 0:05:51.960 are doing. But if wages are well behaved and we 0:05:52.040 --> 0:05:55.640 don't get a collapse in jobs or a big rise 0:05:55.680 --> 0:05:58.280 in unemployment, then the FED is going to be satisfied 0:05:58.320 --> 0:06:00.920 with waiting until September. 0:06:00.839 --> 0:06:05.320 And all that. All that, the wages, moderating inflation. It 0:06:05.360 --> 0:06:07.760 appears to show that the Fed's Higher for Longer campaign 0:06:08.480 --> 0:06:11.599 is working. No disastrous impact on the economy. 0:06:11.279 --> 0:06:14.960 No disastrous impact. I hate to use the soft landing analogy. 0:06:16.080 --> 0:06:19.760 It's almost become a cliche by now, but it looks 0:06:19.800 --> 0:06:22.600 like we're kind of there now. They don't want to 0:06:22.600 --> 0:06:24.640 say that because in the minute they do, it's like 0:06:24.720 --> 0:06:28.080 jinxing themselves and something will go wrong. But at some 0:06:28.160 --> 0:06:31.479 point you got to, as the famous senator said about 0:06:31.520 --> 0:06:33.799 the Vietnam War, you got to declare victory and go home. 0:06:35.520 --> 0:06:36.520 So maybe they'll do that. 0:06:36.960 --> 0:06:38.280 Yeah, this week, maybe that's coming. 0:06:38.320 --> 0:06:38.440 Well. 0:06:38.440 --> 0:06:40.520 The FED wraps up it's latest two day policy meeting 0:06:40.640 --> 0:06:44.400 this Wednesday, a decision expected around two pm Wall Street time, 0:06:44.400 --> 0:06:47.680 and our thanks to Michael McKee Bloomberg International Economics and 0:06:47.760 --> 0:06:50.839 policy correspondent. We move now to earnings from some of 0:06:50.880 --> 0:06:53.880 the nation's biggest tech companies, on the heels of kind 0:06:53.880 --> 0:06:57.120 of disappointing reports from Tesla and Alphabet last week. Now, 0:06:57.120 --> 0:06:59.279 in the days ahead, we're going to hear from more 0:06:59.400 --> 0:07:03.720 the so called Magnificent seven like Microsoft, Meta Platforms, Apple, 0:07:03.920 --> 0:07:06.680 and Amazon. And for more on what to expect, we're 0:07:06.760 --> 0:07:12.200 joined by Mandeep Singh Bloomberg Intelligence, senior tech industry analysts. Now, 0:07:12.240 --> 0:07:14.400 Man Deep, let's start with what we saw last week 0:07:14.560 --> 0:07:18.520 Alphabet and Tesla. What was it that rattled the markets 0:07:18.600 --> 0:07:19.880 and investors? 0:07:20.520 --> 0:07:23.720 Sure, Tom So, Look, when it comes to Alphabet, it 0:07:23.960 --> 0:07:27.280 was pretty obvious that the market is focused on what 0:07:27.320 --> 0:07:30.280 they're going to spend on CAPEX this year. And the 0:07:30.360 --> 0:07:34.200 fact that you know, they spend billion dollars above consensus 0:07:34.200 --> 0:07:37.560 expectations for this quarter and said it's going to be 0:07:38.080 --> 0:07:41.800 higher than their two Q numbers for the next two quarters. 0:07:42.120 --> 0:07:45.080 Clearly it suggests that they will keep spending. And the 0:07:45.400 --> 0:07:48.560 CEO mentioned that in his remarks that they would rather 0:07:48.720 --> 0:07:54.200 overspend right now on AI as opposed to underspend. And look, 0:07:54.560 --> 0:07:57.800 I think what they are suggesting is they want to 0:07:57.840 --> 0:08:02.480 build more capacity because they're that reflected in the cloud numbers. 0:08:02.880 --> 0:08:06.840 So in the case of Alphabet, Google Cloud segment actually 0:08:06.880 --> 0:08:10.680 had a sequential acceleration. It grew twenty nine percent. And 0:08:11.360 --> 0:08:14.400 what it tells me about Microsoft is, look, they will 0:08:14.440 --> 0:08:17.640 be reporting next week and last quarter, Azure, which is 0:08:17.680 --> 0:08:21.680 the equivalent of Google Cloud, grew thirty one percent at 0:08:21.720 --> 0:08:25.120 a much higher base. Microsoft Cloud is a seventy six 0:08:25.160 --> 0:08:28.520 billion dollar rundread business. Google Cloud is about forty billion, 0:08:29.080 --> 0:08:32.960 And so if they are able to show AI contributing 0:08:33.600 --> 0:08:37.160 to the growth in Azure segment, then clearly you know 0:08:37.200 --> 0:08:40.240 it's paying off for these hyperscalers. And in the case 0:08:40.240 --> 0:08:44.479 of Microsoft, they're also monetizing it with their office Copilot, 0:08:44.600 --> 0:08:47.880 So you want to see an acceleration in both those 0:08:47.880 --> 0:08:51.760 segments Office Copilot as well as Microsoft Azure the infrastructure 0:08:51.800 --> 0:08:55.760 sign and Look. With Tesla, I think it was more 0:08:55.760 --> 0:09:00.920 idiosyncratic because they set expectations for a robotaxi launch on 0:09:01.000 --> 0:09:06.000 August eighth, then they said they'll move it to October 0:09:06.120 --> 0:09:07.680 tenth now, and. 0:09:08.040 --> 0:09:11.000 It's only a prototype, not even a real vehicle yet. 0:09:11.080 --> 0:09:13.920 Yeah, but I will give them credit to the extent 0:09:13.960 --> 0:09:16.480 that you know, they're still the furthest along when it 0:09:16.520 --> 0:09:19.360 comes to doing something like this. So think about all 0:09:19.440 --> 0:09:23.240 the other carmakers. They're not even in this game, not close. 0:09:23.559 --> 0:09:26.280 So the fact that they are spending those R and 0:09:26.360 --> 0:09:29.680 D dollars on something that could be a big market 0:09:29.720 --> 0:09:33.080 down the line, whether it becomes feasible this year, next year, 0:09:33.720 --> 0:09:36.640 I mean clearly, I think they still have a lead. 0:09:36.840 --> 0:09:40.360 And obviously they're not managing expectations very well, which is 0:09:40.360 --> 0:09:44.600 why you see that sort of stock reaction. But I 0:09:44.679 --> 0:09:48.079 feel with Tesla it's going to be volatile, just because 0:09:48.160 --> 0:09:50.880 you know, it will all depend on how quickly they 0:09:51.600 --> 0:09:52.800 time this to market. 0:09:52.720 --> 0:09:55.880 When they deliver. Now that was then now this week, 0:09:55.960 --> 0:09:59.040 looking ahead, we're going to hear from you already brought 0:09:59.120 --> 0:10:03.199 up Microsoft as you're it's relationship with open Ai, and 0:10:03.559 --> 0:10:06.000 it's I mean, they're way ahead of the pack on AI, 0:10:06.200 --> 0:10:06.720 aren't they. 0:10:07.200 --> 0:10:12.360 Well, I think what you're finding is other competitors are 0:10:12.440 --> 0:10:15.199 catching up when it comes to the large anglid model. 0:10:15.280 --> 0:10:20.000 So this week Meta actually released their latest large anglid model, 0:10:20.040 --> 0:10:22.840 the three point one version, and they have closed the 0:10:22.880 --> 0:10:28.120 performance gap. I mean, look for consumers like us, we 0:10:28.240 --> 0:10:31.120 read you know about these models and the fact that 0:10:31.160 --> 0:10:35.480 they can reason, they can generate images, they can generate texts, 0:10:35.600 --> 0:10:38.760 do summaries, but it's very hard for us to see 0:10:38.840 --> 0:10:42.920 real time use cases because it's still you know, in 0:10:43.000 --> 0:10:46.280 the development. These companies are in the process of deploying it. 0:10:46.960 --> 0:10:50.880 And to me, the fact that they are kind of 0:10:50.920 --> 0:10:54.760 comparing themselves on benchmarks and saying the performance is almost 0:10:54.800 --> 0:10:59.920 equal doesn't vote very well for open ai because anthropic metal, 0:11:00.800 --> 0:11:03.840 they're all catching up at the same time. With that 0:11:03.880 --> 0:11:07.120 being said, Microsoft still is showing it in the numbers. 0:11:07.160 --> 0:11:10.840 That's why that growth rate of Azure and the copilot 0:11:11.200 --> 0:11:16.200 contribution is very important. If you start to see that moderating, 0:11:16.600 --> 0:11:19.520 then clearly you know the lead is narrowing and that 0:11:19.559 --> 0:11:23.240 will have an impact. Instead of Microsoft being the clear winner, 0:11:23.600 --> 0:11:26.800 you will have others kind of catch up. 0:11:26.720 --> 0:11:27.360 Catching up fast. 0:11:27.440 --> 0:11:27.840 Yeah. 0:11:27.880 --> 0:11:30.439 Well, now that leads me to a point meta platforms. 0:11:31.120 --> 0:11:35.360 You know, it's always been about user numbers for Facebook, WhatsApp, 0:11:35.400 --> 0:11:41.680 Instagram advertising revenue. Is Wall Street now putting that behind 0:11:41.720 --> 0:11:45.040 them and just focusing on AI? And what have you 0:11:45.080 --> 0:11:48.280 done for me lately? How have you monetized AI or 0:11:48.360 --> 0:11:50.200 is that still going to be a big focus? How 0:11:50.200 --> 0:11:52.400 many average daily and monthly users. 0:11:52.760 --> 0:11:55.800 It will absolutely be a focus because guess what, Meta 0:11:55.840 --> 0:11:59.360 will also raise their capex, and we know the capex 0:11:59.400 --> 0:12:03.240 increases right now are not helping these companies when it 0:12:03.240 --> 0:12:06.440 comes to the stock performances. We saw a negative reaction 0:12:06.520 --> 0:12:10.360 with Alphabet. I expect something similar with Meta given the 0:12:10.440 --> 0:12:13.920 valuations these companies are training at. Remember MAC seven stocks 0:12:13.920 --> 0:12:17.800 have done phenomenally well, so the valuations are rich, and 0:12:18.000 --> 0:12:21.840 so any increase in capex is not good for the stocks. 0:12:21.920 --> 0:12:26.000 And so clearly Street cares about monetization. And if Meta 0:12:26.040 --> 0:12:28.760 is saying we are open sourcing our large anglid model 0:12:29.000 --> 0:12:32.280 and we have no kind of roadmap to monetizing it, 0:12:32.400 --> 0:12:34.720 that's not good news. And so they are the only 0:12:34.760 --> 0:12:38.480 ones right now who are open sourcing everything on the 0:12:38.520 --> 0:12:42.000 generative AI side with no plans to monetize. Remember Google 0:12:42.000 --> 0:12:45.560 and Microsoft are monetizing through their cloud through their copilots. 0:12:45.840 --> 0:12:48.560 They're not open sourcing it. Meta is the one that's 0:12:48.600 --> 0:12:50.760 saying we are giving it away for free. 0:12:51.040 --> 0:12:53.199 Well, a full slate of tech earnings in the coming 0:12:53.200 --> 0:12:55.199 week a lot to look forward to. Our thanks to 0:12:55.280 --> 0:13:00.320 Mandeep Sing, Bloomberg Intelligence Senior tech industry analyst up on 0:13:00.320 --> 0:13:02.960 Bloomberg day Break weekend, a look at what's at stake 0:13:03.160 --> 0:13:06.360 at the Bank of England's next policy meeting. I'm Tom 0:13:06.400 --> 0:13:19.640 Busby and this is Bloomberg. This is Bloomberg day Break weekend, 0:13:19.679 --> 0:13:22.079 our global look ahead at the top stories for investors 0:13:22.120 --> 0:13:24.679 in the coming week. I'm Tom Busby in New York. 0:13:25.120 --> 0:13:27.960 Up later in our program a look at more tech earnings, 0:13:28.000 --> 0:13:32.080 including from Samsung. But first, it's approaching ten weeks since 0:13:32.080 --> 0:13:35.120 we last heard from Bank of England Governor Andrew Bailey 0:13:35.200 --> 0:13:38.560 and his fellow policymakers. Now, with the Bank of England 0:13:38.600 --> 0:13:41.800 rate decision due in the coming weeks, Bloomberg Daybreak Europe 0:13:41.800 --> 0:13:46.160 banker Caroline Hepger has been gauging the anticipation in London. 0:13:46.160 --> 0:13:49.880 Tom after the UK has seen some volatile economic data 0:13:49.960 --> 0:13:54.480 in recent weeks, including faster than anticipated inflation numbers, so 0:13:54.679 --> 0:13:58.240 the sense of radio silence is all the more consequential 0:13:58.640 --> 0:14:02.280 before a decision on whether to cut UK interest rates, 0:14:02.440 --> 0:14:05.760 that investors are judging to be on a knife edge, 0:14:06.280 --> 0:14:09.440 Unlike peers in the US and the Eurozone. Andrew Bailey 0:14:09.480 --> 0:14:13.200 has played down the importance of spoon feeding signals to 0:14:13.280 --> 0:14:16.880 the markets, but the Bank of England's approach to messaging 0:14:16.920 --> 0:14:20.560 has been criticized by the former US Federal Reserve Chair 0:14:20.640 --> 0:14:24.320 Ben Bananke, and a full start to rate hikes back 0:14:24.360 --> 0:14:27.720 in twenty twenty one has also bred a persistent level 0:14:27.760 --> 0:14:32.400 of scrutiny of the governor's tactics. While four members of 0:14:32.440 --> 0:14:36.680 the nine person Monetary Policy Committee have communicated following the 0:14:36.840 --> 0:14:40.960 fourth of July election, most were already seen as being 0:14:41.080 --> 0:14:45.080 in either the hawkish or the dubvish camps, revealing little 0:14:45.320 --> 0:14:49.640 of what investors did not already know. The upcoming decision 0:14:49.680 --> 0:14:53.280 then could be a pivotal turning point. Andrew Bailey must 0:14:53.360 --> 0:14:57.280 decide whether to support two rate setters already pushing for cuts, 0:14:57.520 --> 0:14:59.960 or continue to side with the hawks, warning the u 0:15:00.280 --> 0:15:04.200 underlying price pressures still pose a danger. It's something that 0:15:04.200 --> 0:15:07.760 BlueBay Television has been discussing with Janet Henry, who is 0:15:07.840 --> 0:15:11.880 Global Chief Economists at HSBC. She says that Bailey's choice 0:15:11.920 --> 0:15:14.760 will have a big impact on her strategy. 0:15:15.200 --> 0:15:18.000 We are looking for some modest rate cuts over the 0:15:18.040 --> 0:15:21.280 course of the next year. We do have a gradual improvement, 0:15:21.320 --> 0:15:24.280 but it's by no means a v shaped recovery, and 0:15:24.320 --> 0:15:26.640 it's certainly still not a recession, as you know, we've 0:15:26.680 --> 0:15:28.600 never been in that camp. Obviously, we have got this 0:15:28.760 --> 0:15:33.600 enormous uncertainty regarding the fiscal backdrop through twenty twenty five. 0:15:33.760 --> 0:15:38.400 You know, even last year the fiscal deficit widening, added 0:15:38.400 --> 0:15:41.800 to inflation, added to GDP growth. And should we find 0:15:41.840 --> 0:15:45.040 ourselves in a similar situation in twenty twenty five, and 0:15:45.120 --> 0:15:47.000 that would probably mean a lot less in the way 0:15:47.000 --> 0:15:47.640 of rate cuts. 0:15:47.880 --> 0:15:50.120 How much visibility do we really have on twenty twenty five. 0:15:50.720 --> 0:15:53.080 Well, we don't have a lot of visibility on twenty 0:15:53.120 --> 0:15:55.200 twenty five. And of course it's not just the domestic 0:15:55.280 --> 0:15:59.880 politics and the domestic fiscal there is this geopolitical overlay 0:16:00.080 --> 0:16:02.040 in that. You know, one of the remarkable things you 0:16:02.120 --> 0:16:05.320 might say through the first half of twenty twenty four 0:16:05.480 --> 0:16:08.760 is that despite all of this uncertainty in terms of 0:16:08.840 --> 0:16:12.240 conflict underway in the world, tariffs that are still coming 0:16:12.240 --> 0:16:14.960 through not just from the US, but some from Europe 0:16:15.000 --> 0:16:19.160 and even parts of Latin America. Despite all of this uncertainty, 0:16:19.280 --> 0:16:23.240 the global economy generally has muddled through. It's just that 0:16:23.280 --> 0:16:26.359 it's still really the US and from an emerging market perspective, 0:16:26.640 --> 0:16:30.440 India that have been the stellar performers. But you're right, 0:16:30.480 --> 0:16:33.200 twenty twenty five is the key area of uncertainty and 0:16:33.280 --> 0:16:37.000 central banks. You know, the age of medium term forward 0:16:37.000 --> 0:16:39.000 guidance is way behind us now. 0:16:39.520 --> 0:16:43.240 That was Janet Henry, Global Chief Economists at HSBC. Well, 0:16:43.280 --> 0:16:46.320 I've also been discussing the stakes of Andrew Bailey's big 0:16:46.320 --> 0:16:49.920 decision with Bloomberg's chief economist Dan Hanson. He says the 0:16:50.040 --> 0:16:52.760 choice will have far reaching consequences. 0:16:53.160 --> 0:16:54.360 Well, I wish I could say this was a lot 0:16:54.400 --> 0:16:57.320 of confidence. I'm not sure you can. I think we're 0:16:58.160 --> 0:17:01.080 we're on the side of the the case for cutting, 0:17:01.640 --> 0:17:05.199 that's our view, but it's really easy to make the 0:17:05.240 --> 0:17:08.560 case for a hold as well. It's not a clear 0:17:08.600 --> 0:17:14.080 cut decision. Markets are at about forty five percent chance 0:17:14.280 --> 0:17:17.600 of a cut, so slightly less than a coin toss. 0:17:17.640 --> 0:17:20.600 They're not convinced, you know, I think on balance, if 0:17:20.600 --> 0:17:24.199 you look back to at least the June meeting, it 0:17:24.320 --> 0:17:27.560 felt like the bank was quite keen to cut. If 0:17:27.640 --> 0:17:31.120 you read the minutes, you know, you could potentially read 0:17:31.119 --> 0:17:33.720 between the lines and try and make an argument that 0:17:33.760 --> 0:17:35.520 the elections sort of they just didn't want to get 0:17:35.520 --> 0:17:38.760 involved during the election campaign. Since then, the data's been 0:17:39.119 --> 0:17:42.280 a bit choppy, but I think, you know, for us, 0:17:42.359 --> 0:17:45.320 the case is still there. But as I said, at 0:17:45.320 --> 0:17:47.080 the there's a lot of uncertainy. We've also got quite 0:17:47.080 --> 0:17:49.560 a few changes of personnel or at least one change, 0:17:49.600 --> 0:17:51.800 I should say, of personnel on the NPC. That makes 0:17:51.840 --> 0:17:54.840 it just just add that element of uncertainty and the 0:17:54.920 --> 0:17:56.080 vote split that will come out. 0:17:56.400 --> 0:17:56.600 Yeah. 0:17:56.720 --> 0:17:59.679 I mean you talked about the election. Of course that 0:17:59.800 --> 0:18:01.600 meant that there was a black up and actually it's 0:18:01.600 --> 0:18:04.800 been a really long time since we've heard from Andrew Bailey, 0:18:04.800 --> 0:18:08.359 maybe as long as period without communicating as Bank of 0:18:08.400 --> 0:18:10.840 England governor in the kind of four years that he's 0:18:10.920 --> 0:18:15.520 been there. And since then fellow NPC members have also 0:18:15.560 --> 0:18:18.199 been quite quite I mean, how significant is that to 0:18:18.240 --> 0:18:20.639 have so little guidance from policymakers. 0:18:21.080 --> 0:18:23.720 Yeah, I mean it's an interesting one. I was I've 0:18:23.720 --> 0:18:26.199 been quite surprised, if I'm honest, I thought coming out 0:18:26.240 --> 0:18:29.239 of the election blackout periods. You know, as I say, 0:18:29.280 --> 0:18:31.600 we had the June meeting, we had the minutes from that, 0:18:31.760 --> 0:18:35.720 but I thought Bailey and others would would come out 0:18:35.760 --> 0:18:38.800 and sort of say set the record straight. That's not 0:18:38.880 --> 0:18:40.520 quite right, but just give an update on where they 0:18:40.520 --> 0:18:42.320 think things are. You know, we'd had a lot of 0:18:42.400 --> 0:18:44.960 data and we know that the June meeting for we 0:18:45.000 --> 0:18:47.639 don't know who they were, but for some members of 0:18:47.640 --> 0:18:51.480 the NPC, the decision was finally balanced, and I think 0:18:51.480 --> 0:18:53.679 it would have been I think there's sort of a 0:18:53.720 --> 0:18:56.520 belief in amongst sort of economists and in the market 0:18:56.600 --> 0:18:59.280 that you know, Bailey was amongst that group. It would 0:18:59.280 --> 0:19:01.000 have been interesting, I think, to hear from him and 0:19:01.040 --> 0:19:03.560 where things are. I don't necessarily think he would have 0:19:03.560 --> 0:19:05.639 made it one hundred percent clear about what they were 0:19:05.640 --> 0:19:08.560 going to do at this meeting, but I think something 0:19:08.640 --> 0:19:12.280 around the data and you know, the weight they were 0:19:12.280 --> 0:19:15.879 placing on upside surprises and how worried they were about that, 0:19:16.000 --> 0:19:18.720 I think would have been a sort of useful guide. 0:19:18.840 --> 0:19:21.240 Because there's been a lot of volatility, as I say, 0:19:21.240 --> 0:19:23.720 in the data, and that's injective volatility into market pricing 0:19:23.760 --> 0:19:25.680 as well, which I don't think is particularly helpful. 0:19:26.000 --> 0:19:29.800 Okay, there does seem to be though, after the election 0:19:30.240 --> 0:19:33.679 and the turbunce that we've seen in politics, perhaps a 0:19:33.920 --> 0:19:40.080 window where maybe UK politics is calming down and there's 0:19:40.080 --> 0:19:42.200 been a lot of announcements on this new government about 0:19:42.240 --> 0:19:44.200 the things that they're going to do. Obviously it's all 0:19:44.280 --> 0:19:47.919 untested yet, but certainly a feeling that there's maybe an 0:19:48.000 --> 0:19:51.840 opportunity for more calm now in the UK. How useful 0:19:51.840 --> 0:19:55.480 would a rake up be to the new chancellor? Rachel reeves. 0:19:55.720 --> 0:19:57.919 There does seem to be more optimism, and you've written 0:19:57.960 --> 0:20:02.119 about it about economic growth maybe being a bit better 0:20:02.160 --> 0:20:03.119 in the UK now. 0:20:03.240 --> 0:20:04.960 Yeah, So I think, I mean, I think on the 0:20:05.040 --> 0:20:07.680 rate cut point, obviously, I think there's there's a really 0:20:07.720 --> 0:20:10.840 positive narrative around that that the government can spin. Does 0:20:10.840 --> 0:20:12.879 it does you know, if it's a twenty five basis 0:20:12.920 --> 0:20:15.159 point rate cut, does that change the economic outlook? No, 0:20:15.359 --> 0:20:19.600 But if it's a series of rate cuts, you know, 0:20:19.640 --> 0:20:22.440 it does begin to sort of feed into economic activity. 0:20:22.480 --> 0:20:27.080 But remember the sort of mortgages and the like are 0:20:27.119 --> 0:20:30.080 already being priced off the expectations that rates will be cut, 0:20:30.280 --> 0:20:32.800 So you know, the bigger risk is they don't get 0:20:32.800 --> 0:20:34.200 cut and then we sort of have this sort of 0:20:34.280 --> 0:20:37.879 knee jerk in the other direction. I mean, thinking fiscally, 0:20:38.000 --> 0:20:41.159 if you go back to the obr's forecast in March, 0:20:41.880 --> 0:20:43.760 there was actually a lot more easing priced into the 0:20:43.760 --> 0:20:45.560 curve at that point sort of there was sort of 0:20:45.560 --> 0:20:48.160 this exuberance around the number of rate cuts that come 0:20:48.240 --> 0:20:51.560 this year. So actually, in terms of the fiscal the 0:20:51.800 --> 0:20:53.960 sort of in their interest spending and the like is 0:20:54.160 --> 0:20:55.399 probably going to be a little bit higher in the 0:20:55.440 --> 0:20:59.280 obr's forecast because we've got higher guilt yields and also 0:20:59.359 --> 0:21:02.800 higher exp dictations for bank rate and relative to March. 0:21:03.560 --> 0:21:06.000 But you know, Ruth's will want to see rates start 0:21:06.040 --> 0:21:07.919 to come down. That sort of narrative, I think is 0:21:08.200 --> 0:21:11.639 one much more probably political than it is economic. As 0:21:11.680 --> 0:21:13.359 I say, on the economic side, a lot of this 0:21:13.440 --> 0:21:15.239 is already baked in. You know, the idea of two 0:21:15.359 --> 0:21:17.480 rate cuts this year has been the sort of consensus 0:21:17.520 --> 0:21:20.199 for quite a while now, and it's just a case of, 0:21:21.119 --> 0:21:23.720 you know, from her perspective, hoping that the Bank ends 0:21:23.800 --> 0:21:24.399 up delivering that. 0:21:26.200 --> 0:21:28.120 How much influence will the Fed have on the Bank 0:21:28.160 --> 0:21:29.080 of England, now. 0:21:29.600 --> 0:21:31.920 Yeah, that's a good question, I think. You know, the 0:21:32.200 --> 0:21:34.800 argument for one of the arguments for waiting September is 0:21:34.840 --> 0:21:37.120 it looks like the Fed's going to go in September now, 0:21:37.160 --> 0:21:40.399