1 00:00:02,200 --> 00:00:04,760 Speaker 1: This is Bloomberg Daybreak Weekend, our global look at the 2 00:00:04,760 --> 00:00:07,440 Speaker 1: top stories in the coming week from our Daybreak anchors 3 00:00:07,440 --> 00:00:09,720 Speaker 1: all around the world. And straight ahead on the program 4 00:00:09,880 --> 00:00:13,840 Speaker 1: is more Inflation Ahead. I'm Tom Busby in New York. 5 00:00:14,040 --> 00:00:16,119 Speaker 1: I'm Stephen Carol in London, where we're looking ahead to 6 00:00:16,120 --> 00:00:18,600 Speaker 1: the next set of inflation numbers from the Euro Area. 7 00:00:18,880 --> 00:00:21,279 Speaker 1: I'm Joe Matthew in Washington. We'll look ahead of the 8 00:00:21,320 --> 00:00:24,880 Speaker 1: first hearings into the SVB and Signature Bank collapses. I'm 9 00:00:24,880 --> 00:00:27,600 Speaker 1: Bryan Curtis in Hong Kong. We look at the restructuring 10 00:00:27,720 --> 00:00:31,480 Speaker 1: plan finally delivered by China Evergrand Group in the court 11 00:00:31,960 --> 00:00:35,880 Speaker 1: and what it means for China's property recovery. That's all 12 00:00:35,960 --> 00:00:40,160 Speaker 1: straight ahead on Bloomberg Daybreak Weekend on Bloomberg ELEVEM FREEO, 13 00:00:40,280 --> 00:00:44,279 Speaker 1: New York, Bloomberg ninety nine one, Washington, DC, Bloomberg one 14 00:00:44,280 --> 00:00:48,240 Speaker 1: oh six one, Boston, Bloomberg nine sixty, San Francisco, DAB 15 00:00:48,479 --> 00:00:52,199 Speaker 1: Digital Radio London, Sirius XM one nineteen and around the 16 00:00:52,200 --> 00:00:55,320 Speaker 1: world on Bloomberg Radio dot Com and via the Bloomberg 17 00:00:55,360 --> 00:01:01,720 Speaker 1: Business App. Good day to you. I'm Tom Busby. We 18 00:01:01,800 --> 00:01:05,399 Speaker 1: begin today's program with inflation the driving force behind the 19 00:01:05,440 --> 00:01:08,720 Speaker 1: Fed's decision to raise its benchmark lending rate again last 20 00:01:08,760 --> 00:01:12,360 Speaker 1: week despite the banking crisis. And this coming week more 21 00:01:12,480 --> 00:01:15,600 Speaker 1: headlines on inflation, with a key reading on consumer prices, 22 00:01:16,160 --> 00:01:19,160 Speaker 1: also on economic growth in the final quarter of last year. 23 00:01:19,160 --> 00:01:21,320 Speaker 1: And joining me now to talk about all this and more, 24 00:01:21,640 --> 00:01:25,800 Speaker 1: Bloomberg's Global Economics and Policy Editor, Michael McKee. Michael, welcome, 25 00:01:26,000 --> 00:01:29,119 Speaker 1: h nice to be here. Well, Michael will be getting 26 00:01:29,120 --> 00:01:32,640 Speaker 1: and this is a mouthful. The US Personal consumption Expenditures 27 00:01:32,640 --> 00:01:36,520 Speaker 1: price index from February this week. What is it? What 28 00:01:36,720 --> 00:01:39,600 Speaker 1: is it? Measure? It is the Fed's favorite measure of inflation. 29 00:01:39,800 --> 00:01:43,080 Speaker 1: It's constructed a little bit differently from the consumer price index. 30 00:01:43,480 --> 00:01:45,800 Speaker 1: It has different weights on the kinds of things that 31 00:01:45,880 --> 00:01:50,560 Speaker 1: people buy. But the FED looks at it as a 32 00:01:50,640 --> 00:01:55,040 Speaker 1: much better indicator of where underlying inflation actually is. So 33 00:01:55,680 --> 00:02:01,280 Speaker 1: they're expecting a three tenths increase for the month over 34 00:02:01,400 --> 00:02:03,920 Speaker 1: month index, which would be down from six tents and 35 00:02:04,000 --> 00:02:06,280 Speaker 1: that would be in theory good news. It would take 36 00:02:06,280 --> 00:02:08,600 Speaker 1: the year over year level down to five point one 37 00:02:08,720 --> 00:02:12,880 Speaker 1: from five point four. They're really watching core, which came 38 00:02:12,919 --> 00:02:15,960 Speaker 1: in at six tenths in January, they think it economist 39 00:02:15,960 --> 00:02:19,239 Speaker 1: survey by bloomberg'll go down to four tenths, and so 40 00:02:19,639 --> 00:02:24,040 Speaker 1: that would show progress against inflation. The feed is also 41 00:02:24,080 --> 00:02:26,760 Speaker 1: looking at these PC numbers to see what's happening with 42 00:02:26,800 --> 00:02:31,040 Speaker 1: the services side, but that part is not forecast. Now 43 00:02:31,040 --> 00:02:35,960 Speaker 1: we got a surprise increase in January, you know, also 44 00:02:36,000 --> 00:02:38,320 Speaker 1: along with consumer spending, was that they think just an 45 00:02:38,320 --> 00:02:43,679 Speaker 1: anomaly in January. Not an anomaly. What basically they think 46 00:02:43,800 --> 00:02:47,480 Speaker 1: is happening is the low hanging fruit for inflation has 47 00:02:47,520 --> 00:02:51,200 Speaker 1: been picked and now it gets harder to root out 48 00:02:51,200 --> 00:02:54,840 Speaker 1: the inflation in various categories, and so we're going to 49 00:02:54,880 --> 00:02:57,720 Speaker 1: see some lumpy inflation reports. Some months it'll go up 50 00:02:57,760 --> 00:02:59,920 Speaker 1: a little bit in surprise people, and some months at 51 00:03:00,000 --> 00:03:04,600 Speaker 1: the fall faster than anticipated. But we had their annual 52 00:03:05,480 --> 00:03:09,560 Speaker 1: not annual, but quarterly new economic projections out this week, 53 00:03:09,919 --> 00:03:12,720 Speaker 1: and they think that inflation is gonna fall the PC. 54 00:03:12,919 --> 00:03:15,040 Speaker 1: Inflation is gonna fall to about three point four percent 55 00:03:15,080 --> 00:03:17,519 Speaker 1: by the end of the year. So at five point one, 56 00:03:17,560 --> 00:03:19,920 Speaker 1: if that's what it comes in at in February, that 57 00:03:20,040 --> 00:03:22,800 Speaker 1: would still be a significant decline by the end of 58 00:03:22,800 --> 00:03:25,800 Speaker 1: the year. And is that why this is often called 59 00:03:25,800 --> 00:03:30,280 Speaker 1: the PC price deflator. Well, it's called the deflator because 60 00:03:30,320 --> 00:03:33,440 Speaker 1: here's what they do. It's part of the collection of 61 00:03:33,560 --> 00:03:37,480 Speaker 1: data for the GDP report, which we also get coming 62 00:03:37,480 --> 00:03:40,800 Speaker 1: out for the fourth quarter, although they do the PC 63 00:03:41,200 --> 00:03:46,240 Speaker 1: price collection monthly, but they take the GDP numbers and 64 00:03:46,720 --> 00:03:52,320 Speaker 1: they subtract inflation. They deflate inflation, and so the data 65 00:03:52,360 --> 00:03:56,480 Speaker 1: that they use is called the deflator. Okay, Now, more 66 00:03:56,520 --> 00:04:01,000 Speaker 1: on inflation stubbornly high even after nine straight increases in 67 00:04:01,080 --> 00:04:03,280 Speaker 1: the federal funds rate. So what are some of the 68 00:04:03,320 --> 00:04:05,720 Speaker 1: main drivers of inflation that the FED is still concerned 69 00:04:05,720 --> 00:04:09,760 Speaker 1: about right now? Well, we're still concerned mostly about housing. 70 00:04:09,800 --> 00:04:11,880 Speaker 1: That's been the biggest problem for the FED all along. 71 00:04:12,320 --> 00:04:14,880 Speaker 1: It has a smaller weight in the PC, which maybe 72 00:04:14,880 --> 00:04:16,760 Speaker 1: one reason they think it's going to come down some. 73 00:04:17,640 --> 00:04:21,960 Speaker 1: It is only about maybe twenty five percent or so 74 00:04:22,120 --> 00:04:25,960 Speaker 1: of the PC, where it's about forty percent in the CPI, 75 00:04:26,400 --> 00:04:30,640 Speaker 1: So that's an issue. They're also looking at some unusual 76 00:04:30,680 --> 00:04:34,520 Speaker 1: things like used cars. People went out and bought a 77 00:04:34,520 --> 00:04:36,479 Speaker 1: lot of used cars when they came back on the market, 78 00:04:36,480 --> 00:04:38,240 Speaker 1: and now there's a bit of a shortage again. So 79 00:04:38,360 --> 00:04:41,120 Speaker 1: on the wholesale level, we've seen used car prices going up. 80 00:04:41,400 --> 00:04:44,520 Speaker 1: The question is does that translate over and then people 81 00:04:44,600 --> 00:04:48,440 Speaker 1: keep an eye on things like medical care areas where 82 00:04:48,440 --> 00:04:51,000 Speaker 1: we have seen inflation and they're trying to see if 83 00:04:51,000 --> 00:04:54,400 Speaker 1: it if it continues. Now, let's dive a little more 84 00:04:54,440 --> 00:04:57,440 Speaker 1: into housing. In February, we did see the first year 85 00:04:57,480 --> 00:05:01,799 Speaker 1: over year price decline in in prices and over a decade, 86 00:05:01,839 --> 00:05:06,040 Speaker 1: so prices are starting to soften. Bidding wars pretty much evaporated, 87 00:05:06,080 --> 00:05:08,720 Speaker 1: Mortgage rates fluctuated right now, they've been down two weeks 88 00:05:08,720 --> 00:05:11,800 Speaker 1: in a row. So is all this looking good for 89 00:05:12,520 --> 00:05:16,440 Speaker 1: the PC? Yes and no good, but not for this PC. 90 00:05:17,400 --> 00:05:19,520 Speaker 1: The problem is it takes a long time for the 91 00:05:19,720 --> 00:05:25,279 Speaker 1: housing costs numbers to get into the indicators. They don't 92 00:05:25,680 --> 00:05:29,320 Speaker 1: look at the actual cost of housing. They look essentially 93 00:05:29,360 --> 00:05:31,920 Speaker 1: at what it would cost you to rent your house today. 94 00:05:32,600 --> 00:05:36,640 Speaker 1: And what they find is it takes a while because 95 00:05:36,640 --> 00:05:38,680 Speaker 1: you don't sign a lease every day, you know, by 96 00:05:38,720 --> 00:05:41,680 Speaker 1: a house every day either. So even if prices were falling, 97 00:05:41,720 --> 00:05:45,120 Speaker 1: and even if they were doing direct house prices into 98 00:05:45,160 --> 00:05:50,000 Speaker 1: the index, this something that went down this month wouldn't 99 00:05:50,000 --> 00:05:52,640 Speaker 1: make it into the data for six or eight months 100 00:05:53,080 --> 00:05:55,479 Speaker 1: in general, because it takes that long to get enough 101 00:05:56,279 --> 00:06:00,960 Speaker 1: housing activity to make a change visible to the Fed. 102 00:06:01,200 --> 00:06:04,280 Speaker 1: They've been expecting because rents have been going down for 103 00:06:04,440 --> 00:06:06,240 Speaker 1: about a year, they've been expecting it to start to 104 00:06:06,279 --> 00:06:08,599 Speaker 1: show up anytime. And a lot of analysts think that 105 00:06:09,120 --> 00:06:12,560 Speaker 1: maybe by April May will start to see housing decline 106 00:06:12,800 --> 00:06:14,679 Speaker 1: and that will be one of the factors that would 107 00:06:14,680 --> 00:06:18,799 Speaker 1: bring down the overall inflation rate as the FED anticipates 108 00:06:19,160 --> 00:06:22,479 Speaker 1: towards the end of the year. Well, and that, let's 109 00:06:22,480 --> 00:06:24,640 Speaker 1: talk about jobs and how that factors. And now we've 110 00:06:24,640 --> 00:06:27,080 Speaker 1: seen a lot of headlines, a lot of tech sector layoffs, 111 00:06:27,120 --> 00:06:30,599 Speaker 1: some other sectors tens of thousands, but the labor market 112 00:06:30,760 --> 00:06:34,239 Speaker 1: still remains pretty strong. We won't get you the job's 113 00:06:34,279 --> 00:06:36,920 Speaker 1: report for March for another week more. But what are 114 00:06:36,920 --> 00:06:38,800 Speaker 1: some of the signs you're seeing in the labor market 115 00:06:38,839 --> 00:06:43,320 Speaker 1: and is wage inflation still a factor? Wage inflation is 116 00:06:43,320 --> 00:06:45,720 Speaker 1: a factor in certain categories. One of the things that 117 00:06:45,800 --> 00:06:50,400 Speaker 1: happened was we did not refill all the jobs in 118 00:06:50,720 --> 00:06:54,960 Speaker 1: a lot of service industries that went away during the pandemic, 119 00:06:55,000 --> 00:07:00,640 Speaker 1: and so companies, restaurants, bars, people like that are struggling 120 00:07:00,920 --> 00:07:03,760 Speaker 1: to find workers to fill the jobs, and so they 121 00:07:03,800 --> 00:07:07,440 Speaker 1: have had to raise wages, and we've seen those categories 122 00:07:07,440 --> 00:07:11,520 Speaker 1: of wages continue to rise. The question is do they 123 00:07:11,560 --> 00:07:15,160 Speaker 1: start to flatten out. There are some tentative signs that's 124 00:07:15,200 --> 00:07:18,480 Speaker 1: the case, even though hiring has been fairly strong. So 125 00:07:19,480 --> 00:07:21,800 Speaker 1: we're really watching wages in the service sector and as 126 00:07:21,800 --> 00:07:23,920 Speaker 1: far as prices, the FETE has been watching the service 127 00:07:23,920 --> 00:07:27,960 Speaker 1: sector because of those wages. Since in services much of 128 00:07:28,000 --> 00:07:33,160 Speaker 1: your cost is labor. When they have to raise wages 129 00:07:33,440 --> 00:07:35,960 Speaker 1: to attract employees, then that's going to have an impact 130 00:07:35,960 --> 00:07:42,400 Speaker 1: on what they charge you for the service that you get. Gotcha, Okay? Now, 131 00:07:42,440 --> 00:07:45,679 Speaker 1: Also this week we talked about it, just for a moment, 132 00:07:45,720 --> 00:07:48,120 Speaker 1: the latest read economic growth for the end of last year, 133 00:07:48,200 --> 00:07:51,520 Speaker 1: fourth quarter GDP. This one looking backward a bit, but 134 00:07:52,080 --> 00:07:55,480 Speaker 1: for all the hemming and hawing about economic weakness, it 135 00:07:55,520 --> 00:07:58,000 Speaker 1: looks like it's going to be pretty good. Well, this 136 00:07:58,120 --> 00:08:02,120 Speaker 1: is the second reverse to the number, and so it 137 00:08:02,160 --> 00:08:06,240 Speaker 1: doesn't carry as much weight. The Commerce Department looks at 138 00:08:06,280 --> 00:08:10,960 Speaker 1: a Census Bureau looks at all the sales of products 139 00:08:10,960 --> 00:08:14,400 Speaker 1: in the United States, but it takes a while to 140 00:08:14,440 --> 00:08:17,720 Speaker 1: get all the data in, so they will put out 141 00:08:17,760 --> 00:08:21,120 Speaker 1: a first first indication and then they start putting out 142 00:08:21,720 --> 00:08:25,040 Speaker 1: revisions to it, and this is the sort of the 143 00:08:25,040 --> 00:08:27,760 Speaker 1: final revision of this series. It'll be revised again next 144 00:08:27,800 --> 00:08:30,600 Speaker 1: year when they get benchmark numbers. But for right now 145 00:08:30,920 --> 00:08:33,760 Speaker 1: they're looking at two point seven percent, which would be 146 00:08:33,880 --> 00:08:38,280 Speaker 1: unchanged from the first revision and would be still much 147 00:08:38,400 --> 00:08:42,720 Speaker 1: faster than the sustainable rate without inflation that the FED 148 00:08:43,440 --> 00:08:47,240 Speaker 1: needs to see. And the Atlanta Fed GDP now number, 149 00:08:47,280 --> 00:08:50,720 Speaker 1: which is sort of a NowCast of what they think 150 00:08:51,040 --> 00:08:54,319 Speaker 1: the data are telling us about the current quarter, is 151 00:08:54,360 --> 00:08:58,680 Speaker 1: showing three point two percent growth, so that really suggests 152 00:08:58,720 --> 00:09:01,600 Speaker 1: that the economy has not slowed down. Now, we're only 153 00:09:01,720 --> 00:09:05,319 Speaker 1: going to just start getting March data in the next 154 00:09:05,360 --> 00:09:07,920 Speaker 1: few weeks, so that could change things. But right now 155 00:09:08,320 --> 00:09:10,920 Speaker 1: between the fourth quarter and the first quarter still looks 156 00:09:10,920 --> 00:09:14,400 Speaker 1: pretty strong. But that March data is certainly going to 157 00:09:14,520 --> 00:09:17,560 Speaker 1: reflect the crisis in banking and what it means to 158 00:09:17,679 --> 00:09:21,280 Speaker 1: lending and on economic growth. And you know, we don't 159 00:09:21,280 --> 00:09:23,240 Speaker 1: know when this is going to end, if it's going 160 00:09:23,280 --> 00:09:25,559 Speaker 1: to end, how bad it's going to get, but it's 161 00:09:25,559 --> 00:09:28,800 Speaker 1: certainly going to weigh on things. Well, there's an old 162 00:09:29,160 --> 00:09:33,240 Speaker 1: law in economics, if something can't continue, it will stop, 163 00:09:33,679 --> 00:09:35,600 Speaker 1: and so at some point this will stop. We just 164 00:09:35,640 --> 00:09:40,000 Speaker 1: don't know when. The data for March may not reflect 165 00:09:40,080 --> 00:09:44,240 Speaker 1: a lot of this, because the way the crisis would 166 00:09:44,320 --> 00:09:48,199 Speaker 1: hit the economy is if banks stop lending, if they 167 00:09:48,280 --> 00:09:53,559 Speaker 1: raise their lending standards so high to keep from having problems, 168 00:09:54,040 --> 00:09:57,120 Speaker 1: then we would see a restriction of the flow of 169 00:09:57,160 --> 00:10:00,440 Speaker 1: credit into the economy. And that'll take a while to 170 00:10:00,480 --> 00:10:03,400 Speaker 1: show up because the same sort of manner. You don't 171 00:10:03,440 --> 00:10:04,880 Speaker 1: buy a house every day, you don't go to the 172 00:10:04,880 --> 00:10:07,600 Speaker 1: bank for a loan every day, and businesses have to 173 00:10:07,640 --> 00:10:10,480 Speaker 1: make decisions about whether they're going to still want to 174 00:10:10,720 --> 00:10:13,280 Speaker 1: get loans. The FED does a couple surveys, won the 175 00:10:13,440 --> 00:10:15,920 Speaker 1: Senior Loan Officers Survey, which will be out in April, 176 00:10:15,920 --> 00:10:18,640 Speaker 1: and it will tell us whether banks have tightened credit standards. 177 00:10:18,679 --> 00:10:22,000 Speaker 1: But they also have a survey of credit officers that 178 00:10:22,400 --> 00:10:24,320 Speaker 1: the most recent one out a couple of weeks ago, 179 00:10:24,600 --> 00:10:29,120 Speaker 1: showed that demand for loans was off significantly, and that 180 00:10:29,200 --> 00:10:31,440 Speaker 1: was before the banking crisis. That was just saying that 181 00:10:31,920 --> 00:10:36,080 Speaker 1: loans have gotten expensive, and companies at this point are saying, 182 00:10:36,080 --> 00:10:38,320 Speaker 1: maybe we don't want to pay that. Oh boy, well, 183 00:10:38,360 --> 00:10:40,840 Speaker 1: we live in interesting times. Michael, Thank you so much. 184 00:10:40,880 --> 00:10:43,840 Speaker 1: Always a pleasure. That was our Global Economics and Policy 185 00:10:43,960 --> 00:10:47,479 Speaker 1: editor Michael mckeeon coming up on Bloomberg Daybreak weekend. Inflation 186 00:10:47,559 --> 00:10:51,319 Speaker 1: back in focus in Europe this week. I'm Tom Busby. 187 00:10:51,600 --> 00:11:05,480 Speaker 1: This is Bloomberg. This is Bloomberg Daybreak weekend, our global 188 00:11:05,520 --> 00:11:07,680 Speaker 1: look ahead at the top stories for investors in the 189 00:11:07,720 --> 00:11:10,360 Speaker 1: coming week. I'm Tom Busby in New York and up 190 00:11:10,400 --> 00:11:13,720 Speaker 1: later on our program What's Ahead in our Nation's capital. 191 00:11:14,000 --> 00:11:17,679 Speaker 1: But first, after last week central bank meetings, inflation will 192 00:11:17,760 --> 00:11:20,080 Speaker 1: be back in focus in Europe this week with the 193 00:11:20,160 --> 00:11:22,880 Speaker 1: first March readings for the euro Area and some of 194 00:11:22,920 --> 00:11:26,760 Speaker 1: its major economies. This after European Central Bank President Christine 195 00:11:26,800 --> 00:11:31,320 Speaker 1: Lagarde said that underlying inflation wasn't trending down for more. 196 00:11:31,440 --> 00:11:33,959 Speaker 1: Let's ad to London and bring in London Daybreak Europe 197 00:11:34,000 --> 00:11:37,760 Speaker 1: Banker Stephen Carroll, Stephen Tom. February was a month of 198 00:11:37,800 --> 00:11:41,000 Speaker 1: inflation surprises in Europe. The German and French numbers came 199 00:11:41,040 --> 00:11:43,679 Speaker 1: in higher than expected, just like they did here in 200 00:11:43,720 --> 00:11:46,720 Speaker 1: the UK. So will the March data bring good or 201 00:11:46,880 --> 00:11:50,320 Speaker 1: bad news for officials at the European Central Buying quot 202 00:11:50,320 --> 00:11:54,960 Speaker 1: To discuss. I'm joined by Bloomberg's chief Europe economists Jamie Rush. Jamie, So, 203 00:11:54,960 --> 00:11:57,640 Speaker 1: we had a few surprises in February. The wider Eurozone 204 00:11:57,679 --> 00:12:00,360 Speaker 1: reading was eight and a half percent, still en Rogy 205 00:12:00,400 --> 00:12:02,680 Speaker 1: dictory from the peak that we had in October. What's 206 00:12:02,720 --> 00:12:07,880 Speaker 1: the general expectation from March. Well, we're expecting headline inflation 207 00:12:07,960 --> 00:12:10,040 Speaker 1: to drop from eight and a half to seven percent, 208 00:12:10,160 --> 00:12:14,800 Speaker 1: so big drop, largely caused by energy prices, and you know, 209 00:12:14,840 --> 00:12:16,839 Speaker 1: there's there's an element of inflation which is going to 210 00:12:16,920 --> 00:12:18,840 Speaker 1: fall and that's just baked in because of the energy 211 00:12:18,880 --> 00:12:22,160 Speaker 1: cost stuff. So that's what we expecting. Headline core though 212 00:12:22,760 --> 00:12:26,680 Speaker 1: probably very similar to where it was in the last month, 213 00:12:26,720 --> 00:12:28,760 Speaker 1: so around about five point seven percent, and we think 214 00:12:28,800 --> 00:12:31,480 Speaker 1: it probably be around that number for the next few months, 215 00:12:31,840 --> 00:12:33,920 Speaker 1: and that's something that's very important for the ECB. Will 216 00:12:33,960 --> 00:12:35,640 Speaker 1: get to that in a moment, but I want to 217 00:12:35,679 --> 00:12:38,600 Speaker 1: reflect a little bit on what happened in February, because 218 00:12:38,880 --> 00:12:42,160 Speaker 1: first of all, we had the Spanish reading coming in, 219 00:12:42,400 --> 00:12:45,200 Speaker 1: then France and Germany came in harder. You know, where 220 00:12:45,200 --> 00:12:47,960 Speaker 1: did those surprises come from the last time around her? 221 00:12:48,000 --> 00:12:49,320 Speaker 1: And it does it give us any clues as to 222 00:12:49,320 --> 00:12:52,360 Speaker 1: where we could be looking for surprises this time. Well, 223 00:12:52,559 --> 00:12:54,760 Speaker 1: I think that the troubling thing when you looked at 224 00:12:54,760 --> 00:12:57,720 Speaker 1: all the numbers from the Eurozone is that services price 225 00:12:57,760 --> 00:13:00,600 Speaker 1: inflation picked up, and so this is the thing that 226 00:13:00,679 --> 00:13:03,640 Speaker 1: we need to probably pay most attention to. It's not 227 00:13:03,679 --> 00:13:06,120 Speaker 1: always like the most clear read on inflation because it 228 00:13:06,160 --> 00:13:09,360 Speaker 1: bounces around up and down because of like package holidays 229 00:13:09,400 --> 00:13:13,200 Speaker 1: in Germany, for example, airfares. There's lots of stuff that 230 00:13:13,240 --> 00:13:15,560 Speaker 1: moves things around. But I think that's that's where these 231 00:13:15,559 --> 00:13:18,439 Speaker 1: people were focused. That's certainly where we're focused. In terms 232 00:13:18,480 --> 00:13:21,199 Speaker 1: of energy prices, of course, the energy price shock was 233 00:13:21,240 --> 00:13:25,160 Speaker 1: what drove so much of this inflation over the past year. 234 00:13:25,440 --> 00:13:30,200 Speaker 1: Has that effect largely petered out now? Not yet, not 235 00:13:30,200 --> 00:13:31,800 Speaker 1: in the annual rate. I mean, it's still got quite 236 00:13:32,080 --> 00:13:34,640 Speaker 1: quite a bit further to run, but by the end 237 00:13:34,640 --> 00:13:36,400 Speaker 1: of the year we should be heading back towards sort 238 00:13:36,440 --> 00:13:39,920 Speaker 1: of like three percent headline inflation rates, and the energy 239 00:13:39,920 --> 00:13:42,280 Speaker 1: cost could even start to push down on the headline 240 00:13:42,360 --> 00:13:45,600 Speaker 1: rate a bit further out, how much of the differential 241 00:13:45,640 --> 00:13:48,480 Speaker 1: and rates that we see across the Euro Area, because 242 00:13:48,520 --> 00:13:49,959 Speaker 1: I mean, look, if you look at the numbers across 243 00:13:50,000 --> 00:13:53,000 Speaker 1: the twenty countries, hungry. CPI was nearly twenty six percent 244 00:13:53,040 --> 00:13:56,040 Speaker 1: in February. The lowest reading was in Luxembourg at four 245 00:13:56,120 --> 00:13:58,840 Speaker 1: point eight percent. How much of this is down to 246 00:13:59,040 --> 00:14:03,920 Speaker 1: national factor and national responses to inflation. I'm thinking about 247 00:14:03,960 --> 00:14:06,200 Speaker 1: things like the energy price cap in France. Does that 248 00:14:06,760 --> 00:14:09,280 Speaker 1: does those sort of differentials still holds when we think 249 00:14:09,320 --> 00:14:12,640 Speaker 1: about the numbers to come. Yeah, it's made a massive difference. 250 00:14:13,480 --> 00:14:16,240 Speaker 1: I mean, you're broadly speaking has faced the same sort 251 00:14:16,240 --> 00:14:17,760 Speaker 1: of shock. There's a bit of a difference in the 252 00:14:17,840 --> 00:14:23,040 Speaker 1: mix which countries consume, what proportion of gas, electricity, this 253 00:14:23,080 --> 00:14:25,440 Speaker 1: sort of thing. But generally speaking, it comes down to 254 00:14:25,480 --> 00:14:28,320 Speaker 1: how governments have responded and how it's been priced and 255 00:14:28,720 --> 00:14:32,720 Speaker 1: hedging against against changing energy prices. So there's a massive 256 00:14:32,720 --> 00:14:34,320 Speaker 1: difference on the way up. There's going to be a 257 00:14:34,320 --> 00:14:36,640 Speaker 1: big difference on the way down. Now, obviously this is 258 00:14:36,640 --> 00:14:38,800 Speaker 1: going to be very important to work. The European Central 259 00:14:38,800 --> 00:14:41,520 Speaker 1: Bank doesn't its next rate decision, although that's not until 260 00:14:41,640 --> 00:14:44,120 Speaker 1: early May. Now, Christine Legard has been speaking about the 261 00:14:44,120 --> 00:14:47,000 Speaker 1: inflation picture in recent days. Let's listen to some of 262 00:14:47,000 --> 00:14:50,600 Speaker 1: her speech at the ECB and it's Watchers conference, which 263 00:14:50,640 --> 00:14:53,800 Speaker 1: we brought to you live on Bloomberg Radio. The Urrea 264 00:14:53,880 --> 00:14:57,240 Speaker 1: has been hit by an inflation shock which is now 265 00:14:57,240 --> 00:15:02,160 Speaker 1: working its way through the economy. While headline inflation is 266 00:15:02,200 --> 00:15:06,320 Speaker 1: likely to decline steeply this year, driven by falling energy 267 00:15:06,360 --> 00:15:13,440 Speaker 1: prices and easing supply bottlenecks, underlying inflation dynamics remain strong 268 00:15:15,280 --> 00:15:19,040 Speaker 1: and in such an environment, our ultimate goal is clear. 269 00:15:20,120 --> 00:15:24,640 Speaker 1: We must and we will bring down inflation to our 270 00:15:24,720 --> 00:15:28,000 Speaker 1: medium term target in a timely manner. So that was 271 00:15:28,080 --> 00:15:30,600 Speaker 1: Christine the Guard speaking at the ECB and its Watchers 272 00:15:30,680 --> 00:15:36,040 Speaker 1: conference in Frankfurt. Jamie the last ECB decision, which really 273 00:15:36,080 --> 00:15:38,680 Speaker 1: isn't very long ago in the grand scheme of things, 274 00:15:38,880 --> 00:15:40,920 Speaker 1: they got in a fifty basis point hike. There's been 275 00:15:41,000 --> 00:15:42,920 Speaker 1: lots of speculation they're up to it, that perhaps the 276 00:15:43,160 --> 00:15:47,440 Speaker 1: instability in the banking sector might affect that. How should 277 00:15:47,440 --> 00:15:50,360 Speaker 1: we be thinking about the ECB's trajectory from here, given 278 00:15:50,360 --> 00:15:52,280 Speaker 1: that they did manage to get through a fifty basis 279 00:15:52,280 --> 00:15:55,080 Speaker 1: point hike last time around. So I think on the 280 00:15:55,120 --> 00:15:57,920 Speaker 1: last meeting there's important thing to understand it, which is 281 00:15:57,960 --> 00:16:00,560 Speaker 1: that you can be hawkish in two ways. Now. You 282 00:16:00,600 --> 00:16:03,520 Speaker 1: can be hawkish because you're worried about underlying inflation being 283 00:16:03,560 --> 00:16:06,240 Speaker 1: too high. But you can also be hawkish about the 284 00:16:06,280 --> 00:16:11,960 Speaker 1: division of monetary policy and financial policy, and that's what 285 00:16:12,000 --> 00:16:14,360 Speaker 1: we saw. You can be a dave about inflation but 286 00:16:14,600 --> 00:16:18,280 Speaker 1: not want to muddy the water between muniture policy and 287 00:16:18,480 --> 00:16:21,160 Speaker 1: financial stability. And so I think that's probably why they 288 00:16:21,200 --> 00:16:23,960 Speaker 1: have much more support for the big fifty basis point 289 00:16:24,040 --> 00:16:27,560 Speaker 1: hike than markets are expecting even up to the day, 290 00:16:29,320 --> 00:16:31,760 Speaker 1: and that carries forward to the subsequent meetings. They're still 291 00:16:31,800 --> 00:16:34,000 Speaker 1: going to be focusing on this division between monetary and 292 00:16:34,000 --> 00:16:37,520 Speaker 1: financial stability, and we've heard from Lagarde they're going to 293 00:16:37,520 --> 00:16:39,800 Speaker 1: be thinking about three things as they set policy. They're 294 00:16:39,800 --> 00:16:42,880 Speaker 1: going to be thinking about inflation forecasts. They're going to 295 00:16:42,920 --> 00:16:46,920 Speaker 1: be thinking about underlying inflation as measured now, and they're 296 00:16:46,920 --> 00:16:49,280 Speaker 1: going to be thinking about how much policy is transmitting 297 00:16:49,360 --> 00:16:52,480 Speaker 1: to the economy. So they're monitoring those three things. Our 298 00:16:52,560 --> 00:16:55,800 Speaker 1: view is that the banking crisis isn't yet severe enough 299 00:16:56,240 --> 00:16:58,720 Speaker 1: to take great hikes off the table, and we think 300 00:16:58,720 --> 00:17:00,840 Speaker 1: they're going to keep hiking tony five basis points of 301 00:17:00,920 --> 00:17:03,680 Speaker 1: meeting through the summer. What does that mean then, in 302 00:17:03,800 --> 00:17:07,119 Speaker 1: terms of the sort of terminal rate, where do you 303 00:17:07,160 --> 00:17:09,800 Speaker 1: see that now I think we're probably getting somewhere between 304 00:17:09,880 --> 00:17:13,439 Speaker 1: three and a half and three point seven five. There 305 00:17:13,440 --> 00:17:17,560 Speaker 1: has been a tightening of financial conditions in terms of 306 00:17:17,600 --> 00:17:21,720 Speaker 1: the cost of credit for banks relative to risk free rates. 307 00:17:22,040 --> 00:17:23,800 Speaker 1: That is going to be that is going to weigh 308 00:17:23,800 --> 00:17:26,000 Speaker 1: on the economy a bit in future years. But it 309 00:17:26,000 --> 00:17:27,840 Speaker 1: takes like it takes one hike out the cycle. It 310 00:17:27,920 --> 00:17:30,200 Speaker 1: doesn't take it doesn't take three out. So I think, 311 00:17:30,200 --> 00:17:33,359 Speaker 1: whereas markets for previously expecting a terminal rate of four percent, 312 00:17:34,160 --> 00:17:36,199 Speaker 1: somewhere three and a half three point seventy five. Now, 313 00:17:36,359 --> 00:17:39,119 Speaker 1: now that's reasonable to us. Christie and regard did mention 314 00:17:39,440 --> 00:17:43,560 Speaker 1: wage pressures in that speech in Frank First, what is 315 00:17:43,600 --> 00:17:46,719 Speaker 1: the situation as regards wage inflation in Europe and how 316 00:17:46,760 --> 00:17:50,040 Speaker 1: does that feed into the broader inflationary picture. Well, so 317 00:17:50,520 --> 00:17:53,240 Speaker 1: we've had this energy shock and we're going to decide 318 00:17:53,240 --> 00:17:56,520 Speaker 1: who's going to pay for it, and it's a negotiation 319 00:17:56,560 --> 00:18:03,240 Speaker 1: between employees and between is, and so far businesses have 320 00:18:03,359 --> 00:18:06,800 Speaker 1: basically one like, they've expanded their profit margins quite a lot, 321 00:18:07,080 --> 00:18:10,000 Speaker 1: and they haven't made made good on on wage gains 322 00:18:10,040 --> 00:18:14,520 Speaker 1: all that much. So the question is our household, our 323 00:18:14,560 --> 00:18:20,080 Speaker 1: employees gonna achieve these some compensation over the coming year, 324 00:18:20,119 --> 00:18:21,800 Speaker 1: and the more they push for it and the higher 325 00:18:21,840 --> 00:18:25,679 Speaker 1: their wage costs go up, the longer inflation is going 326 00:18:25,720 --> 00:18:27,879 Speaker 1: to be is going to stay high. So I think 327 00:18:27,960 --> 00:18:32,480 Speaker 1: that's that the it's a negotiation the moment, the balance 328 00:18:32,520 --> 00:18:34,919 Speaker 1: is probably already song too far in favor of businesses, 329 00:18:35,720 --> 00:18:38,719 Speaker 1: but there are upside risks the inflation outlook from that. 330 00:18:38,800 --> 00:18:43,159 Speaker 1: From that negotiation, we of course are sitting here in 331 00:18:43,200 --> 00:18:45,399 Speaker 1: London looking at the picture as well. How different is 332 00:18:45,400 --> 00:18:49,879 Speaker 1: the picture for Eurozone inflation versus inflation in the UK. Well, 333 00:18:49,960 --> 00:18:52,560 Speaker 1: here in the UK and in the US, we do 334 00:18:52,680 --> 00:18:55,840 Speaker 1: have really strong wage growth which is pushing up costs 335 00:18:55,840 --> 00:18:58,960 Speaker 1: for businesses and extending the overshoot of inflation, and as 336 00:18:58,960 --> 00:19:01,320 Speaker 1: the target and the Zone, it's not quite there yet. 337 00:19:02,200 --> 00:19:03,919 Speaker 1: So I think that's the main difference. We have a 338 00:19:03,960 --> 00:19:06,800 Speaker 1: difference in the amount of underlying pressure in the economy, 339 00:19:07,200 --> 00:19:09,360 Speaker 1: and you could definitely say I think that the UK 340 00:19:09,400 --> 00:19:11,919 Speaker 1: and the US were overheating by more. We have a 341 00:19:11,920 --> 00:19:15,000 Speaker 1: couple more data points to come before the next ECB meeting, 342 00:19:15,920 --> 00:19:19,000 Speaker 1: but I am conscious that we're looking ahead to the 343 00:19:19,000 --> 00:19:22,960 Speaker 1: March figures. I suppose how important will it be in 344 00:19:23,000 --> 00:19:27,680 Speaker 1: that scheme of policymaking when you come towards the next decision. Well, 345 00:19:27,680 --> 00:19:30,080 Speaker 1: I think they're going to want to see underlying inflation 346 00:19:30,160 --> 00:19:32,520 Speaker 1: come down. I mean they've said as much, and they're 347 00:19:32,560 --> 00:19:35,320 Speaker 1: not going to see that probably until maybe even as 348 00:19:35,400 --> 00:19:38,320 Speaker 1: late as September. So I think there's nothing There's not 349 00:19:38,320 --> 00:19:40,840 Speaker 1: going to be a major change in core inflation or 350 00:19:40,840 --> 00:19:42,600 Speaker 1: the underlying cost pressure until you get to the end 351 00:19:42,600 --> 00:19:44,639 Speaker 1: of the summer, so that that keeps them hiking. And 352 00:19:44,800 --> 00:19:46,360 Speaker 1: the main risk to that is just that something else 353 00:19:46,359 --> 00:19:49,280 Speaker 1: blows up in the banking sector or that the tensions 354 00:19:49,280 --> 00:19:51,360 Speaker 1: we've seen so far turned out it's been more painful 355 00:19:51,400 --> 00:19:54,119 Speaker 1: than people in visage, in which case you know that 356 00:19:54,200 --> 00:19:57,440 Speaker 1: all bets are off okay. Bloomberg's chief europe economist, Jamie Rush, 357 00:19:57,480 --> 00:20:00,000 Speaker 1: thank you very much for joining us with those insights. 358 00:20:00,119 --> 00:20:02,520 Speaker 1: I'm Stephen Carroll in London. You can catch us every 359 00:20:02,560 --> 00:20:05,359 Speaker 1: weekday morning here for Bloomberg Daybreak. You're at beginning at 360 00:20:05,400 --> 00:20:08,879 Speaker 1: six am in London and one am on Wall Streets. Tom, 361 00:20:08,880 --> 00:20:12,040 Speaker 1: thank you, Stephen, and coming up on Bloomberg Daybreak weekend, 362 00:20:12,119 --> 00:20:15,520 Speaker 1: the latest out of our nation's capital. I'm Tom Buzzbee 363 00:20:15,560 --> 00:20:31,600 Speaker 1: This is Bloomberg broadcasting live from the Bloomberg Interactive Broker 364 00:20:31,720 --> 00:20:35,399 Speaker 1: Studio in New York. Bloomberg elvon Freo to Washington, d C, 365 00:20:35,600 --> 00:20:39,000 Speaker 1: Bloomberg ninety nine one to Boston, Bloomberg one oh six 366 00:20:39,119 --> 00:20:42,359 Speaker 1: one to San Francisco, Bloomberg nine sixty to the country, 367 00:20:42,440 --> 00:20:46,720 Speaker 1: Sirius XM Channel one nineteen to London DAB Digital Radio, 368 00:20:46,840 --> 00:20:49,920 Speaker 1: and around the globe the Bloomberg Business app in Bloomberg 369 00:20:50,040 --> 00:21:00,600 Speaker 1: Radio dot com. This is Bloomberg Daybreak Weekend, Tom Posty 370 00:21:00,680 --> 00:21:02,480 Speaker 1: in New York, where your global look ahead at the 371 00:21:02,520 --> 00:21:05,399 Speaker 1: top stories for investors in the coming week. On Tuesday, 372 00:21:05,440 --> 00:21:07,719 Speaker 1: the Senate Banking Committee will hold the first of several 373 00:21:07,760 --> 00:21:11,440 Speaker 1: hearings on the collapse of Silicon Valley Bank and Signature Bank. 374 00:21:11,880 --> 00:21:14,000 Speaker 1: For what we can expect, led ted to our Bloomberg 375 00:21:14,040 --> 00:21:17,240 Speaker 1: ninety nine one newsroom in Washington and sound On host 376 00:21:17,440 --> 00:21:20,520 Speaker 1: Joe Matthew. Thanks Tom. I'm joined by Kaylee Lines here 377 00:21:20,560 --> 00:21:22,440 Speaker 1: in Washington as we look ahead now to the week 378 00:21:22,480 --> 00:21:25,320 Speaker 1: on Capitol Hill. You thought this past week was fun. 379 00:21:26,160 --> 00:21:28,760 Speaker 1: We may not have TikTok influencers crowding the halls of 380 00:21:28,800 --> 00:21:30,600 Speaker 1: Congress next week, but we do have a lot of 381 00:21:30,600 --> 00:21:34,160 Speaker 1: heavy duty stuff on the calendar here, Kayley. It begins 382 00:21:34,200 --> 00:21:38,560 Speaker 1: with the first banking hearings, the first hearings into the 383 00:21:38,600 --> 00:21:42,160 Speaker 1: collapse of SVB and Silicon Bank. We've been waiting for these, 384 00:21:42,720 --> 00:21:45,480 Speaker 1: and as Emily Wilkins at Bloomberg Government will help us 385 00:21:45,760 --> 00:21:49,480 Speaker 1: look ahead to as well, some important energy legislation will 386 00:21:49,560 --> 00:21:52,639 Speaker 1: dominate the House next week. So you know, rest up 387 00:21:52,680 --> 00:21:56,919 Speaker 1: this weekend, right, Yeah, definitely, because it's going to be 388 00:21:56,960 --> 00:21:59,200 Speaker 1: two days of probably what is going to be pretty 389 00:21:59,200 --> 00:22:02,399 Speaker 1: intense questions of regulators on Capitol Hill. We thought the 390 00:22:02,480 --> 00:22:05,920 Speaker 1: first hearing in inquiring as to what happened at Silicon 391 00:22:06,000 --> 00:22:07,639 Speaker 1: Valley Bank and Signature Bank was going to be in 392 00:22:07,680 --> 00:22:11,000 Speaker 1: the House. They announced it first Chairman Patrick McHenry and 393 00:22:11,080 --> 00:22:13,439 Speaker 1: ranking Member Maxine Waters that they're going to have the 394 00:22:13,480 --> 00:22:15,800 Speaker 1: hearing on Wednesday. Then the Senate Banking Committee came out 395 00:22:15,840 --> 00:22:18,520 Speaker 1: and said they are actually going to have their hearing Tuesday, 396 00:22:18,640 --> 00:22:20,920 Speaker 1: so that will be the one that we get first. 397 00:22:20,920 --> 00:22:24,800 Speaker 1: But same witnesses will have Marty Grunberg from the FDIC, 398 00:22:25,160 --> 00:22:27,080 Speaker 1: Michael Barr, the Vice chaff Supervision at the FED, and 399 00:22:27,080 --> 00:22:29,840 Speaker 1: Nellie Lang, the Under Secretary for Domestic Finance. At the 400 00:22:29,880 --> 00:22:33,480 Speaker 1: Treasury Department, so they will all three be testifying both days, 401 00:22:33,520 --> 00:22:35,520 Speaker 1: and in the statements that the committee's put out, the 402 00:22:35,600 --> 00:22:37,639 Speaker 1: language is the same. We want to get to the 403 00:22:37,680 --> 00:22:41,119 Speaker 1: bottom of how Silicon Valley Bank and Signature Bank collapsed, 404 00:22:41,520 --> 00:22:44,000 Speaker 1: and they say that's to maintain a strong banking system 405 00:22:44,040 --> 00:22:46,160 Speaker 1: going forward. My question, Joe, is how much of it 406 00:22:46,240 --> 00:22:49,240 Speaker 1: is going to be backward looking at what happened versus 407 00:22:49,520 --> 00:22:51,920 Speaker 1: forward looking? What should we do now so it doesn't 408 00:22:51,920 --> 00:22:54,439 Speaker 1: happen again. Well, that's what we've heard. Let's add Emily 409 00:22:54,480 --> 00:22:56,600 Speaker 1: Wilkins voice to this. Emily, there's been a lot of 410 00:22:56,600 --> 00:22:59,240 Speaker 1: talk about an autopsy, write a post mortem, and lawmakers 411 00:22:59,240 --> 00:23:01,840 Speaker 1: don't want to sug just a solution in many cases 412 00:23:01,880 --> 00:23:05,760 Speaker 1: until they figure out what happened to bring us to 413 00:23:05,840 --> 00:23:07,960 Speaker 1: this point. But are we ever going to do anything 414 00:23:08,200 --> 00:23:11,359 Speaker 1: beyond hearings? That is a really good question, because I 415 00:23:11,400 --> 00:23:15,680 Speaker 1: think the question is what could actually be done. Republicans 416 00:23:15,680 --> 00:23:17,480 Speaker 1: in the House have been pretty firmed that they do 417 00:23:17,520 --> 00:23:21,560 Speaker 1: not want more regulation, that they are not very interested 418 00:23:21,600 --> 00:23:27,680 Speaker 1: in a long term increase of these FDIC deposit insurance caps. 419 00:23:27,760 --> 00:23:29,720 Speaker 1: And you do see, you know some Democrats who are 420 00:23:29,760 --> 00:23:32,359 Speaker 1: interested in it, but we have split government and you 421 00:23:32,400 --> 00:23:35,560 Speaker 1: really need that bipartisan support. And what you've seen from 422 00:23:35,560 --> 00:23:38,720 Speaker 1: Patrick McHenry is a lot of that level headed cautiousness 423 00:23:38,840 --> 00:23:41,399 Speaker 1: that let's look into this, let's actually find the causes. 424 00:23:41,760 --> 00:23:44,399 Speaker 1: You know, some of his colleagues have veered into some 425 00:23:44,480 --> 00:23:47,000 Speaker 1: more partisan talking points when it comes to the banking 426 00:23:47,000 --> 00:23:49,400 Speaker 1: crisis that he has not. He has kind of kept 427 00:23:49,400 --> 00:23:52,520 Speaker 1: things very, very level. At the same point though, for 428 00:23:52,560 --> 00:23:54,840 Speaker 1: a lot of these lawmakers, you know, at this point, 429 00:23:54,840 --> 00:23:58,840 Speaker 1: we haven't heard of any more banks closing. It seems 430 00:23:58,840 --> 00:24:02,280 Speaker 1: like for now the bleeding has been stopped. At least 431 00:24:02,280 --> 00:24:04,760 Speaker 1: that is the sun Song Capitol Hill. And if that's 432 00:24:04,800 --> 00:24:08,040 Speaker 1: the case, then the momentum for actually having more legislation 433 00:24:08,320 --> 00:24:11,080 Speaker 1: is going to lessen the more that lawmakers see this 434 00:24:11,480 --> 00:24:14,239 Speaker 1: as a crisis that has already been addressed. Kaylee, I'm 435 00:24:14,280 --> 00:24:16,879 Speaker 1: stuck on this. Moody's warning that we got risk that 436 00:24:16,960 --> 00:24:20,679 Speaker 1: banking system stress will spill over into other sectors, unleashing 437 00:24:20,760 --> 00:24:24,120 Speaker 1: greater financial and economic damage than anticipated, and we're still 438 00:24:24,160 --> 00:24:27,199 Speaker 1: trying to figure out what happened a month ago. Yeah. No, 439 00:24:27,359 --> 00:24:30,600 Speaker 1: it's an excellent point because obviously, as we're trying to 440 00:24:30,680 --> 00:24:33,640 Speaker 1: dissect the failures that have already happened. You risk if 441 00:24:33,680 --> 00:24:36,080 Speaker 1: you overanalyze too much or spend too much time doing so, 442 00:24:36,119 --> 00:24:38,920 Speaker 1: that you don't prevent the failures that could be to come. 443 00:24:39,000 --> 00:24:42,720 Speaker 1: Perhaps because we're all still watching First Republic, which has 444 00:24:42,760 --> 00:24:44,960 Speaker 1: been in our focus for several weeks, they had the 445 00:24:45,000 --> 00:24:47,879 Speaker 1: thirty billion dollars in deposits put in by eleven larger banks. 446 00:24:47,920 --> 00:24:51,159 Speaker 1: We know that the Treasury or Secretary Janet Yellen had 447 00:24:51,200 --> 00:24:53,399 Speaker 1: a hand in navigating that, and then there was the 448 00:24:53,440 --> 00:24:57,840 Speaker 1: talk of potentially converting that into a capital infusion that 449 00:24:57,880 --> 00:25:00,160 Speaker 1: doesn't really seem to be going anywhere. We really haven't 450 00:25:00,160 --> 00:25:02,359 Speaker 1: in any real news, and I keep asking people, is 451 00:25:02,400 --> 00:25:04,639 Speaker 1: no news good news or is no news bad news 452 00:25:04,640 --> 00:25:06,800 Speaker 1: in this case? And we really we really don't know. 453 00:25:06,880 --> 00:25:09,560 Speaker 1: So I think there are still things we're on high 454 00:25:09,720 --> 00:25:13,040 Speaker 1: alert for. And it raises the question emily, especially when 455 00:25:13,080 --> 00:25:14,800 Speaker 1: we have had a week in which Jane Ellen has 456 00:25:14,840 --> 00:25:18,160 Speaker 1: had to clarify some of her remarks, try to make 457 00:25:18,160 --> 00:25:21,639 Speaker 1: tweaks to her language to convey to the markets, perhaps 458 00:25:21,720 --> 00:25:25,320 Speaker 1: what she really is trying to say about ensuring deposits, 459 00:25:25,320 --> 00:25:28,720 Speaker 1: if there is some kind of systemic risk, just kind 460 00:25:28,720 --> 00:25:31,440 Speaker 1: of if that is let the market seem to be 461 00:25:31,560 --> 00:25:34,840 Speaker 1: latching onto each and every word, and yet it's not 462 00:25:34,920 --> 00:25:38,000 Speaker 1: really anything that the Treasury can do except for in emergencies, right, 463 00:25:38,040 --> 00:25:42,240 Speaker 1: And Congress isn't likely to give her much room otherwise. Yeah, 464 00:25:42,280 --> 00:25:46,640 Speaker 1: I mean Congress. Congress tends to act two different times. Ay, 465 00:25:46,760 --> 00:25:49,080 Speaker 1: if there is a giant emergency and Congress is the 466 00:25:49,119 --> 00:25:51,159 Speaker 1: only one who can do anything to fix it, or 467 00:25:51,240 --> 00:25:54,239 Speaker 1: be if there is some absolute hard deadline coming up 468 00:25:54,240 --> 00:25:57,320 Speaker 1: that you can't pass, see the debt limit later this 469 00:25:57,400 --> 00:26:00,239 Speaker 1: summer into this fall. And at this point, I mean 470 00:26:00,280 --> 00:26:03,200 Speaker 1: there is that sense that, Look, I don't think lawmakers 471 00:26:03,200 --> 00:26:04,919 Speaker 1: are thinking that they're out of the woods. When I 472 00:26:04,960 --> 00:26:07,320 Speaker 1: say that the bleeding is stemmed. I'm not suggesting that 473 00:26:07,359 --> 00:26:10,280 Speaker 1: Capitol Hill is now ignoring banks were no longer paying 474 00:26:10,320 --> 00:26:12,479 Speaker 1: attention to this issue or no longer feels that this 475 00:26:12,520 --> 00:26:15,000 Speaker 1: issue is important. But I do feel like there is 476 00:26:15,040 --> 00:26:18,600 Speaker 1: a lack of a crisis mode and just a cooling 477 00:26:18,640 --> 00:26:21,560 Speaker 1: of some of the urgency then that you saw previously. Now, 478 00:26:21,640 --> 00:26:24,639 Speaker 1: certainly if that reverses, if we do see more banks 479 00:26:24,640 --> 00:26:27,159 Speaker 1: get in danger, if we do see you know, the 480 00:26:27,240 --> 00:26:30,040 Speaker 1: Treasury and that day I see having to step in more, 481 00:26:30,440 --> 00:26:33,199 Speaker 1: you might see that urgency increased on Capitol Hill and 482 00:26:33,240 --> 00:26:35,879 Speaker 1: you might start seeing folks talking about some sort of 483 00:26:35,960 --> 00:26:39,800 Speaker 1: increase in caps But I think at this point Congress 484 00:26:39,880 --> 00:26:42,240 Speaker 1: is kind of watching to see what happens next, and 485 00:26:42,359 --> 00:26:44,439 Speaker 1: some of the urgency that was really there in the 486 00:26:44,440 --> 00:26:48,040 Speaker 1: early days of Signature Valley Bank and Signature Bank, it's 487 00:26:48,080 --> 00:26:51,120 Speaker 1: just it's it's not as palatable on the hill right now. 488 00:26:51,480 --> 00:26:53,399 Speaker 1: Kill did you hear what Larry Summers said about the 489 00:26:53,400 --> 00:26:55,680 Speaker 1: deposit insurance. You can talk to David Weston about it 490 00:26:55,680 --> 00:26:57,560 Speaker 1: and actually made a little bit of news. Yeah, well 491 00:26:57,600 --> 00:27:00,480 Speaker 1: wants to have a much more full throated amen. Ye're 492 00:27:00,520 --> 00:27:03,080 Speaker 1: coming out of the Treasury Department. Yeah, basically make it 493 00:27:03,200 --> 00:27:05,840 Speaker 1: clear and he thinks they should pledge that they will 494 00:27:05,880 --> 00:27:09,160 Speaker 1: back uninsured deposits in any banks that fail in the 495 00:27:09,200 --> 00:27:13,000 Speaker 1: next year. How palatable is that though? Really politically exactly 496 00:27:13,040 --> 00:27:15,520 Speaker 1: here's what he said. There needs to be clarity on 497 00:27:15,560 --> 00:27:20,639 Speaker 1: the situation regarding deposits. Authorities do not have the authority 498 00:27:21,040 --> 00:27:24,199 Speaker 1: to say that there's going to be some kind of 499 00:27:24,280 --> 00:27:30,240 Speaker 1: universal guarantee on deposits, But what they do have is 500 00:27:30,280 --> 00:27:35,440 Speaker 1: the essentially equivalent power to declare that in the event 501 00:27:35,960 --> 00:27:41,800 Speaker 1: of a bank's failure, they will use the systematic risk 502 00:27:41,880 --> 00:27:47,240 Speaker 1: exemption in order to assure that depositors are paid off 503 00:27:47,280 --> 00:27:50,720 Speaker 1: in full. Okay, so as long as the Treasury if 504 00:27:50,720 --> 00:27:52,960 Speaker 1: they did that, If Janet Yellen came out today and 505 00:27:53,000 --> 00:27:57,440 Speaker 1: said that, what motivation to lawmakers have to stick their 506 00:27:57,520 --> 00:28:00,639 Speaker 1: neck out and act as a really good question. And 507 00:28:00,680 --> 00:28:03,320 Speaker 1: I wonder what we're going to hear about this next week. 508 00:28:03,480 --> 00:28:07,640 Speaker 1: I wonder how much we'll be questioning to the regulators. Hey, 509 00:28:07,680 --> 00:28:11,000 Speaker 1: what is your preferred policy initiative going from here? Should 510 00:28:11,040 --> 00:28:12,640 Speaker 1: we just leave it up? Leave it up to you guys, 511 00:28:12,680 --> 00:28:15,000 Speaker 1: leave it up to the Treasury Department. Hey, Emily, we 512 00:28:15,040 --> 00:28:17,400 Speaker 1: got to talk about energy legislation as well, not just 513 00:28:17,560 --> 00:28:21,880 Speaker 1: any legislation, but HR one. This is the one they 514 00:28:21,880 --> 00:28:26,240 Speaker 1: put HR one on, which typically means an important bit 515 00:28:26,280 --> 00:28:30,000 Speaker 1: of messaging from the majority, in this case the Republican 516 00:28:30,080 --> 00:28:34,120 Speaker 1: party in the House. I'm assuming this is going nowhere 517 00:28:34,200 --> 00:28:36,840 Speaker 1: where the Democratic led Congress, Emily leave it? How does 518 00:28:36,880 --> 00:28:40,280 Speaker 1: it work? Well? HR one is I would not expect 519 00:28:40,280 --> 00:28:42,520 Speaker 1: to see this go to the Senate and to the President, 520 00:28:42,840 --> 00:28:46,000 Speaker 1: but Republicans are hoping that maybe some smaller parts of 521 00:28:46,040 --> 00:28:48,600 Speaker 1: this bill could actually advance. I'll get to that in 522 00:28:48,600 --> 00:28:52,200 Speaker 1: a minute, but basically HR one is Republicans big energy package. 523 00:28:52,240 --> 00:28:55,440 Speaker 1: It is about producing energy in America. It is about 524 00:28:55,560 --> 00:28:58,160 Speaker 1: making it easier for companies that do produce. And we're 525 00:28:58,200 --> 00:29:00,480 Speaker 1: not just talking you know, oil and gas here, but 526 00:29:00,560 --> 00:29:04,000 Speaker 1: we are actually talking nuclear, we're talking solar, we're talking 527 00:29:04,040 --> 00:29:07,480 Speaker 1: with Republicans have really kind of adopted in an era 528 00:29:07,560 --> 00:29:09,480 Speaker 1: where more and more people are being to care about 529 00:29:09,480 --> 00:29:12,959 Speaker 1: climate change, including in the Republican Party. You see Republicans 530 00:29:13,000 --> 00:29:15,480 Speaker 1: kind of changing their message to really start to include 531 00:29:15,480 --> 00:29:18,240 Speaker 1: this all of the above energy approach where they aren't 532 00:29:18,240 --> 00:29:22,080 Speaker 1: actually talking about renewable energy sources while continuing to talk 533 00:29:22,120 --> 00:29:26,640 Speaker 1: about you know, oil, gas, coal, other different types of minerals. 534 00:29:26,840 --> 00:29:29,040 Speaker 1: And so this is kind of their big package, their 535 00:29:29,080 --> 00:29:31,760 Speaker 1: big proposal on what they're going to do. It is 536 00:29:31,760 --> 00:29:34,600 Speaker 1: a messaging bill. It's something that Republicans can take back 537 00:29:34,600 --> 00:29:36,600 Speaker 1: and see, see this is what we did to lower 538 00:29:36,640 --> 00:29:39,840 Speaker 1: your gas prices. Thanks to Bloomberg Government's Emily Wilkins with 539 00:29:39,960 --> 00:29:42,719 Speaker 1: Kaylee Lines, I'm Joe Matthew in Washington. Back to you 540 00:29:42,720 --> 00:29:45,600 Speaker 1: in New York time. Joe Matthew reporting from our Bloomberg 541 00:29:45,680 --> 00:29:48,800 Speaker 1: ninety nine one Newsroom in Washington. Thank you Joe, and 542 00:29:48,840 --> 00:29:52,040 Speaker 1: you can hear Joe on sound On's new Time weekdays 543 00:29:52,080 --> 00:29:54,160 Speaker 1: one to three pm Wall Street Time. Right here on 544 00:29:54,200 --> 00:29:57,840 Speaker 1: Bloomberg Radio. Coming up on Bloomberg Daybreak Weekend, a close 545 00:29:57,920 --> 00:29:59,840 Speaker 1: up look at what's happening with one of the u 546 00:30:00,040 --> 00:30:03,960 Speaker 1: huge players in the Chinese real estate market. I'm Tom Busby, 547 00:30:04,120 --> 00:30:18,720 Speaker 1: and this is Bloomberg. This is Bloomberg Daybreak Weekend, our 548 00:30:18,760 --> 00:30:21,040 Speaker 1: global look ahead at the top stories for investors in 549 00:30:21,040 --> 00:30:24,120 Speaker 1: the coming week. I'm Tom Busby in New York. New 550 00:30:24,200 --> 00:30:26,600 Speaker 1: details coming in on what's happening at one of the 551 00:30:26,640 --> 00:30:30,560 Speaker 1: best known names globally in the Chinese property market. For more, 552 00:30:30,640 --> 00:30:33,200 Speaker 1: Let's go to Hong Kong and Bloomberg Daybreak host Brian 553 00:30:33,240 --> 00:30:36,560 Speaker 1: Curtis and his colleague Doug Krisner. To Doug, and I 554 00:30:36,600 --> 00:30:39,160 Speaker 1: thought we'd take a closer look at the China Everground 555 00:30:39,200 --> 00:30:42,160 Speaker 1: restructuring and what it means for the overall state of 556 00:30:42,200 --> 00:30:45,760 Speaker 1: play in China's property sector. The plan calls for offshore 557 00:30:45,800 --> 00:30:49,920 Speaker 1: creditors to swap their debt form new securities, but Everground 558 00:30:49,960 --> 00:30:53,040 Speaker 1: needs an additional thirty six to forty four billion dollars 559 00:30:53,040 --> 00:30:56,480 Speaker 1: worth of financing to ensure that it can deliver all 560 00:30:56,480 --> 00:30:58,600 Speaker 1: of its properties, and as a result, it could mean 561 00:30:58,640 --> 00:31:02,880 Speaker 1: a delay for some of it's more than thirteen hundred developments, 562 00:31:02,960 --> 00:31:05,920 Speaker 1: and it could be a new blow to buyer confidence 563 00:31:05,960 --> 00:31:09,560 Speaker 1: in projects brought forward by a number of property developers. 564 00:31:10,000 --> 00:31:12,840 Speaker 1: China's housing sector, as we know, is beginning to recover. 565 00:31:13,200 --> 00:31:17,760 Speaker 1: Even so, there remain many uncertainties. No matter what, Everground 566 00:31:17,800 --> 00:31:21,640 Speaker 1: will remain the world's most indented developer. But this overhaul 567 00:31:21,720 --> 00:31:25,800 Speaker 1: could provide a guidepost for other builders restructurings, and that 568 00:31:25,880 --> 00:31:28,800 Speaker 1: might be the key to unlocking the property sector for 569 00:31:29,000 --> 00:31:32,560 Speaker 1: China's broader recovery. Joining us here in our studios in 570 00:31:32,600 --> 00:31:37,600 Speaker 1: Hong Kong is Alice Wong, a Bloomberg China Credit reporter. So, Alice, 571 00:31:37,680 --> 00:31:42,200 Speaker 1: what's the general reaction to this much awaited overhaul? Yeah, 572 00:31:42,280 --> 00:31:45,200 Speaker 1: I think you know. Markie is still trying to digest 573 00:31:45,320 --> 00:31:48,080 Speaker 1: this news. To be honest, it has been a sudden 574 00:31:48,160 --> 00:31:53,360 Speaker 1: quick turnaround after fifteen months of waiting following Everground's first 575 00:31:53,400 --> 00:31:56,640 Speaker 1: public dollar bond default. So what we're seeing now actually 576 00:31:56,960 --> 00:32:00,560 Speaker 1: Everground's dollar bonds this morning has jumped lightly, but it 577 00:32:00,640 --> 00:32:03,680 Speaker 1: is still trading around license on the dollar. Now, that's 578 00:32:03,800 --> 00:32:06,800 Speaker 1: much much lower than some of his peers that have 579 00:32:07,200 --> 00:32:10,520 Speaker 1: shown US plans so far. For example, Sunac, which used 580 00:32:10,520 --> 00:32:14,480 Speaker 1: to be China's fourth largest developer, is bonds have been 581 00:32:14,520 --> 00:32:18,160 Speaker 1: trading above twenty cents on the dollar. So that's that's 582 00:32:18,200 --> 00:32:21,680 Speaker 1: double what what Evergrands dollar bonds are doing now? Um? 583 00:32:21,840 --> 00:32:26,800 Speaker 1: But you know, arguably Evergrands debtload is a lot a 584 00:32:26,800 --> 00:32:30,040 Speaker 1: lot more huge than all the other ones that we're seeing. 585 00:32:30,160 --> 00:32:35,640 Speaker 1: It is China's largest dollar debt borrower among his peers. 586 00:32:35,680 --> 00:32:40,400 Speaker 1: So yeah, that really um shows that it will have 587 00:32:40,440 --> 00:32:44,280 Speaker 1: a lot more work to do before people can start 588 00:32:44,320 --> 00:32:47,160 Speaker 1: to see his money see their money back. So I 589 00:32:47,160 --> 00:32:50,200 Speaker 1: would imagine this is a positive development not only for 590 00:32:50,280 --> 00:32:54,200 Speaker 1: property developers, but for the overall dollar bond market as well. 591 00:32:54,320 --> 00:32:58,040 Speaker 1: I know shares in China Evergrand have been halted since 592 00:32:58,120 --> 00:33:02,800 Speaker 1: March of last year. Does this necessarily mean these developments, 593 00:33:03,280 --> 00:33:06,680 Speaker 1: this restructuring. Does it mean that we've or will avoid 594 00:33:06,720 --> 00:33:09,680 Speaker 1: a delisting of Evergrand in Hong Kong. Not really, that's 595 00:33:09,720 --> 00:33:12,680 Speaker 1: a very good point. Actually, Evergrand has a few things 596 00:33:12,680 --> 00:33:15,800 Speaker 1: it needs to work through before it can avoid being 597 00:33:15,800 --> 00:33:19,440 Speaker 1: delisted in September. Since its shares have been halted since 598 00:33:19,480 --> 00:33:22,960 Speaker 1: March twenty twenty two. So number one, it actually needs 599 00:33:23,000 --> 00:33:26,040 Speaker 1: to get the winding up petition. It's a hearing a 600 00:33:26,120 --> 00:33:29,920 Speaker 1: lawsuit that's facing in Hong Kong to be either dismissed 601 00:33:30,080 --> 00:33:34,040 Speaker 1: or withdrawn. And the proposal that we're seeing so far 602 00:33:34,200 --> 00:33:36,560 Speaker 1: is an important step because this shows the Core that 603 00:33:36,880 --> 00:33:39,400 Speaker 1: the company is doing something. It will convince the Core 604 00:33:40,120 --> 00:33:44,640 Speaker 1: that it's working toward a debt resolution. So perhaps at 605 00:33:44,680 --> 00:33:48,120 Speaker 1: the next hearing the judge will actually be able to 606 00:33:48,160 --> 00:33:51,760 Speaker 1: dismiss the case. But just seeing the plan is not enough. 607 00:33:51,920 --> 00:33:55,560 Speaker 1: Evergrand needs to get a bondholders support. Now we have 608 00:33:55,720 --> 00:33:59,120 Speaker 1: reported that it got a major group of dollar bondholders support, 609 00:33:59,280 --> 00:34:02,960 Speaker 1: but they only represent about twenty five percent of outstanding 610 00:34:02,960 --> 00:34:05,880 Speaker 1: dollar bonds, while because every gonna want to go through 611 00:34:05,960 --> 00:34:09,640 Speaker 1: what's called a scheme of arrangement, it typically would require 612 00:34:10,040 --> 00:34:13,279 Speaker 1: seventy five percent of bondholder agreement. So you can see 613 00:34:13,280 --> 00:34:15,319 Speaker 1: there's a lot to be done. Alice, thanks so much 614 00:34:15,360 --> 00:34:17,960 Speaker 1: for joining us here in our studios in Hong Kong. 615 00:34:18,160 --> 00:34:22,319 Speaker 1: Alice Huang Bloomberg, China Credit reporter. I'm Brian Curtis along 616 00:34:22,360 --> 00:34:25,200 Speaker 1: with Doug Christener. You can catch us every Weekday. Here 617 00:34:25,280 --> 00:34:28,680 Speaker 1: for Bloomberg Daybreak Asia, beginning at six am in Hong 618 00:34:28,760 --> 00:34:32,040 Speaker 1: Kong and six pm on Wall Street. Tom, thank you, 619 00:34:32,080 --> 00:34:34,600 Speaker 1: Brian and Doug. That does it for this edition of 620 00:34:34,600 --> 00:34:37,879 Speaker 1: Bloomberg Daybreak Weekend. Join us again Monday morning at five 621 00:34:37,920 --> 00:34:40,759 Speaker 1: am Wall Street time for the latest on markets overseas 622 00:34:40,760 --> 00:34:43,520 Speaker 1: and the news you need to start your day. I'm 623 00:34:43,560 --> 00:34:46,480 Speaker 1: Tom Busby. Stay with us. Top stories and global business 624 00:34:46,480 --> 00:34:53,920 Speaker 1: headlines are coming up right now.