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Speaker 1: I'm gonna do a little history here because it is

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Speaker 1: important question or this is the boast. I'm Thomas Subscribe Politics,

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Speaker 1: Financial Investment, Attack, Subscribe Voice, Spotify, Great Kansas and always

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Speaker 1: I'm Tom. Wonderful to have you with the terminal. And

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Speaker 1: I want to go back to the sweat right now

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Speaker 1: in the advent of You're fed, which was when United

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Speaker 1: Copper blew up in nineteen oh seven and JP Morgan

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Speaker 1: sat in a study of a house built by phelp

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Speaker 1: Dodge money and tried to ball out the financial system.

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Speaker 1: That is the age old distrust of a grarian America

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Speaker 1: with the fancy people in New York. Is the history

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Speaker 1: repeating itself now with the fancy people in Silicon Valley

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Speaker 1: and for that matter, the fancy people and Zurich Swit's on. Well,

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Speaker 1: that's a bit of a stretch. I would say that

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Speaker 1: what's really happening is that classic night that follows day.

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Speaker 1: Because we had a a lot of very smart and

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Speaker 1: knowledgeable people who pursued a policy over the last decade

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Speaker 1: or more of a very accommodative, highly accommodative monetary policy

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Speaker 1: with very low interest rates for an extended period of time,

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Speaker 1: and when you do that. If you think back over

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Speaker 1: every crisis, When you do that for a long period

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Speaker 1: of time and inflation of assets and prices rise, you

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Speaker 1: end up having to tighten policy. And that means all

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Speaker 1: these asset values take downward pressure. And that's what we're

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Speaker 1: seeing today. That's what we saw back then, that's what

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Speaker 1: we saw in the eighties, and that's what we saw

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Speaker 1: in the two thousand and eight period. Is this because

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Speaker 1: of the financialization of America and that some of these

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Speaker 1: troubled banks are sort of kind of like banks where

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Speaker 1: they're catering to the elite, to the haves, to the

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Speaker 1: have nots, creating immense distrust politically in Washington, creating an

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Speaker 1: immense distrust away from where the elite live. Well, what

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Speaker 1: they're doing, I think is when you have this kind

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Speaker 1: of speculative, I mean, this is this kind of policy

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Speaker 1: in vice speculation. So no, it's not just the elites

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Speaker 1: that those who are saying, hey, I'm going to take

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Speaker 1: advantage of this. Whether you're in the Midwest or in

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Speaker 1: the varying part of the nation, or you're on the

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Speaker 1: East coast, you take advantage of this. And then when

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Speaker 1: the problem comes and here's where the I think the

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Speaker 1: resentment comes you bail out, you bail out banks, you

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Speaker 1: bail out some banks, and that's what we have with

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Speaker 1: too Big to Fail from the last time through, and

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Speaker 1: it still continues today. And those who are in the

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Speaker 1: smaller communities who are not bailed outcome or lose your

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Speaker 1: job as a result of having the titan poll too much.

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Speaker 1: They become very resentful and blame it to some extent

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Speaker 1: rightfully on the elites who supposedly know all this. I'm

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Speaker 1: often asked, you know, Tom, you know these are really

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Speaker 1: smart people. You should just let them, you know, figure

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Speaker 1: this stuff where you and I say, well, that's smart

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Speaker 1: where we're in this mess. So it's it's it's I

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Speaker 1: think there needs to be a lot of humility in

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Speaker 1: the policy making business because it can often go south

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Speaker 1: when you get too cocky, too confident. Tom, let's talk

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Speaker 1: about the moment that we have at had, because you

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Speaker 1: have incredible expertise, both as a former head of the

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Speaker 1: Kansas City Federal Reserve as well as the head of

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Speaker 1: the fdi C, and I'm curious about whether your suspicion

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Speaker 1: is there is a more significant risk that authorities are

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Speaker 1: trying to stave off by some of the actions overnight.

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Speaker 1: In other words, what do you make of the criticism

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Speaker 1: that they took a bazuka to basically an well, I

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Speaker 1: would like to be able to say that too, that

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Speaker 1: it wasn't a systemic but there was with this event

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Speaker 1: a great uncertainty raised about banks, especially regional banks. And

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Speaker 1: so if I were sitting at that table, as much

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Speaker 1: as I would not want it to, but in a crisis,

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Speaker 1: you do what you have to do, and I would

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Speaker 1: have gone along with that, I think. I think yes,

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Speaker 1: but there and they are trying to avoid further problems

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Speaker 1: down a little because when you raise interest rates by

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Speaker 1: a factor at least twenty five in less than a year,

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Speaker 1: the assets it's not just those government bonds with duration

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Speaker 1: rests that are taking hits. There are other assets, and

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Speaker 1: everyone knows that that's why you see this uncertain you continue,

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Speaker 1: there's a whole asset on the portfolio these banks, and

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Speaker 1: those are going to be under pressure with this higher

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Speaker 1: interest rate and with the likelies slowing of the economy.

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Speaker 1: And so that's really what they're trying to do. Yes,

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Speaker 1: we're going to the depositors say don't run, let's not

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Speaker 1: make this thing worse, and that's what you do in

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Speaker 1: a crisis. Go ahead. Well, but I guess that the

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Speaker 1: concern that some people have is, Okay, this is a

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Speaker 1: crisis response. But on the flip side, you're creating long

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Speaker 1: lasting policy without actually creating it. And this goes to

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Speaker 1: ensuring all deposits above two hundred and fifty thousand dollars,

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Speaker 1: the thinking, okay, let's protect all those small businesses so

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Speaker 1: that they can meet payroll. Is there a consequence to

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Speaker 1: having a de facto policy implied by the actions without

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Speaker 1: it being codified or even paid for by some of

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Speaker 1: these banks. Well, yes, I mean you have set the

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Speaker 1: expectation today. I mean everyone's going to be protected. Every

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Speaker 1: depositor is going to be protective. That's if you walk

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Speaker 1: away from that, now you are going to create a

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Speaker 1: heck of a crisis. So yes, that is pretty clear.

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Speaker 1: And what they're trying to do is what these special

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Speaker 1: facilities learning facilities to say, hey, we'll take your assets

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Speaker 1: at far, especially the so called government bonds, so that

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Speaker 1: there's there's a liquidity coming into the system and if

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Speaker 1: there are other problems in other assets. You were talking

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Speaker 1: about commercial real estate earlier, Well, at that point, they're

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Speaker 1: going to have to step up and protect these these depositors,

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Speaker 1: because that's the expectation. If you don't do it, you're

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Speaker 1: going to have a made your problem on your hand.

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Speaker 1: The issue is we never learned from the mistake. I

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Speaker 1: mean everyone I've heard this on this program and others,

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Speaker 1: that capital is just we're well capitalized. Well, if you

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Speaker 1: were well capitalized, you wouldn't have this kind of uncertainty

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Speaker 1: in the in the system. So you're well capitalized for

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Speaker 1: good times, but can you really take the shocks? Liquidity?

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Speaker 1: Liquidity is follow us capital because when people become uncertain

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Speaker 1: about your solvency, they run, and then your liquidity problem

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Speaker 1: forces the issue. So we have to you know, we're

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Speaker 1: going to have to get through this, and the government's

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Speaker 1: going to intervene. But if we don't learn on the

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Speaker 1: other side of this to watch monetary policy are supervision.

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Speaker 1: We need stronger capital these put anycovery racials. We have

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Speaker 1: to make sure they're actually liquid because we say bonds

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Speaker 1: are risk free, Well they're not duracial risk free. So

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Speaker 1: we better could do a different better job on the

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Speaker 1: other side of this media panic. If we're going to

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Speaker 1: avoid him in the future. I gotta get through the

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Speaker 1: stone first. Thomas, this was fantastic. Try to catch up

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Speaker 1: with these, sir. Thank you Thomas Hunik, the former FDIC.

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Speaker 1: Nice check. Our team has just done a great job.

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Speaker 1: Guess to have to guess. As we just spoke with

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Speaker 1: the former president of the Kansas City Fed, John and

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Speaker 1: I are going to force a day to check here. John,

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Speaker 1: I'm going to go to the two year yield of

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Speaker 1: four point one five percent. It's in a little bit,

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Speaker 1: but it's not giving me the theater that we see

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Speaker 1: in some of the printings for the banks. Do you

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Speaker 1: want the fatter of the two year right for the

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Speaker 1: last week, because I can bring it to you if

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Speaker 1: you like. We're unchanged on the two year this morning,

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Speaker 1: Yesterday up twenty seven basis points, Wednesday dance thirty six,

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Speaker 1: Tuesday up twenty seven, Monday dance sixty one. When was

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Speaker 1: the last time you saw a week like that? Lisa?

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Speaker 1: In the vonmarket, Well, in terms of IMPI volatilty two

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Speaker 1: thousand and eight, it's like arrhythmia. You look at the chart,

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Speaker 1: it looks like an arrhythmic kind of problem with your heart.

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Speaker 1: Right now, we're gonna jump to it with our guest

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Speaker 1: Anastasia Murosso she's chief investment strategist at I Capital, but

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Speaker 1: with a brilliant no doubt in the last twenty four

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Speaker 1: hours of where we are, Anastasia, you take a much

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Speaker 1: broader view. You've always done that with JP Morgan and others,

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Speaker 1: and you're out in searching for shadows globally this morning.

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Speaker 1: Of these traumas, what's the shadow you're most focused one? Well,

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Speaker 1: it's in the US banking sector. And we were talking

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Speaker 1: about whether SVB and Signature Bank or idiots and creadic issues.

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Speaker 1: I don't think they're idiots and creadic issues. I think

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Speaker 1: there is a broader problem. There's some very specific things

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Speaker 1: that went wrong at those two banks. But if you

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Speaker 1: take a step back, let's take stock of what's happening.

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Speaker 1: Is the FED is raising rates. First of all, depositors

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Speaker 1: have other options, and if you look at the online

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Speaker 1: savings rate, for example, it is much higher than what

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Speaker 1: you're getting on your checking accounts or your savings accounts.

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Speaker 1: So depositors are looking for other options, and as a results,

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Speaker 1: as those deposits go out, the banks are having to sell.

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Speaker 1: They're either available for sales, securities or now the fears

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Speaker 1: that they're going to have to sell some of their

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Speaker 1: health to maturity securities, and that means a new wave

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Speaker 1: of markdowns. So this is I mean, this is systemic,

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Speaker 1: or at least it's broad based. And this is why

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Speaker 1: I think the market is having a hard time saying, yes,

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Speaker 1: this is it, this is over, because what we've seen

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Speaker 1: is sort of a patchwork, a piecemeal approach of regulation.

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Speaker 1: And we said the depositors of these two institutions don't

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Speaker 1: have to worry about their deposits, and we sort of

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Speaker 1: have an implicit guarantee, but implicit may not be enough.

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Speaker 1: Next steps Federal serfmates next week. If they met today

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Speaker 1: and had to make that decision, what on earth would

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Speaker 1: they do? It is such a coin toss. But the

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Speaker 1: more I thought about it this week, the more I

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Speaker 1: think they have two pause. It is a very different store.

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Speaker 1: I think in the US versus the ECB, the ECB

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Speaker 1: is pre committed to fifty basis points, and the ECB

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Speaker 1: can look at all the capital ratios and liquidity ratios

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Speaker 1: of their banks and say, our banking system is fine,

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Speaker 1: and our rates are not at four point seven five percent,

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Speaker 1: and Credit Suite is truly unique and different. But you

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Speaker 1: look at the US and you say, the banking system

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Speaker 1: broadly is experiencing strain under these level of rates, and

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Speaker 1: you know the confidence signal of twenty five basis points.

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Speaker 1: I don't really think that goes that far. The biggest

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Speaker 1: signal of confidence would be to say we are tuned

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Speaker 1: to the issue. We want to take the time to

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Speaker 1: make sure we have the right approach in place before

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Speaker 1: we resume the rate hiking cycle. To me, that would

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Speaker 1: be the best approach. The economic argument that they could

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Speaker 1: make that a lot of economists are making is that

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Speaker 1: you are seeing a rapid tightening in financial conditions and

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Speaker 1: the heels of this that you're not seeing the same

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Speaker 1: kind of credit that is even over to smaller businesses.

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Speaker 1: Given all of your experience in the private markets world,

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Speaker 1: do you see this distress starting to spread in a

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Speaker 1: way that Larry Fink is describing saying that that's the

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Speaker 1: next shoe to drop. Not yet and certainly not broadly,

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Speaker 1: but I think it will impact pockets of private markets.

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Speaker 1: So for example SVB. The reason why you know this

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Speaker 1: is such a big deal for the startup community, it's

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Speaker 1: forget the deposits deposits are safe, but what about the

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Speaker 1: lines of credit. What about the loans that some of

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Speaker 1: these VC back companies were able to get that they

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Speaker 1: wouldn't have gotten from some of the bigger banks. So

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Speaker 1: who's going to step in and fill the void? Now?

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Speaker 1: I do happen to think that people will step in.

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Speaker 1: I think there's a lot of venture capital that has

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Speaker 1: been raised that has to be deployed, but guess what,

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Speaker 1: least it's not going to be deployed at the same valuations.

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Speaker 1: And if you look at the early stage VC valuations,

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Speaker 1: this sort of did never one up to the levels

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Speaker 1: that the late stage venture did. You know, we'd had

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Speaker 1: a huge surge in twenty twenty one. So I think

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Speaker 1: the deals may still be getting done vcs, maybe the

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Speaker 1: providers of liquidity, but they're going to demand a pretty

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Speaker 1: steep haircut and a discount on those valuations. So base

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Speaker 1: case now for many people and a stage usk that

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Speaker 1: growth gets hit. With that in mind, what do you

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Speaker 1: play for at the moment in the sanquity market. Yeah,

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Speaker 1: so maybe I'm a big contrarian on the standpoint. I mean,

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Speaker 1: I do agree with Lisa that this is a deflationary

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Speaker 1: development and that the banks will tighten landing standards and

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Speaker 1: they'll pull back on lending over time. But John, if

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Speaker 1: you look at the economy today, we came into the

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Speaker 1: air the consensus did expecting zero percent GDP growth the

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Speaker 1: last I checked, which was yesterday Atlanta GDP FED. The

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Speaker 1: projection now for Q one is three point two percent

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Speaker 1: GDP growth. This is an economy this week aside, that's

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Speaker 1: these consumer confidence that has been rising, the new manufacturing

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Speaker 1: orders that are picking up, and the economy is actually fine.

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Speaker 1: So I think that explains the resilience why we've seen

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Speaker 1: in the market. That's why we hang around this four thousand,

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Speaker 1: thirty nine hundred dollar level, because the economy is fine,

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Speaker 1: and I think the market is betting that this banking

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Speaker 1: issue is going to make the FED at least pause.

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Speaker 1: So for now, you know, I can't say we're going

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Speaker 1: to see immediate new lows in the market. But at

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Speaker 1: the same time, I think how this ultimately plays out

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Speaker 1: as hopefully the banking issue is fixed and then the

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Speaker 1: FED gets back to its inflation fighting man date and

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Speaker 1: then we have this major repricing that needs to happen,

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Speaker 1: you know, back from whatever the terminal rate is. It

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Speaker 1: now four point six percent back to five point eight,

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Speaker 1: maybe to six and a half percent. So that's a

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Speaker 1: big repricing that's probably coming for the market. Let's say

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Speaker 1: later this year. That's how white the ranch of outcomes.

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Speaker 1: I'm right now potentially. And I started to thank you

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Speaker 1: on Stam said that FI Capital, thank you. We got

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Speaker 1: eight ways to go with our guests here, John, I'm

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Speaker 1: gonna cut it. I'm gonna give you an anecdote, John,

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Speaker 1: and then you guys can pick up the adult conversation

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Speaker 1: with Gerard Cassidy, who's been fabulous with us this week

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Speaker 1: and particularly interpreting Senator Warren's comments. Gerard, you and I've

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Speaker 1: lived this. You're in Swellsley, Massachusetts, and you need a jumbo.

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Speaker 1: The new place up the coast of Maine in bar

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Speaker 1: Harbor right now, there's an eleven million dollar property up there,

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Speaker 1: and I need a five million jumbo. And you go

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Speaker 1: down Washington Street in Wellesley and you're walts into First

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Speaker 1: Republic Bank and you get a five million dollar jumbo

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Speaker 1: over a cup of coffee? Is that what we're bailing out? Tom?

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Speaker 1: Thank you again for having me on the program. And

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Speaker 1: I would say, I don't think that's exactly what we're

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Speaker 1: bailing out. But yes, they are definitely a jumbo mortgage lender,

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Speaker 1: but they're also a financial advisor. They were a wealth manager,

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Speaker 1: and that is certainly part of it. All. The key, though, is,

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Speaker 1: I think it's more the contagion risk than people are

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Speaker 1: worried about that. If you allow any of these very

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Speaker 1: large banks to become insolvent and the depositors at risk,

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Speaker 1: you certainly worry about the contagion risk, which is of

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Speaker 1: course what we have worried about in past crisis. Is

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Speaker 1: whether it was the O eight or nine prices, or

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Speaker 1: even in the nineteen ninety prices. Jared, I think a

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Speaker 1: lot of people in America are finding the communication at

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Speaker 1: the moment from authorities to be somewhat confusing. They have

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Speaker 1: implied at some level the old depositors will be made hold.

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Speaker 1: They have implied at some level the regardless of size,

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Speaker 1: most financial institutions in this country would carry that systemic

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Speaker 1: risk exception, and yet there is still nervousness. Jarard, What

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Speaker 1: on earth can authorities do when it comes to tackling

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Speaker 1: those issues? I think, John, what we're going to see

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Speaker 1: is obviously each day beyond the failures of those two

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Speaker 1: banks last weekend will give us some calm in the markets.

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Speaker 1: People are still jittery. But in my conversations with bank

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Speaker 1: managements this week, what we saw and heard was that

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Speaker 1: depositors were very angst on Monday, but as the week

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Speaker 1: went on, things start to calm down a little bit.

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Speaker 1: So I think what we'll see is time will help

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Speaker 1: heal some of these wounds. But you're right about the

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Speaker 1: communication part of it. It has been a time confusing,

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Speaker 1: and I think they need to get a stronger message

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Speaker 1: out there that for the time being, in a period

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Speaker 1: of uncertainty, the Federal Reserve, the FDAC in Treasury will

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Speaker 1: be there. More explicitly than they said on Sunday, Jared,

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Speaker 1: the public might hear numbers like one hundred and fifty

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Speaker 1: three billion dollars come from the so called discount window

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Speaker 1: at the Federal Reserve, and Jared, there might be people

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Speaker 1: tuning in this morning, listening watching this program, finding all

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Speaker 1: of that quite scary. There are these two facilities, Gerard.

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Speaker 1: There is the discount window, It's been around a long

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Speaker 1: long time. There was a new facility introduced on Sunday

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Speaker 1: evening BTFP, the Bank Term Funding program in really simple terms, Gerard,

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Speaker 1: Can you explain those big numbers we heard yesterday afternoon, Johnny.

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Speaker 1: They're incredible numbers, but when you put it on the

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Speaker 1: banking system, and if you just look at total deposits

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Speaker 1: in the banking system, they're around seventeen eighteen trillion dollars.

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Speaker 1: It's hard for any of us to get our arms

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Speaker 1: around a number a trillion dollars. So our system is gigantic.

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Speaker 1: And these numbers that you just referenced on the discount

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Speaker 1: window borrowings that we're announced yesterday are very large, but

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Speaker 1: the economy in the system is extremely large. So putting

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Speaker 1: it in that perspective, the numbers I think are more manageable.

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Speaker 1: But you know, just seeing that absolute number one hundred

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Speaker 1: and fifty plus billion dollars is a big number, Gerard.

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Speaker 1: This one French policy expert, quoted in the Financial Times,

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Speaker 1: highlighted the sort of insignificance relatively speaking, in terms of

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Speaker 1: the scope of some of these banks that are being

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Speaker 1: rescued by authorities, saying, this is the US version of

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Speaker 1: small Venetian banks. You're always systemic for somebody. Do you

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Speaker 1: think that that criticism is valid? I think to some

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Speaker 1: extent it is. I mean, we still have, as you know, Lisa,

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Speaker 1: are over forty six hundred banks in the United States,

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Speaker 1: and unfortunately, if million dollar bank, if there's any banks

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Speaker 1: that's small, were to go insolvent, it wouldn't cause the

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Speaker 1: repercussions that a two hundred billion dollar bank did so,

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Speaker 1: even though the two hundred billion dollar bank is smaller

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Speaker 1: relative to JP Morgan or Bank America. As you all know,

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Speaker 1: this was the second largest bank failure in US history.

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Speaker 1: It's a big bank, even though relative to our big

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Speaker 1: guys it's not. So they certainly need to put in

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Speaker 1: further controls and procedures. More liquidity might be required, more

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Speaker 1: capital might be required, But the industry is definitely going

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Speaker 1: to see more regulation as a result of what we

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Speaker 1: just came through. Is there a bigger problem, Gerard the

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Speaker 1: people are kind of hinting at but not addressing directly,

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Speaker 1: which is that the disproportional amount of commercial real estate,

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Speaker 1: as Thomas mentioned many times, of individual loans of sort

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Speaker 1: of the riskier assets the bigger banks have gotten out

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Speaker 1: of that. That concentration has regulators authorities very concerned about

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Speaker 1: smaller and regional banks and the potential contagion and the

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Speaker 1: const quinces. Lisa, We're always worried about commercial real estate.

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Speaker 1: If you go back in time before even Tom and

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Speaker 1: I were doing this in the eighteen hundreds, commercial real

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Speaker 1: estate's always been a problem for banks during a crisis

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Speaker 1: and then has to be managed effectively. And to do

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Speaker 1: that you have to, to your point, you need to

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Speaker 1: keep the concentration risks in the manage real state. You

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Speaker 1: cannot have a bank that has seventy five of their

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Speaker 1: assets in commercial real estate loans. So commercial real estate

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Speaker 1: it's going to potentially be challenging in the urban markets

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Speaker 1: for downtown class B and C space, But overall, you know,

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Speaker 1: most commercial real estate is underwritten very conservatively, and should

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Speaker 1: there be some higher delinquencies and charge offs, I think

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Speaker 1: the system will handle it effectively with the levels of

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Speaker 1: capital in the system today. Jod next steps options, what

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Speaker 1: do you think they are? John? Really good question, and

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Speaker 1: I would tell you we anticipate that more of the

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Speaker 1: smaller reach nals will be required to carry more liquidity.

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Speaker 1: You might be familiar with something called the LCR liquidity

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Speaker 1: coverage ratio, where the banks have to hold up the

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Speaker 1: thirty days of money that they would handle a run

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Speaker 1: on the bank. These are our giant g set banks

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Speaker 1: as they're referred to, like a JP Morgan Bank America.

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Speaker 1: I see more banks being required to do that. You

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Speaker 1: heard a lot about this AOCI accumulated other comprehensive income.

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Speaker 1: That's where the unrealized gains and losses go for securities.

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Speaker 1: For the biggest banks, they deduct that through regulatory capital.

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Speaker 1: We expect the smaller banks to be required to do

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Speaker 1: that as well. Third, we also expect that the industry

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Speaker 1: will have to pay higher fees to the FDIC to

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Speaker 1: build up the insurance fund, especially if they raised the

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Speaker 1: limit on insurance on the deposits to five hundred thousand dollars.

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Speaker 1: That will be cost late to the industry as well.

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Speaker 1: What is it about a crisis A new acronyms tone?

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Speaker 1: Oh just like a long mist Ryan, Yeah, Chat did

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Speaker 1: a great job of explain it. Thank you said, we're

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Speaker 1: gonna jump into this right now and continue this discussion

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Speaker 1: with Alvaro Santos Pereira, well timed chief economist at OECD,

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Speaker 1: and we're now supposed to have a dry, boring discussion

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Speaker 1: about what OECD looks like forward on economic growth. Amid

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Speaker 1: bank crisis. We will not do that, and we can

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Speaker 1: do that because he is schooled and has taught at

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Speaker 1: the University of British Columbia and Simon Fraser, which truly

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Speaker 1: owns a high ground on this arcane world the econometrics Elvarro.

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Speaker 1: We have a bank crisis going on, we have different

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Speaker 1: shades of bank crisis going on. Well that diminish global GDP.

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Speaker 1: Do you just assume with financial fragility things tighten up

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Speaker 1: even in China and we see a dampening to economic recovery. Well, Tom,

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Speaker 1: thanks very much, so, first of all, I think it's

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Speaker 1: important to say that we see a fragile recovery going on.

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Speaker 1: Basically we've been we see some positive news in terms

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Speaker 1: of activity and in terms of confidence all across the

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Speaker 1: world in fact, and we see some good news regarding inflation,

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Speaker 1: which it's came down in terms of headline but even

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Speaker 1: though care remains a bit fixed and sticky and service

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Speaker 1: inflation is a bit sticky. So we've been thinking about

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Speaker 1: exactly what is the impact we think at this stage

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Speaker 1: the last few days, the impact has been mostly on

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Speaker 1: the risk side. That is, risks have certainly increased in

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Speaker 1: terms of finance stability and the risk overall, they're more

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Speaker 1: tilty to the downside. But at this stage we think

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Speaker 1: that it's very important to say that we are undertaking

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Speaker 1: and undergoing a tentative or fragile recovery that is ongoing.

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Speaker 1: I know it's inappropriate for you as an institution and

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Speaker 1: you as a chief economist of EC. The second guess

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Speaker 1: central banks as well. But if we're in the interest

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Speaker 1: rate structure we're in now, and particularly ex Japan, can

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Speaker 1: you state at OECD that in a general statement we

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Speaker 1: are restrictive in our global monetary policy. Well, we can

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Speaker 1: say that in spite of the turbulence of the past

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Speaker 1: few days, our big problem still is inflation, and so

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Speaker 1: we think that we need to be more data driven,

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Speaker 1: which means that central banks for sure need to see

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Speaker 1: whether what they need to do in regarding press stability

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Speaker 1: but also financial stability. And you can see that many

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Speaker 1: countries have follow different approaches. I'll give an example there.

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Speaker 1: Even before the past few days, Brazil had a big

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Speaker 1: increase in inflation. Their central bank was very forceful their

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Speaker 1: car and the headline efficitions coming down, so they are

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Speaker 1: taking a reader now. The Bank of Canada in the

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Speaker 1: last two meetings, they decided to let's look at the

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Speaker 1: data first. We've done a lot, so let's see if

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Speaker 1: it is enough. And so I think the Central Bank

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Speaker 1: for Central Bank will have to decide what to do

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Speaker 1: right now. Now this important to cent terms of financial stability.

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Speaker 1: This is not two thousand and eight important to say

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Speaker 1: that banks are in better, much better ship than they

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Speaker 1: used to be. Regulations also in many countries and monterry

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Speaker 1: authorities are way more active than they used to be.

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Speaker 1: So even though yes, there are risks and there are

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Speaker 1: some episodes that a financial volatility that could potentially continue,

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Speaker 1: we do think that right now we don't have a

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Speaker 1: We don't see systemic risk still on the on the cards.

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Speaker 1: What does it rise to that risk? What does something

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Speaker 1: break from your vantage point? Well, I think what matters

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Speaker 1: that it will be exactly if we have really bad

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Speaker 1: news regarding other inflation in front and would that would

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Speaker 1: mean that rates would have to go higher than anticipated,

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Speaker 1: or if there's an unexpected event right now. As I said,

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Speaker 1: what we sey in terms of our risks is that

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Speaker 1: even though they are tilted to the downside, the economy

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Speaker 1: is starting to have It's not on the United States.

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Speaker 1: It's also in Europe and China and a few other

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Speaker 1: countries in which we start seeing some positive signs out there.

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Speaker 1: So I think it's important to keep the eye on

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Speaker 1: the ball and understand that in spite of the very

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Speaker 1: short run for volatibility, we still think that at these

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Speaker 1: stage the economy is slowly getting back on their feet.

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Speaker 1: Over the market disagrees, and this is sort of what

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Speaker 1: I've found really notable. Over the past couple of days.

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Speaker 1: We've seen a huge repricing in FED policy going forward.

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Speaker 1: We have seen a huge repricing and expectations for inflation

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Speaker 1: and for growth at least at based on the markets

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Speaker 1: right now, people are basically expecting FED funds rates are

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Speaker 1: showing basically one more hike than done than almost a

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Speaker 1: hundred basis points still of rate cuts. What are you saying,

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Speaker 1: what are you seeing that is so different to that

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Speaker 1: scenario that markets are currently pricing in well, looking at fundamentals,

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Speaker 1: and so I understand the markets, and of course sometimes

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Speaker 1: markets get over reaction times. Obviously they are on the ball,

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Speaker 1: but we think that we need to look at fundamentals,

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Speaker 1: and for us, the fundamentals are how is the economy

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Speaker 1: looking in terms of lab market, how is the economy

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Speaker 1: doing to the financial stability front, and also how's the

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Speaker 1: economy doing in terms of activity indicators? And what we

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Speaker 1: see right now is that, yes, it's true that very

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Speaker 1: likely because of the turbulence of the past few days,

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Speaker 1: it's very likely that, for example, in financial institutions might

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Speaker 1: become a bit more conservative in the lending procedures. It

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Speaker 1: is very possible that we might have a few volatively

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Speaker 1: in a few in a few financi stitutions. But at

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Speaker 1: this stage we don't see systemic risk on the table

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Speaker 1: from Paris to the purview of the OECD of our

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Speaker 1: Osento's prayer with us their chief economist. Subscribe to the

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Speaker 1: Bloomberg Surveillance podcasts on Apple, Spotify and anywhere else you

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Speaker 1: get your podcasts. Listen live every weekday starting at seven

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00:26:54,320 --> 00:26:59,040
Speaker 1: am Easter on Bloomberg dot Com, the iHeartRadio app, tune In,

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00:26:59,440 --> 00:27:02,840
Speaker 1: and the Blueberg Business Out. You can watch us live.

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Speaker 1: I'm Bloomberg Television and always I'm the Bloomberg Terminal. Thanks

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Speaker 1: for listening. I'm Tom Keane and this is Bloomberg