WEBVTT - (Radio) 0:00:02.160 --> 0:00:04.680 This is Bloomberg day Break Weekend, our global look at 0:00:04.720 --> 0:00:06.720 the top stories in the coming week from our Daybreak 0:00:06.760 --> 0:00:09.000 anchors all around the world, and just a hint on 0:00:09.000 --> 0:00:13.400 the program, politicians are pushing for more regulation in the 0:00:13.440 --> 0:00:17.040 crypto industry. I'm John Tucker in New York. I'm Stephen 0:00:17.079 --> 0:00:19.639 Carol in London, where the economic picture across Europe looks 0:00:19.840 --> 0:00:22.840 less gloomy than expected after inflation east up in November. 0:00:23.040 --> 0:00:25.040 But there could be more body news on the way. 0:00:25.280 --> 0:00:28.360 I'm dead Chrisner to the central banks of Australia and 0:00:28.560 --> 0:00:32.240 India take cues from the Fed. I'm Amy Morris in Washington. 0:00:32.320 --> 0:00:36.280 We're watching the Senate runoff in Georgia. That's all straight 0:00:36.320 --> 0:00:40.159 ahead on Bloomberg Daybreak Weekend on Bloomberg eleven three on 0:00:40.280 --> 0:00:44.599 New York, Bloomberg one, Washington d C, Bloomberg one oh 0:00:44.640 --> 0:00:48.519 six one, Boston, Bloomberg nine sixties, San Francisco d A B, 0:00:48.720 --> 0:00:52.559 Digital Radio, London, Sirius XM one nineteen and around the 0:00:52.600 --> 0:00:55.720 world on Bloomberg Radio dot Com and via the Bloomberg 0:00:55.720 --> 0:01:01.720 Business App. Hi, everybody, I'm John Tucker, and let's start 0:01:01.760 --> 0:01:05.560 today's program with the swirl of crypto chaos and joining 0:01:05.560 --> 0:01:09.480 me now Bloomber, Katie Greiphil and Katie, we've had some 0:01:09.520 --> 0:01:13.440 big crypto companies go bust. The contagion and ripple effects 0:01:13.440 --> 0:01:16.959 still swirling as we speak. Here's Tim Adams, he's the 0:01:16.959 --> 0:01:20.520 CEO of the Institute of International Finance. Bubbles are gonna 0:01:20.520 --> 0:01:23.280 pop and f t X as an example of business 0:01:23.480 --> 0:01:25.920 plans are made on a napkin that just didn't work. 0:01:26.360 --> 0:01:28.200 But I don't think it's crypto per se. I think 0:01:28.280 --> 0:01:31.320 what we saw with that particular enterprise is just really 0:01:31.360 --> 0:01:35.559 bad governance in bad oversight, bad governance and bad oversight, 0:01:35.640 --> 0:01:37.600 as he puts it. In the other coming weeks, we're 0:01:37.640 --> 0:01:40.759 gonna have the House Financial Committee convened for a hybrid 0:01:40.880 --> 0:01:45.600 hearing entitled Investigating the Collapse of f t X, Part One. 0:01:46.040 --> 0:01:48.760 So Katie, um, the horses left the barn and now 0:01:48.840 --> 0:01:52.040 it's time to close the barn doors. Hab. I mean, 0:01:52.720 --> 0:01:57.560 it's a complicated regulatory puzzle here. Who actually has oversight, 0:01:57.680 --> 0:01:59.840 especially in the case of f t X. I mean, 0:02:00.320 --> 0:02:03.400 clearly there was some failing here, but just a reminder 0:02:03.440 --> 0:02:07.280 of what we're dealing with. This was a Bahamas based exchange. 0:02:07.560 --> 0:02:11.519 What a US regulatory agency should have done about that 0:02:11.680 --> 0:02:14.919 as an open question right now. Congressional hearings usually don't 0:02:14.960 --> 0:02:16.880 get my attention, but I'll be sitting down with a 0:02:16.880 --> 0:02:19.240 big bowl of popcorn for this one. What do you expect? 0:02:19.560 --> 0:02:21.880 Is he going to show up? Sam Bankman Freed, the 0:02:22.800 --> 0:02:26.000 head of bankrupt Well, he's given an interview to just 0:02:26.160 --> 0:02:29.240 about everyone. It feels like I think that the reporting 0:02:29.280 --> 0:02:30.919 has shown that they would like him to be in 0:02:31.160 --> 0:02:33.960 person physically there, whether or not he will actually come 0:02:34.000 --> 0:02:36.120 to you. Maybe he shouldn't come to the US because 0:02:36.160 --> 0:02:39.840 somebody's gonna want to put some cufflings on him. Hopefully 0:02:39.960 --> 0:02:42.640 he's talking to his lawyers. I'm not I'm not sure 0:02:43.520 --> 0:02:47.960 who's advising him here. But in any case, uh, theoretically 0:02:48.040 --> 0:02:50.920 he will be appearing in front of Congress, or at 0:02:50.960 --> 0:02:53.680 least that is the hope. But I don't know he has. 0:02:53.880 --> 0:02:55.880 We've heard a lot from him between the New York 0:02:55.960 --> 0:03:00.200 Times interview, his tweets, the reporting from other outlets as well. 0:03:00.560 --> 0:03:03.480 What did he say in that that interview with andrews 0:03:03.800 --> 0:03:07.359 ross Sorkin? It was pretty amazing. I mean, the big 0:03:07.520 --> 0:03:11.440 takeaway is that he said that he wasn't trying to 0:03:11.600 --> 0:03:14.679 commit fraud. So the intent was, well, no, I'm not 0:03:14.760 --> 0:03:17.480 sure that you know in the annals of fraud history 0:03:17.720 --> 0:03:21.160 that you really start off trying. It's sort of like 0:03:21.240 --> 0:03:24.560 a well worn path, like unless you're a cartoon villa 0:03:24.639 --> 0:03:27.359 in theoretically most people don't start off with fraud in mind. 0:03:27.440 --> 0:03:29.720 But I mean, he was very candid. It was a 0:03:29.840 --> 0:03:32.280 long interview. First of all, this of course, was at 0:03:32.280 --> 0:03:35.040 the New York Times deal Book summit with Andrew Ross Sorkin. 0:03:35.440 --> 0:03:38.000 He said, I made a lot of mistakes. There are 0:03:38.040 --> 0:03:39.560 things I would give to be able to do it 0:03:39.680 --> 0:03:43.000 over again again and again. I didn't ever try to 0:03:43.160 --> 0:03:46.000 commit fraud. There was a lot of talk about whether 0:03:46.160 --> 0:03:48.920 he knew that the customer deposits at f t X 0:03:49.240 --> 0:03:51.920 were being com mingled with the trading shop, which is 0:03:52.040 --> 0:03:55.440 Alameda Research, which when you put you know, customers funds 0:03:55.480 --> 0:03:58.280 into different accounts, that's that's a big no no. Yeah, 0:03:58.400 --> 0:04:01.160 for sure that that is typically on the naughty list, 0:04:01.240 --> 0:04:03.800 And the Wall Street Journal has reported that that's exactly 0:04:03.920 --> 0:04:07.320 what was happening, that they were basically funneling those customer 0:04:07.400 --> 0:04:12.240 funds into the trading shop to fuel those risky bets. 0:04:12.400 --> 0:04:14.600 And you end up with a ton of leverage and 0:04:14.640 --> 0:04:17.360 when the market moves against you, here we are. Yeah. 0:04:17.360 --> 0:04:19.720 I don't want to get too complicated, but f t 0:04:20.080 --> 0:04:23.560 X was not just a platform, but it was other 0:04:23.640 --> 0:04:26.080 stuff too. There was a hedge fund, did you pointed 0:04:26.120 --> 0:04:28.880 out and they had their own token, right, yes, So 0:04:29.000 --> 0:04:31.400 the exchange out of token, the f t T token, 0:04:31.520 --> 0:04:34.600 which it's hard to describe. I mean, Matt Levine of 0:04:34.600 --> 0:04:37.360 Bloomberg Opinion has basically described it as kind of like 0:04:37.680 --> 0:04:41.720 equity in the exchange itself. But I mean, to your point. 0:04:41.880 --> 0:04:44.640 The thing about the crypto industry, the reason that it 0:04:44.760 --> 0:04:50.120 has this very uh, these strong connections, this interconnectedness, is 0:04:50.160 --> 0:04:53.920 because a lot of these companies are wearing a lot 0:04:54.000 --> 0:04:56.400 of hats that would be separate roles in the traditional 0:04:56.520 --> 0:04:59.040 finance world. It's not uncommon for a firm in the 0:04:59.080 --> 0:05:02.480 crypto industry to be a custodian, to be a brokerage, 0:05:02.560 --> 0:05:06.559 to be in exchange. Again, those are all distinct roles 0:05:06.600 --> 0:05:10.120 in the world of traditional finance. But these crypto companies 0:05:10.160 --> 0:05:13.080 were putting them all under one house, and then it 0:05:13.160 --> 0:05:17.159 sort of creates this really what can be an unstable situation, 0:05:17.279 --> 0:05:20.240 as we've seen play out and he complained about too 0:05:20.320 --> 0:05:23.800 much regulation. He did so he felt like he had 0:05:23.800 --> 0:05:27.800 spent too much time trying to get licenses for f 0:05:27.960 --> 0:05:30.800 t x. Uh. He said of the regulatory process that 0:05:30.880 --> 0:05:34.160 he had spent hundreds even thousands of hours meeting with 0:05:34.279 --> 0:05:38.360 regulators to try and get approval for f t x US, 0:05:38.480 --> 0:05:41.880 the US arm of the platform to offer futures trading 0:05:42.200 --> 0:05:45.960 that of course didn't work out. Maybe for the best. Okay, 0:05:46.279 --> 0:05:48.240 this I'm I'm betting this will be one of the 0:05:48.320 --> 0:05:51.000 first questions if he shows up, if he's there for 0:05:51.279 --> 0:05:56.280 any congressionally hearing, where's the money? It's a great question. No, 0:05:56.800 --> 0:06:00.520 it's does he know they were still talking about missing 0:06:01.160 --> 0:06:05.560 billions here? Uh. The the people who are handling the 0:06:05.640 --> 0:06:08.840 liquidation process, of course, John Jay Ray, the third is 0:06:09.000 --> 0:06:11.000 at the helm of it, the new fd X CEO. 0:06:11.120 --> 0:06:13.560 He of course handled en Ron. He's the he's the 0:06:13.920 --> 0:06:16.839 court a point at the bankruptcy court appointed dude who's 0:06:16.880 --> 0:06:21.080 done every major bankruptcy you can think of. Yeah, he Ron, 0:06:21.120 --> 0:06:24.360 I think exactly exactly. So he's been around the block 0:06:24.400 --> 0:06:27.520 a few times, and I mean the words, he hasn't 0:06:27.560 --> 0:06:29.640 minced words when it comes to ft X. He's talked 0:06:29.640 --> 0:06:34.960 about completely just so unprofessional in terms of the record keeping, 0:06:35.080 --> 0:06:37.880 basically that it didn't exist. So one of the things 0:06:37.920 --> 0:06:40.400 they're trying to do right now is figure out where 0:06:40.600 --> 0:06:44.480 all the billions of dollars of customer deposits when they've 0:06:44.560 --> 0:06:48.880 located some of the bitcoin in cold wallets, for example. 0:06:49.720 --> 0:06:53.559 But there's still a lot to uncover here. Katie, always 0:06:53.600 --> 0:06:57.159 a pleasure to appreciate it. Bloomberg's Katie Grindfeld helping us 0:06:57.360 --> 0:07:00.960 explore the world of crypto. Katie, thanks a lot, and 0:07:01.080 --> 0:07:03.880 just to hand. On Bloomberg Daybreak weekend, I'll look at 0:07:03.920 --> 0:07:07.880 the inflation picture and what next in Europe. I'm John Tucker. 0:07:08.160 --> 0:07:15.560 This is Bloomberg. This is Bloomberg Daybreak Weekend, our global 0:07:15.560 --> 0:07:17.600 look ahead of the top stories for investors in the 0:07:17.680 --> 0:07:20.480 coming week. I'm John Tucker in New York. Up later 0:07:20.560 --> 0:07:23.160 in the program, big week coming for central banks in 0:07:23.320 --> 0:07:27.880 Australia and India. But first November's inflation numbers from the 0:07:27.920 --> 0:07:30.520 countries using the Euro will lay the groundwork for the 0:07:30.600 --> 0:07:34.480 European Central banks next decision December fift But in the 0:07:34.560 --> 0:07:37.120 coming days a raft of other economic data will tell 0:07:37.240 --> 0:07:40.520 us more about the state of economies across Europe and 0:07:40.600 --> 0:07:43.520 from or lets into London and bring in Bloomberg Daybreak 0:07:43.560 --> 0:07:47.040 Europe anchors Stephen Carroll John The predictions for this winter 0:07:47.160 --> 0:07:50.920 were dire for Europe, warnings of blackouts forced factory shutdowns 0:07:51.000 --> 0:07:54.239 due to the energy crisis provoked by Russia's invasion of Ukraine. 0:07:54.680 --> 0:07:57.560 Milder weather, though until early November, has avoided the worst 0:07:57.560 --> 0:08:02.160 scenario for many major European economy, but inflation remains close 0:08:02.280 --> 0:08:04.960 to record high. As our tief eerupoconumis. Jamie Ross joins 0:08:05.000 --> 0:08:08.120 us now for more Jamie's The latest CPI figures for 0:08:08.120 --> 0:08:11.440 the Aurozone showed a slowdown to ten percent from ten 0:08:11.480 --> 0:08:14.440 point six percent in October, better than had been expected. 0:08:14.720 --> 0:08:17.640 What was driving us, so the bulk about has been 0:08:17.800 --> 0:08:20.520 has been best news on energy prices, so particularly in 0:08:20.600 --> 0:08:24.040 the Netherlands and Spain, and I think to some extent 0:08:24.160 --> 0:08:28.000 Belgium that these countries see very quick paths through from 0:08:28.040 --> 0:08:31.280 wholesale gas prices into into retail prices. So you know, 0:08:31.400 --> 0:08:34.280 that's what we're seeing. It's taking some pressure off, it's 0:08:34.360 --> 0:08:37.920 beaten consensus to the you know, to the downside, and 0:08:38.000 --> 0:08:39.559 you know, actually the cp just needs that it just 0:08:39.640 --> 0:08:41.559 needs some good news on inflation. We've had a year 0:08:41.600 --> 0:08:43.960 and a half of upside surprises. This is the first 0:08:44.000 --> 0:08:46.280 time I've got a downside one in that period. And 0:08:46.880 --> 0:08:48.880 does it give us any indication as to whether or 0:08:48.920 --> 0:08:50.880 not we could be close to a peak of inflation 0:08:50.920 --> 0:08:53.079 and we're still talking about ten percent even though it 0:08:53.120 --> 0:08:56.079 has come down slightly. I think we probably are past 0:08:56.160 --> 0:08:59.560 the peak, depending on clearly things could things could change, right, 0:08:59.600 --> 0:09:02.480 We're not only just it going into winter now, we're 0:09:02.520 --> 0:09:06.719 not actually there and so it could easily prove cold things. 0:09:06.800 --> 0:09:08.760 Could you know that the reason that gas prices have 0:09:08.840 --> 0:09:11.360 fallen is partly because the risk premium has just gone 0:09:11.360 --> 0:09:13.760 away that could come back. So it's I think it's 0:09:13.760 --> 0:09:15.719 too early to say to you know, to rule out 0:09:15.800 --> 0:09:19.559 another surgeon inflation. But my best guess is that from 0:09:19.559 --> 0:09:21.800 what we know now, probably we've we've passed the peak 0:09:22.080 --> 0:09:24.559 and we do like your best gases, they proved to 0:09:24.600 --> 0:09:28.040 be right quite a lot of the time. How much 0:09:28.160 --> 0:09:31.280 divergence are we seeing among countries in the euro Area, 0:09:31.320 --> 0:09:33.640 because that's part of the picture now that's emerging as 0:09:33.679 --> 0:09:36.439 we're getting you know, are the individual figures that we've 0:09:36.440 --> 0:09:39.160 gotten from countries. France still seems a little bit sticky, 0:09:39.200 --> 0:09:41.079 but we did get the sign of a slowdown in 0:09:41.480 --> 0:09:44.199 Spain and in Germany. Yeah, that's right. I mean, we 0:09:44.280 --> 0:09:45.920 know that there are quite big differences in the energy 0:09:46.000 --> 0:09:48.840 mix in different European countries, France in particularly because it's 0:09:48.880 --> 0:09:52.199 reliance on nuclear and also that you know, government policies 0:09:52.240 --> 0:09:56.000 just cap prices there. So we've seen much low inflation 0:09:56.080 --> 0:09:58.760 in France and the rest of the Eurozone, but it's 0:09:58.800 --> 0:10:02.439 gonna last for much longer. So we have very different experiences, 0:10:02.480 --> 0:10:04.400 which actually trying to say in different politics as well, 0:10:04.440 --> 0:10:06.880 and just you know the way people are people are 0:10:07.240 --> 0:10:12.160 viewing the crisis itself. Well, this figures that we've gotten 0:10:12.400 --> 0:10:14.840 for the broader Eurozone will be complemented by more data 0:10:14.880 --> 0:10:17.120 that's coming in the next few days, of course, going 0:10:17.200 --> 0:10:19.440 to form the basis of the next rate eyed decision 0:10:19.520 --> 0:10:22.959 by the European Central Bank. ECB President Christine Laud was 0:10:22.960 --> 0:10:26.040 speaking to the European European Parliament in Brussels in the 0:10:26.120 --> 0:10:29.600 past few days. She said she'd be surprised if inflation 0:10:29.679 --> 0:10:33.760 has peaked. By reducing people's real income and pushing up 0:10:33.880 --> 0:10:40.079 costs for firms, high inflation is dampening spending and production. 0:10:40.880 --> 0:10:46.280 High uncertainty tied to financial conditions and weakening global demand 0:10:46.679 --> 0:10:50.520 are also weighing on economic growth, which is expected to 0:10:50.640 --> 0:10:54.640 continue weakening for the remainder of this year fourth quarter 0:10:55.120 --> 0:10:58.559 and the beginning of next year first quarter of twenties three. 0:10:58.679 --> 0:11:00.959 That's to be President Christine are talking there about the 0:11:01.200 --> 0:11:05.120 outlook for the months to come, and we will get 0:11:05.200 --> 0:11:10.040 final third quarter GDP data for the Eurozone coming up 0:11:10.040 --> 0:11:13.760 in the next couple of days. The last you know 0:11:13.840 --> 0:11:16.760 that the preliminary readings for the third quarter did show 0:11:17.120 --> 0:11:20.080 small growth. But where where where does this go from here? 0:11:20.160 --> 0:11:23.199 What's such ajectory for for the euro Area? But I 0:11:23.240 --> 0:11:26.600 think most people are expecting a shallow ish recession over 0:11:26.679 --> 0:11:29.240 the winter and going into next year. But I think 0:11:29.280 --> 0:11:31.720 what's one thing that's interesting now is that because energy 0:11:31.760 --> 0:11:35.160 prices have fallen back, the impact from the gas crisis, 0:11:35.280 --> 0:11:38.600 that the direct impact could actually end up being smaller 0:11:39.440 --> 0:11:41.880 then the e CBS response to it. Because the if 0:11:41.920 --> 0:11:44.520 you just use like a simple model and you compare 0:11:44.559 --> 0:11:46.959 what what the impact of gas prices is too to 0:11:47.080 --> 0:11:49.920 the impact of higher higher interest rates, it's now looking 0:11:49.920 --> 0:11:52.480 like higher interest rates could be the dominant factor driving 0:11:52.520 --> 0:11:55.400 the slowdown in the Eurozone next year. So it's um, 0:11:55.840 --> 0:11:58.520 you know, the the queue has been potentially worse than 0:11:58.600 --> 0:12:01.520 the than the and the illness to start with. Well, this, 0:12:01.640 --> 0:12:03.640 of course as we're looking ahead towards the next meeting 0:12:03.720 --> 0:12:06.839 of the European Center Banking in just under two weeks time. Now, 0:12:07.880 --> 0:12:10.880 what is the calculation the ECB has to make here, 0:12:10.880 --> 0:12:13.800 because it's this question of their only mandates is inflation. 0:12:14.000 --> 0:12:15.800 So how much do they actually care about you know, 0:12:15.880 --> 0:12:17.280 it's not the same as the fair so how much 0:12:17.280 --> 0:12:19.679 they actually care about the rest of the economy and 0:12:20.040 --> 0:12:22.400 kind of striking that balance. So I think there's two 0:12:22.400 --> 0:12:24.720 things they need to think about. One is the risk 0:12:25.000 --> 0:12:28.360 from just high headline inflation what that does for inflation expectations. 0:12:28.440 --> 0:12:31.640 Now on that side, on that dimension, things are looking better, right, 0:12:31.840 --> 0:12:35.480 So headline inflation surprises downside is lower. That on balance, 0:12:35.520 --> 0:12:37.120 I think means that the UP doesn't need to do 0:12:37.240 --> 0:12:39.520 seventy five when it meets in December. It can do fifty. 0:12:39.640 --> 0:12:43.240 That's fine. Across another dimension though, they're going to be 0:12:43.320 --> 0:12:46.240 looking much more closely in months to come at core inflation, 0:12:46.360 --> 0:12:49.240 underlying inflation and that's going to be pretty sticky, so 0:12:49.360 --> 0:12:51.000 we think that they're going to keep hiking rates in 0:12:51.520 --> 0:12:54.360 twenty three UM. So it's it's those two things they're 0:12:54.400 --> 0:12:58.240 looking at slightly. One one calls for urgent action headline inflation. 0:12:58.360 --> 0:13:01.839 One calls for something that's going to be drawn out 0:13:01.840 --> 0:13:04.440 into next year. Given that core inflation element, though, does 0:13:04.520 --> 0:13:06.200 that also tell us that we're going to be looking 0:13:06.280 --> 0:13:08.880 at rates higher for longer and that they will hold 0:13:08.920 --> 0:13:11.360 at a certain position, which you know, in the history 0:13:11.360 --> 0:13:13.880 of the Euro Area, we haven't really seen long periods 0:13:13.920 --> 0:13:16.839 of higher interest rates. So I think what's going to 0:13:16.920 --> 0:13:19.679 happen is this this focus on core inflation. I think 0:13:19.679 --> 0:13:21.400 they're only going to be able to bring the cycle, 0:13:22.000 --> 0:13:24.599 the hiking cycle to a close once they see co 0:13:24.720 --> 0:13:29.079 inflation dropping, and our forecasts show that happening around the 0:13:29.120 --> 0:13:31.120 beginning of the second quarter next year, so we think 0:13:31.160 --> 0:13:33.120 that's when they'll be they'll have like the breathing space 0:13:33.200 --> 0:13:35.200 just to to stop hiking rates, and we think they'll 0:13:35.200 --> 0:13:37.880 get to three percent on the refinancing rate. Then I 0:13:38.000 --> 0:13:39.839 think it won't be until perhaps was the end of 0:13:39.880 --> 0:13:42.839 the year that they feel they can cut and so 0:13:43.080 --> 0:13:46.040 we are going to see potentially that the high relatively 0:13:46.080 --> 0:13:48.679 high interest rate period for for much of next year. 0:13:48.760 --> 0:13:50.880 And again, one of those challenges the ECB has is 0:13:50.960 --> 0:13:53.800 a very diverse group of countries that it is, you know, 0:13:53.840 --> 0:13:58.960 the monetary policy institution. For either countries within the euro 0:13:59.080 --> 0:14:01.520 Area that are going to suffer more because of higher rates, 0:14:01.880 --> 0:14:03.959 there are I mean, the CBS own models show that 0:14:04.000 --> 0:14:06.680 when you hike interest rates, countries like Italy and Spain 0:14:06.760 --> 0:14:09.120 are hit much harder than countries like France and Germany. 0:14:09.600 --> 0:14:11.280 And actually Italy is one of the country is just 0:14:11.360 --> 0:14:13.280 going to be worse hit by the gas crisis, so 0:14:13.440 --> 0:14:15.760 it just doesn't need it um So we are going 0:14:15.800 --> 0:14:20.200 to see differing performances across the Eurozone going through when 0:14:20.240 --> 0:14:22.960 we're looking at the broader economic picture, is it too 0:14:23.040 --> 0:14:25.080 soon to worry about next winter or is this where 0:14:25.120 --> 0:14:28.320 policymakers should be thinking too now about how the energy 0:14:28.360 --> 0:14:30.720 crisis might play out over the more medium term. And 0:14:30.880 --> 0:14:33.360 let's think about it. We've entered this winter missing six 0:14:33.480 --> 0:14:35.680 months of gas flows from Russia. When we go into 0:14:35.720 --> 0:14:37.720 next winter, we're gonna be missing twelve months of gas 0:14:37.760 --> 0:14:40.440 flows from from Russia. So the problem is going to 0:14:40.480 --> 0:14:42.480 be bigger The question is how quickly can the European 0:14:42.520 --> 0:14:46.160 economy adapt to the new energy reality. We've been surprised 0:14:46.200 --> 0:14:48.400 at how much energy has come into the Eurozone and 0:14:48.480 --> 0:14:50.240 also we've got lucky with the weather. But I mean 0:14:50.280 --> 0:14:52.320 it's not going to be an easy winter next year either. 0:14:52.600 --> 0:14:55.080 Thank you very much to Boomberg Steve economist Jamie Rush. 0:14:55.160 --> 0:14:57.600 I'm Stephen Carroll in London. You can catch us every 0:14:57.640 --> 0:15:00.280 weekday morning here for Bloomberg Daybreak Europe, beginning at six 0:15:00.360 --> 0:15:03.200 am in London and one am on Wall Streets. John 0:15:03.800 --> 0:15:06.160 all right, Stephen, thanks a lot. Just ahead on Bloomberg 0:15:06.240 --> 0:15:10.440 day Break weekend, look at inflation issues in Australia and India, 0:15:10.680 --> 0:15:13.800 impossible central bank moves in those countries this coming week. 0:15:14.160 --> 0:15:22.400 I'm John Tucker at This is Bloomberg broadcasting live from 0:15:22.440 --> 0:15:26.520 the Bloomberg Interactive Broker Studio in New York. Bloomberg elmon 0:15:26.560 --> 0:15:31.120 Frio to Washington, d C, Bloomberg to Boston, Bloomberg one 0:15:31.200 --> 0:15:34.960 oh six one to San Francisco, Bloomberg six to the Country, 0:15:35.040 --> 0:15:38.240 Serious XM Channel one nineteen to London d A B 0:15:38.520 --> 0:15:41.800 digital radio, and around the globe. The Bloomberg Business APT 0:15:41.920 --> 0:15:46.160 and Bloomberg Radio dot Com. This is Bloomberg day Break weekend. 0:15:52.360 --> 0:15:54.440 I'm John Tuckery in New York with your global look 0:15:54.480 --> 0:15:57.080 ahead of the top stories for investors in the coming week. 0:15:57.560 --> 0:16:00.720 Policy Makers at central banks in Australia and India will 0:16:00.720 --> 0:16:04.040 be grappling with some big questions this coming week, and 0:16:04.120 --> 0:16:06.280 for more, let's go to Hong Kong and Bloomberg Daybreak 0:16:06.360 --> 0:16:10.080 Asian host Brian Purtison and his colleague Doug Prisoner. John, 0:16:10.240 --> 0:16:13.080 the central banks of both countries are facing interest rate 0:16:13.160 --> 0:16:16.320 decisions as they grapple with the dominant issue across much 0:16:16.360 --> 0:16:19.560 of the globe, high inflation, and both economies are now 0:16:19.720 --> 0:16:22.920 feeling the effect of aggressive monetary tightening. We want to 0:16:23.000 --> 0:16:25.840 take a closer look now with Bloomberg's Global Economics and 0:16:25.920 --> 0:16:30.720 Policy editor Kathleen Hayes. Kathleen, let's begin with the Reserve 0:16:30.800 --> 0:16:34.080 Bank of Australia. The RBA will meet on Tuesday, and 0:16:34.240 --> 0:16:37.320 the question that I have for you will they borrow 0:16:37.560 --> 0:16:40.960 from the Fed's playbook, at least what we seem to 0:16:41.040 --> 0:16:43.600 know of it, as it was implied this week from 0:16:43.680 --> 0:16:46.200 FED chair J Powell that the size of rate hikes 0:16:46.280 --> 0:16:48.800 will be reduced going forward fair statement. Well, let me 0:16:48.840 --> 0:16:51.800 tell you about the Reserve Bank of Australia. By starting 0:16:51.840 --> 0:16:55.400 with the Bank of Korea. The Bank of Korea last Friday, 0:16:55.840 --> 0:16:58.760 uh it was pretty widely expected they had they'd done 0:16:59.160 --> 0:17:02.480 to fifty base point rate hikes July and October and 0:17:02.720 --> 0:17:05.560 and other than that. When they started back in July one, 0:17:05.600 --> 0:17:08.479 they had did twenty five basis point hikes. And one 0:17:08.480 --> 0:17:11.640 of the big reasons they were expected to dial back 0:17:11.800 --> 0:17:14.680 to the twenty five basis point hike was because the 0:17:14.760 --> 0:17:18.320 feder Reserve has been signaling more and more strongly that 0:17:18.440 --> 0:17:20.800 they're not going to do seventy five bases point rate hikes. 0:17:20.800 --> 0:17:23.399 They're gonna go back to fifty in parts so they 0:17:23.440 --> 0:17:27.239 can pause and see the impact of the recent rate 0:17:27.320 --> 0:17:30.560 hikes to date. So that's another reason I think why 0:17:30.680 --> 0:17:32.720 you know the b okay has gone in that direction, 0:17:33.320 --> 0:17:35.119 that the r b A is expected to do so 0:17:35.280 --> 0:17:37.879 as well. And I think just generally the conditions in 0:17:38.240 --> 0:17:41.560 in Australia or another reason why they're expected to do that. 0:17:41.760 --> 0:17:44.560 The Reserve Bank has surprised markets three out of ten 0:17:44.720 --> 0:17:47.760 meetings this year. That's that's quite interesting in itself. It 0:17:47.800 --> 0:17:51.200 means that their communication policy a little bit different from 0:17:51.280 --> 0:17:54.200 the Fed. Is it likely that they'll surprise us again 0:17:54.280 --> 0:17:56.560 this time? Well, certainly we can say Phil Low isn't 0:17:56.600 --> 0:17:58.720 afraid to change his mind when he sees what's going 0:17:58.760 --> 0:18:01.800 on in the economy around him, and go ahead and 0:18:01.880 --> 0:18:03.960 do what he thinks needs to be done. And in 0:18:04.080 --> 0:18:07.000 fact we know that now traders, instead of seeing the 0:18:07.080 --> 0:18:09.439 twenty five basis paint rate hike that is is by 0:18:09.480 --> 0:18:11.800 far and away the majority of view, they think it 0:18:11.880 --> 0:18:15.520 could be a fifty basis point hike. And in fact, 0:18:15.720 --> 0:18:19.080 when he started uh tightening last May, if he did 0:18:19.080 --> 0:18:21.440 a quarter point hike to zero point three when the 0:18:21.520 --> 0:18:25.040 market was pricing in fifteen basis points to start on 0:18:25.119 --> 0:18:27.280 winding the last of the pandemic eric rate cuts and 0:18:27.440 --> 0:18:31.280 returned to the usual basis point move, then he followed 0:18:31.320 --> 0:18:33.560 that up with a surprise half point increase in June. 0:18:34.000 --> 0:18:37.120 Then he broke ranks with central banks around the world 0:18:37.200 --> 0:18:40.000 in October by down shifting to a quarter point. And 0:18:40.080 --> 0:18:42.840 he was talking about the sharp tightening already delivered by 0:18:42.880 --> 0:18:44.240 the r b A and that it had yet to 0:18:44.280 --> 0:18:47.200 work it's ready through the economy, so a small hike 0:18:47.240 --> 0:18:50.200 would actually leave him the key rate at three percent, 0:18:50.800 --> 0:18:53.479 and a lot of investors are saying that will give 0:18:53.520 --> 0:18:56.720 them some time to assess the incoming data flow over 0:18:56.960 --> 0:18:59.000 the summer break. So I'm wondering whether or not he's 0:18:59.000 --> 0:19:01.280 going to get any push back on reducing to twenty 0:19:01.359 --> 0:19:05.320 five basis points that there is a contingent saying, hey, 0:19:05.560 --> 0:19:08.440 it's time to remain aggressive, because what we've been hearing 0:19:08.480 --> 0:19:11.120 from a number of central bankers, when you lose control 0:19:11.640 --> 0:19:16.200 of the inflation problem, it's really really difficult as time 0:19:16.280 --> 0:19:18.800 goes on to attack it in a way that's going 0:19:18.880 --> 0:19:22.760 to be effective. There was an investment conference recently in 0:19:23.040 --> 0:19:27.560 Australia that Bloomberg News wrote about, and the theme here 0:19:27.640 --> 0:19:30.440 is that they're playing with fire by signaling a higher 0:19:30.520 --> 0:19:33.959 tolerance for inflation, by slowing the pace of policy tightening 0:19:34.000 --> 0:19:35.920 and trying to deliver a soft landing. That's one of 0:19:35.920 --> 0:19:38.280 the things people criticize the FED for. It's a little 0:19:38.280 --> 0:19:40.159 bit contradictory. Don't want to have a soft landing and 0:19:40.240 --> 0:19:44.320 still be super aggressive or aggressive enough on inflation. Another comment, 0:19:44.440 --> 0:19:47.360 it feels like they're playing with fire, but the payoff 0:19:47.440 --> 0:19:49.399 is a pretty good one if they can achieve that. 0:19:49.960 --> 0:19:51.800 Uh and of course that's as you just mentioned, I 0:19:51.840 --> 0:19:56.160 mean risk the inflation expectations will become un anchored because 0:19:56.200 --> 0:19:58.040 it's going to be a long time to keep inflation 0:19:58.119 --> 0:20:00.879 outside of the target band. One estimate that Australia we 0:20:00.960 --> 0:20:03.720 have four or five and six percent inflation for a 0:20:03.800 --> 0:20:06.240 few years and that that could come back to haunt 0:20:06.320 --> 0:20:09.480 them now the day after the r b A meets, 0:20:09.480 --> 0:20:12.720 so we'll have an RBI decision. And is it is 0:20:12.760 --> 0:20:14.640 it too early for them to take their foot off 0:20:14.680 --> 0:20:19.640 the pedal. Yes, they're supposed to, although they are supposed 0:20:19.680 --> 0:20:22.359 to do a smaller thirty five basis point hiked to 0:20:22.440 --> 0:20:26.280 six and a quarter percent. About you know, well more 0:20:26.359 --> 0:20:29.720 than half, about two thirds of investors saying they can't 0:20:29.760 --> 0:20:32.040 stop fighting inflation. That's for sure. It's slow to six 0:20:32.119 --> 0:20:35.840 point seven seven percent in October um, and it's been 0:20:35.960 --> 0:20:37.720 but still it's been above the upper end of the 0:20:37.760 --> 0:20:41.639 two to six percent band for all year. More modest, 0:20:41.800 --> 0:20:44.400 modest rate rise of thirty five basis points would follow 0:20:44.440 --> 0:20:48.040 a series of fifty basis point hikes. And it again 0:20:48.119 --> 0:20:51.280 it's coincides with the fetter reserve sending a signal that 0:20:51.320 --> 0:20:53.720 they're going to shift to smaller rating increases at their 0:20:53.760 --> 0:20:56.480 policy meeting this month. Kathleen, thank you so much for 0:20:56.600 --> 0:20:59.560 that preview of the r b A and RBI meetings. 0:21:00.000 --> 0:21:05.359 Boomberg's Kathleen Hayes, Global Economics and Policy Editor. I'm Brian Curtis, 0:21:05.440 --> 0:21:08.280 along with Doug Krisner. You can catch us every weekday 0:21:08.440 --> 0:21:11.639 for Bloomberg Daybreak Asia, beginning at seven am in Hong 0:21:11.720 --> 0:21:15.359