Speaker 1: Welcome to the Bloomberg surveillance podcast. I'm Tom Keene, along
Speaker 1: with Jonathan Ferrill and Lisa are Brawnowitz Jailey. We bring
Speaker 1: you insight from the best and economics, finance, investment and
Speaker 1: international relations. Find Bloomberg surveillance and apple podcast soundcloud, Bloomberg
Speaker 1: Dot Com and, of course, on the Bloomberg terminal. Danny
Speaker 1: Blash flag joins US right now. Danny, it's fantastic to
Speaker 1: catch up and I think we should start there, at
Speaker 1: the heart of these decisions. What do these decisions mean
Speaker 1: for Everyday Brits, every day Americans, when city are basically
Speaker 1: saying millions are going to end up unemployed? And the
Speaker 1: question I've asked, and I think you're perfectly positioned to
Speaker 1: try and answer it, is higher unemployment of price worth
Speaker 1: paying to try and get inflation down? No? Well, we
Speaker 1: have a lot of evidence. I mean the central bankers
Speaker 1: forever have said how important inflation is and they just
Speaker 1: kind of guessed it. So there's a huge body of
Speaker 1: literature that I've contributed to and we look at what's
Speaker 1: the what's the impact on the country's well being, if
Speaker 1: you like, on the wealth of nations of a one
Speaker 1: percentage point rising unemployment compared to a one percentage point
Speaker 1: rise in inflation, and the answer is it's absolutely clear
Speaker 1: between five and ten times worse. So a new paper
Speaker 1: says that the rising unemployment that they're going to bring
Speaker 1: about is ten times worse than the problem they're trying
Speaker 1: to solve. And you started this thing out. We I've
Speaker 1: been talking a lot about the woman on the mile
Speaker 1: in road, omnibus, and what I mean by that is
Speaker 1: so so the Bank of England sits in the city
Speaker 1: of London. One mile away is the mile in road.
Speaker 1: It's called the mile in road because it's a mile
Speaker 1: from the city and it's where the two worlds collide.
Speaker 1: And the question is, what's going on that's going to
Speaker 1: help the bankers and the city folks that we talked
Speaker 1: to and the woman riding the bus on the mislen road.
Speaker 1: And the answer, it seems to me, is that is
Speaker 1: that we're we're seeing disaster coming. We're seeing rises in
Speaker 1: interest rates in the UK when the Bank of being
Speaker 1: there's agents today talk about slowing demands, slowing output. The
Speaker 1: Bank of being the four has before the rate rise
Speaker 1: that there's a high probability of deflation and that output
Speaker 1: is going to fall over the next three years. So
Speaker 1: what are they trying to do for a problem that's
Speaker 1: not about demand driven inflation? And the other thing, Johnathan
Speaker 1: and Tom I think we really should think about. In
Speaker 1: a sense, you guys talk about this all the time,
Speaker 1: but there's so little discent the story at the ECB,
Speaker 1: the story at the Bank of being the story at
Speaker 1: the Fed. We kind of do things a banning flesh.
Speaker 1: We've got to raise rates. Potentially this is going to
Speaker 1: crash the economies and it will all be much worried.
Speaker 1: Professor Blanche floor, I stood in the bottom of our
Speaker 1: building here in New York with Secretary Treasury Tim Geitner
Speaker 1: in the heart of the financial crisis and Geitner brilliantly
Speaker 1: laid out that they needed to extend the x axis
Speaker 1: and use time to heal the wounds. Are these central
Speaker 1: banks that are panicking because they refuse to send to
Speaker 1: extend time, to extend the x axis, to to diffuse
Speaker 1: inflash Canary Impulse? Well, that's absolutely right, Tom. I mean
Speaker 1: the thing that it strikes me as very interesting is
Speaker 1: these central bankers seem to want to respond to every
Speaker 1: piece of MINU Sha that comes in every day. Their
Speaker 1: job is to focus on the forecast, to rise at
Speaker 1: what inflation is going to be, let's say, in two
Speaker 1: years time. But if that causes all kinds of problems,
Speaker 1: there's no reason why you shouldn't say, okay, let's let
Speaker 1: inflation come back to target in three years or four years.
Speaker 1: I mean that's absolutely allowed and the sensible thing probably
Speaker 1: to do is to see if this temporary shock dissipates.
Speaker 1: So you could sit there and say a sensible path
Speaker 1: would be to sit and wait and watch. But again,
Speaker 1: where's the dissenting voices? They're all saying the same thing,
Speaker 1: based on zero data. They have no precedent to this
Speaker 1: and the danger is that the soft landings are not
Speaker 1: going to come. And in the forecast yesterday from the
Speaker 1: Fed said output is going to be fine, impost is
Speaker 1: gonna rise just a little bit and raising rates to
Speaker 1: four and a half percent, no worry, it will slowly
Speaker 1: bring inflation to and that's for Garga land. That's not
Speaker 1: gonna happen. Danny is there? Are there any circumstances under
Speaker 1: which you would argue for raising rates? Well, of course, obviously.
Speaker 1: I mean the re absolutely. So what? So? What what
Speaker 1: are the scenarios that would cause you to say it
Speaker 1: is important question? That's a stupid question in a way.
Speaker 1: I mean what we've seen since two thousand and eight
Speaker 1: is the mother of all shocks. We saw the mother
Speaker 1: of all shocks, negative shock to output in two thousand
Speaker 1: seven eight, which you had to counter. If you haven't
Speaker 1: counted it, Ben Banankei said unemployed would have been so
Speaker 1: I'd buy that. So now what we have a giant shocks,
Speaker 1: I mean giant shock from the covid and from the war.
Speaker 1: We don't know how it's going to recover. So why
Speaker 1: would I want to punch the labor market and punch
Speaker 1: demand before I really know what's coming? I mean it's
Speaker 1: as if they know what's coming, because they clearly don't.
Speaker 1: So under these circumstances, supplied driven shock that essentially is
Speaker 1: going to drop out. My guests in the United State
Speaker 1: Eights and in the UK will see very low inflation
Speaker 1: by June, as those big numbers, one off big numbers
Speaker 1: that we saw dropped up. So I would have not
Speaker 1: been rotive over rate rises because of the large negative shock.
Speaker 1: And the debate over the last decade is about the
Speaker 1: scale of that negative shock. Danny. It may be a
Speaker 1: stupid question, and yet some people might be wondering that
Speaker 1: because they're taking a look at CPI where it is
Speaker 1: and saying why wouldn't you want to raise rates? So,
Speaker 1: and I mean I'm just saying so, from your first
Speaker 1: from your coat, what data point would you be watching
Speaker 1: to prove your point every week? Okay, so let's just
Speaker 1: go with the claims that the Fed has made and
Speaker 1: the claim that I make. So what you've got was
Speaker 1: a couple of once off events which are basically driving
Speaker 1: the base effects. You've had inflation of zero and zero
Speaker 1: point one in the last two months. If you just
Speaker 1: take two thousand twelve to two thousand ninety and you
Speaker 1: impose those inflation shocks over the next eight months, inflation
Speaker 1: gets to one by about you. If you go back
Speaker 1: to two thousand and eight, same date, July, two thousand
Speaker 1: and eight, inflation was five point six percent. It was
Speaker 1: minus two a year later. So the question is, everything's
Speaker 1: being driven by the base effects. So I would be
Speaker 1: watching and waiting to blanche. Thank you, sir. Our guest
Speaker 1: is so important on what to do with your assets,
Speaker 1: your money forward. Lisa, help me here with the data check.
Speaker 1: So much going on. Equities give me a mixed story.
Speaker 1: The vix went out above thirty and pulled right back
Speaker 1: into twenty. Seven, point six, eight, maybe a more quiescent
Speaker 1: response to Dow, just still above thirty thousand. Didn't get
Speaker 1: to the twenty nine thousand level. Lisa. What do you
Speaker 1: see in bonds this morning? Well, what you're seeing is
Speaker 1: a front end that just won't quit. Right four point
Speaker 1: on that two year old, and I think that's really important. Also, though,
Speaker 1: in the currency space, and this sort of goes to
Speaker 1: the scene that we've been talking about over the first
Speaker 1: two hours of the show. How does the other central
Speaker 1: banks respond to this? The Swiss National Bank rose, raised rates,
Speaker 1: baviusly left uh the negative yield regime, which had been
Speaker 1: an eight year regime, and their currency is weakening the
Speaker 1: most is two thousand and fifteen. What is the path
Speaker 1: ahead in this currency war to get a stronger currency
Speaker 1: at a time when nobody wants anything other than the dollar?
Speaker 1: For those keeping scored at home, let's be clear. The
Speaker 1: Swiss went one way, the Japanese went another way. Maybe
Speaker 1: that's called a currency war, Lisa. I mean, and a
Speaker 1: very different one than the ones that we're used to
Speaker 1: over the very different. It's really, really important, is Jeff.
Speaker 1: You said earlier with B and y melon. It's asymmetric,
Speaker 1: to say the least. We need to solve the Carnag
Speaker 1: in your portfolio, Lisa Shallott, with us, chief investment officer
Speaker 1: Morgan Stanley Wealth Management, and we readjust this morning. Are
Speaker 1: we rebalancing, Lisa? Are We readjusting? What are we doing
Speaker 1: amid the carnage? Well, look, our our advice to our
Speaker 1: clients is certainly that we should be rebalancing here. You know,
Speaker 1: what we have said is this is a time for
Speaker 1: active risk management, and what we mean by that is
Speaker 1: taking Um a maximum level of diversification. That means diversification
Speaker 1: by sectors, diversification by technical factors, diversification, uh, you know,
Speaker 1: by region, uh and UH. You know, I know it's
Speaker 1: not popular right now, you know, to speak about uh,
Speaker 1: you know, American investors owning uh, non US stocks, given
Speaker 1: relative out performance of the last decade. But you know,
Speaker 1: we think that what's going on in the currency markets
Speaker 1: is material, i. and that this, this divergence, ultimately will
Speaker 1: mean revert and and that there is going to be
Speaker 1: some catch up. So we're recommending, uh, you know, maximum
Speaker 1: active management, diversification and things of that nature. I really
Speaker 1: look forward to speaking to you because I want to
Speaker 1: talk about the strange words scale and I'M gonna go
Speaker 1: back to the Great Peter Lynch at Fidelity, who got
Speaker 1: angry one day and he said, look, I care about
Speaker 1: your forty seven stock pick, knock your number one stock pick.
Speaker 1: There seems to be so little to choose from. Lisa Ala,
Speaker 1: Mike Wilson. How do you get scale or diversification within
Speaker 1: US equities now if you've only got so many good ideas? Well,
Speaker 1: I actually Um I might push back on that. I
Speaker 1: think that, you know, underneath the surface of the S
Speaker 1: and p five index and even the Nastack in disease, Um,
Speaker 1: you know, we're finding real opportunities. There has been carnage
Speaker 1: in this market. We know that in small and midcap
Speaker 1: land there's been carnage. We know that there's a host
Speaker 1: of uh, sectors that that have sold off across sably,
Speaker 1: including things like home builders, uh, you know, again, contrarian perhaps,
Speaker 1: but where, you know, a lot of the bad news
Speaker 1: or likely news is discounted, uh, and so we do
Speaker 1: think that there, you know, are our things to accumulate
Speaker 1: out there if you are willing to do the fundamental work.
Speaker 1: I mean, I think one of the UH, you know,
Speaker 1: one of the challenges for a lot of investors is
Speaker 1: the last thirteen years have been dominated by a handful
Speaker 1: of stocks in the US with a growth orientation in
Speaker 1: the tech and and and communication sector, and people didn't
Speaker 1: have to do much work because they could just buy
Speaker 1: the index and get the job done. Uh, this is
Speaker 1: going to require homework navigating in these markets. Um, and
Speaker 1: this is when active managers actually, you know, uh, for
Speaker 1: good or for bad, earn their fees and, Um, you know, we,
Speaker 1: we think that that is the place to be. Does
Speaker 1: that mean Le so that you think the headline in
Speaker 1: figure for the SMP, for example, could trade sideways for years?
Speaker 1: I do. I am, uh, you know, more in that camp.
Speaker 1: I mean, I think that one of the things that
Speaker 1: has continued to surprise me is the extent to which
Speaker 1: equity investors have been willing to hold the levels of
Speaker 1: forward multiples that we're holding in the face of decade
Speaker 1: high interest rates. We know mathematically and fundamentally that the
Speaker 1: movement and interest rates higher should equate to lower price
Speaker 1: earnings ratios. Um, and you know, yes, have we pressed
Speaker 1: down a bit from where we are in January, as
Speaker 1: the Fed funds has gone, you know, from zero to uh,
Speaker 1: you know, three. Yes, we have some. But you know,
Speaker 1: you know that we're also in the camp that the
Speaker 1: current figures in terms of estimates for forward consensus earnings
Speaker 1: estimates for two full year and then probably remain too high,
Speaker 1: especially if we're in this debate about, you know, recession, no,
Speaker 1: recession Um. And so while you know the current pricing
Speaker 1: and markets at at thirty eight hundred and change may suggest,
Speaker 1: you know, a sub seventeen times forward multiple, uh, if
Speaker 1: you adjust those earnings down, we might be back at
Speaker 1: seventeen and a half, eighteen times forward. And so this
Speaker 1: market has more work to do in terms of quote unquote,
Speaker 1: getting real. So who is going to be the leadership?
Speaker 1: And I asked this because it sounds like in your scenario,
Speaker 1: big tech cannot be it anymore correct. I think big
Speaker 1: tech is going to have to consolidate and I think
Speaker 1: those valuations are going to have to come in and
Speaker 1: I think that they're going to have the come to
Speaker 1: Jesus moment which says, yes, these are great companies, but
Speaker 1: they are no longer great stocks, because everyone knows the
Speaker 1: stories and expectations are extraordinarily hot. Um, you know, the
Speaker 1: reality is that they do operate in the whole big
Speaker 1: wide world, global world. The Global World is slowing, the
Speaker 1: US dollar is a material headwind and inflation and cost
Speaker 1: pressures are realities for them as well. So new leadership,
Speaker 1: you know from where we sit, is likely to come
Speaker 1: from different areas, areas like healthcare, areas like energy, industrials
Speaker 1: that may benefit Um from some of the infrastructure and
Speaker 1: capital spending that we think is gonna occur over the
Speaker 1: next couple of years. Lisa, we at a point, and
Speaker 1: I'm thinking of Andrew Mellon the nineties, on transactions and combinations.
Speaker 1: Are we at a point where the zombies roll up?
Speaker 1: I mean we finally at a point where the real
Speaker 1: interst rate market, which was a gift of zombies head
Speaker 1: for seventeen years, whatever the number is. Is this the
Speaker 1: point where the zombies end? I I love what you're saying,
Speaker 1: Tom Because I do think that that that is going
Speaker 1: to be the next phase here where the cost of
Speaker 1: capital does start to pinch. I do think that those
Speaker 1: who have, uh, you know, strategic capital to deploy uh,
Speaker 1: you know, are going to be able to to, Um,
Speaker 1: go out and and acquire some capabilities. At the same time,
Speaker 1: I think some of those zombies are going to go
Speaker 1: by the wayside. Um and, uh, you know, start from
Speaker 1: not being able to get financing. Yeah, I gotta leave
Speaker 1: it there. Lisa shallow, thank you so much, Turvic. Brief there.
Speaker 1: And actually what to do with your capital with Morgan
Speaker 1: Stanley wealth management. Is this joy? And how do we know?
Speaker 1: It's an historic day of Japanese intervention, Bank of England action.
Speaker 1: To Abbe Joseph Cohen with his Professor at Columbia Business School,
Speaker 1: a modest career at Goldman Sachs as well. Abby, thank
Speaker 1: you so much for joining us here. How to keep
Speaker 1: us informed on the underlying finance and equations, the mathematics
Speaker 1: of these equity markets? Abbe Joseph Cohen. Suddenly the sharp
Speaker 1: ratio matters. I guess Beta man otters again, but outside
Speaker 1: of Beta we've got the risk free rate and it
Speaker 1: is returned with a vengeance. Are we revisiting the sharp ratio?
Speaker 1: Are we back to the articles you wrote for the
Speaker 1: CFA years ago? Tom Wonderful question and I'm going to
Speaker 1: respond by giving a bit of a prologue, which is
Speaker 1: that many models are broken have been broken during this
Speaker 1: period of time, because they typically respond to cyclical phenomenon.
Speaker 1: For example, your question to Michael before about the Phillips Curve,
Speaker 1: and the reality is that there are so many structural
Speaker 1: changes in the economy and the markets as well that
Speaker 1: a lot of those models simply have not applied. Some
Speaker 1: of them are coming back and force uh, the Phillips Curve,
Speaker 1: for example, had no way in this model to reflect
Speaker 1: the fact that there was a pandemic uh, that we
Speaker 1: have had this generational shift in La reforce participation, by
Speaker 1: which I mean the baby boomers are now stepping out
Speaker 1: of the labor force. And the other thing, of course,
Speaker 1: is that we have had a four year uh deceleration,
Speaker 1: if you will, in terms of immigrants coming into the
Speaker 1: United States, and over the prior decade immigrants filled sixty
Speaker 1: to sixty of the increase in employment in the United States.
Speaker 1: So there are a lot of things that are different.
Speaker 1: Within the market itself, a lot of the models haven't
Speaker 1: applied for a while. Keep in mind this weird twenty
Speaker 1: to thirty year period in which interest rates and inflation
Speaker 1: were extraordinarily low and, to your point, real rates reached
Speaker 1: negative levels Um, something we had never seen before. I
Speaker 1: for one, now I'm answering your question. I'm happy to
Speaker 1: see that the Fed is now focused on making sure
Speaker 1: that real rates, really yields, are in fact positive. And
Speaker 1: does the market believe them? And the reality is that
Speaker 1: we now have a too inverted yield curve, which suggests
Speaker 1: to me that bond investors and least, are giving the
Speaker 1: Fed credence, in credibility in terms of believing that the
Speaker 1: Fed policy will have efficacy. Abby, are you saying that
Speaker 1: stock markets are not accurately reflecting the fact that inflation
Speaker 1: would be higher and would remain higher even after this
Speaker 1: cycle collapse, if the Fed were not to keep rates
Speaker 1: at a much higher level than they had been um?
Speaker 1: Another very good question. Let me just talk about what
Speaker 1: happened yesterday in response, uh, and that is the equity
Speaker 1: market didn't know what to do. Um, first it was up,
Speaker 1: then it was down, then it was up, then it
Speaker 1: was down big time. There was really erratic behavior because,
Speaker 1: to your point, Lisa, equity investors are really confused because
Speaker 1: there is this Yin Yang between inflation and higher yields
Speaker 1: versus will the economy and earnings continue to grow, and
Speaker 1: I think we're now at a point where, given the
Speaker 1: significant rises in Um interest rates and yields across the
Speaker 1: yield curve since the beginning of the year, the equity
Speaker 1: market is now focused much less on inflation and yields
Speaker 1: than it is on earnings, and there there's a lot
Speaker 1: of confusion. Um Investors are not sure how this is
Speaker 1: going to play out Um for the rest of the year,
Speaker 1: let alone for three we see, for example, that they're
Speaker 1: ongoing adjustments to the consensus earnings forecast. But let me
Speaker 1: point out we're starting at record profit margins Um. It's
Speaker 1: not as if profit profit margins and R O e
Speaker 1: were low. R O e for the SMP five is
Speaker 1: an excessive Um, you know. So if there is in
Speaker 1: fact ongoing profit margins squeezed, I think the impact overall
Speaker 1: is not dramatic. The impact, however, in individual sectors may
Speaker 1: be significant. Do you see the possibility of a lost decade?
Speaker 1: I've given the fact that we're trying to readjust and
Speaker 1: renormal realized rates, renormalize some of the financialization of the economy.
Speaker 1: You mean a lost decade in the offense in G
Speaker 1: D P and a lot of things that people hearken
Speaker 1: back to the seventies. About sure. I mean if if
Speaker 1: you look at the valuation of the US Equity Market
Speaker 1: and some of the markets as well, at the end
Speaker 1: of one they were at record high levels in terms
Speaker 1: of where we were on percentiles, almost every valuation model
Speaker 1: was between the ninety nine percentile, indicating, in my view, overvaluation,
Speaker 1: unless you believe that the dream scenario of extremely low
Speaker 1: interest rates and strong profit growth would continue uninterrupted. So
Speaker 1: where are we now? The valuations are roughly at average
Speaker 1: levels Um. SMPI PE, for example, is about sixteen times
Speaker 1: earnings Um and given where we are, even with a
Speaker 1: rise in interest rates, that's not a bad place to be.
Speaker 1: So when we talk about the lost decade, let's talk
Speaker 1: about two different phases. Number One, we've now had a
Speaker 1: correction and share prices from record high levels and record
Speaker 1: high valuations. Can we get back that? I don't think
Speaker 1: that happens over the next several months, UM, over the
Speaker 1: next few quarters. I think the economy will slow, earnings
Speaker 1: growth will slow, but I think it's possible that we
Speaker 1: could see higher equity prices. I kind of peg that
Speaker 1: along the same lines of the growth and earnings, which
Speaker 1: is probably, uh, what do we call it, five over
Speaker 1: the next few months. I mean a few years ago
Speaker 1: you wrote an iconic paper for the CFA institute. You
Speaker 1: mentioned an old strategist I used to talk to named Aristotle.
Speaker 1: Aristotle never saw a bond market with yield up, price
Speaker 1: down and the losses that we've seen over the last
Speaker 1: year and a half. How do bond investors re ever,
Speaker 1: given this historic carnage? The damage clearly has been much
Speaker 1: more dramatic in the bond market and in some ways
Speaker 1: the overvaluation and bonds was much more extreme. We had
Speaker 1: central banks around the world who kept interest rates nominally
Speaker 1: extremely low levels and real yields were low in many countries.
Speaker 1: You know, two thirds of major economies, not the US,
Speaker 1: but two thirds of major economies, had negative real yields.
Speaker 1: So the damage that we've seen in the bond market, Um,
Speaker 1: I think it was expected. When we look at government bonds,
Speaker 1: it's one thing. The damage and the credit markets, Um,
Speaker 1: is something that we've not yet seen fully rolled forward
Speaker 1: because a lot of those are ill liquid securities and
Speaker 1: I think we're going to see more damage ahead. But
Speaker 1: for the average investor, who is willing to buy, for example,
Speaker 1: an individual bond um and now can get a three
Speaker 1: or four percent yield, depending upon the maturity they're willing
Speaker 1: to take on. Uh, that is something that is one
Speaker 1: of the best opportunities in twenty years. Very good. Are
Speaker 1: you like in teaching, Abby? I mean this is a
Speaker 1: whole different act for you. You you you're surviving Colombia.
Speaker 1: Do you throw chalk at people? I do not throw
Speaker 1: chalk because we use white boards. So anything. Um, so
Speaker 1: I'm I'm I'm loving it, tom it's it's a great
Speaker 1: opportunity for me to be involved in the next generation. Wonderful,
Speaker 1: you look Tannon rested. Thank you so much, Abby. Joseph Cohen,
Speaker 1: Professor at Columbia Business School. This is a week of well,
Speaker 1: at least a traffic at midtown Manhattan. How about that
Speaker 1: traffic that we all see, with thousands descending for the
Speaker 1: United Nations General Assembly meetings? And much more, far more important,
Speaker 1: there's a migration in October to the meetings of the
Speaker 1: International Monetary Fund in Washington. Someone who knows the schedule
Speaker 1: is Sergey Nikolacheck, deputy governor of the National Bank of Ukraine,
Speaker 1: and we're honored if you join us today amid a terrible,
Speaker 1: terrible war. I need to go first of all to
Speaker 1: a simple anecdote of your Kiev. You're educated in Kiev.
Speaker 1: You've seen the transformation over twenty years. How does Kiev
Speaker 1: recover back to what you knew when you were younger?
Speaker 1: How do how do you see that happening? Actually, kieve
Speaker 1: changed dramatically for the last twenty years before the war.
Speaker 1: It looked like normal European city, capital of the European country,
Speaker 1: so you may he you was able to enjoy the restaurants, clubs,
Speaker 1: uh shopping malls and so on. Definitely a change, changed
Speaker 1: to real sizeable since the beginning of the war. So
Speaker 1: Gi was completely empty in March April. So nowadays the
Speaker 1: life is recovering, coming back, coming back. But still you feel,
Speaker 1: do you feel the consequences of the war on a
Speaker 1: on each step Gore gave of the International Monetary Fund
Speaker 1: has a few distractions away from your war. What is
Speaker 1: your unique message to the International Monetary Fund as you
Speaker 1: cry for help? What is the distinction, you say, versus
Speaker 1: all the other headaches they have around the world? Definitely
Speaker 1: Ukraine needs their support from the International Monetary Fund. So
Speaker 1: we are very grateful for the International Monetary Fund for
Speaker 1: providing US one point four billion dollars under the Rifi
Speaker 1: at the beginning of the war, but so far we
Speaker 1: need more and we are ready to engage into the
Speaker 1: full fledged program so in uh, mainly. So, mainly we
Speaker 1: focus our efforts in order to launch the e FF
Speaker 1: program of the large scale, and the authorities are fully
Speaker 1: functional and ready to negotiate and to discuss the policies
Speaker 1: for in order to uh to launch such problem. Sergey,
Speaker 1: we've been talking a lot about central bank great decisions
Speaker 1: over the past week and we've gotten a lot of
Speaker 1: them in the past twenty four hours. You recently kept
Speaker 1: the rate unchanged. How do we even have monetary policy
Speaker 1: and try to keep a normal sense of monetary transmission
Speaker 1: in the face of a war, in the face of
Speaker 1: such incredible disruption and day to day commerce that it
Speaker 1: becomes sort of not really a main feature? Yeah, definitely.
Speaker 1: Our approach to the monetary policy change dramatically. Stance at
Speaker 1: the beginning of the war. Before the war, were relied
Speaker 1: on the inflation targeting framework, very similar to many other
Speaker 1: central banks all around the world, but at the beginning
Speaker 1: of the war. Are we UH. We moved to another setup.
Speaker 1: We started to rely heavily on the stability of the
Speaker 1: change rate. Uh, we supported our actions on a fixed
Speaker 1: market with a tough capital controls. And after some period
Speaker 1: of UH adjustment. So when we keep capt the interest
Speaker 1: rate stable at ten percent, in early June, so we
Speaker 1: raised it to twenty five in order to help ourselves
Speaker 1: to uh, to maintain the stability of the exchange rate.
Speaker 1: And UH, UM, last two H, our last two monitory decisions,
Speaker 1: we are to keep this interest rate at twenty five
Speaker 1: at the same time. So, as you rightly man mentioned,
Speaker 1: so we struggled to improve the monitory transmission, which was
Speaker 1: not perfect before the war, and definitely it's uh, it
Speaker 1: is even worse since the beginning of the war. But
Speaker 1: so how we see that? Our decisions, so they are translates.
Speaker 1: They translate into the banking rates more or less, uh,
Speaker 1: as we expected, and we hope that title monetary conditions
Speaker 1: will help us to maintain the stable change rate. What
Speaker 1: will it take on the physical side? And you're talking
Speaker 1: about the I M F aid and how much you
Speaker 1: might potentially need. How much would you need? How long
Speaker 1: would it take overall to rebuild the economy in a
Speaker 1: way where you could go back to something more akin
Speaker 1: to normalcy. Okay, so, frankly speaking, the losses from the
Speaker 1: world tremendous. So that relates both to the current situation,
Speaker 1: when we have a huge budget gap which we have
Speaker 1: to help to finance from the Central Bank site, and
Speaker 1: actually this year we already provided uh more than ten
Speaker 1: billion dollars to to to the to the government, in
Speaker 1: order to support the essential needs, financial, the essential needs
Speaker 1: and at the same time, at the same time, that
Speaker 1: puts a sizeable pressure polytics market. Here you were, you
Speaker 1: were running out of time here, governor, and so I've
Speaker 1: got to keep this short and abruptly and being rude
Speaker 1: and doing that. Ukraine has had a courageous two weeks.
Speaker 1: The news flow has been extraordinarily good at the military front.
Speaker 1: What do you need from the allies right now? What
Speaker 1: do you need from Mr Biden in the West right now?
Speaker 1: Definitely we need the continuation of the support of both
Speaker 1: on military front and also an also continuation of financial
Speaker 1: eight so we prove to the whole world that we
Speaker 1: have we may us, we may we may win, and
Speaker 1: we hope that with a continuation of the support from
Speaker 1: the democratic world, we will achieve the Victorias as soon
Speaker 1: as possible. Thank you so much for joining US Bloomberg today.
Speaker 1: Seray Nikolai check of the National Bank of Ukraine here
Speaker 1: among this week of this UN United Nations. Really an
Speaker 1: extraordinary set of meetings. Lisa, I'M gonna call it post pandemic.
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