WEBVTT - (Radio) 0:00:02.440 --> 0:00:05.040 This is Bloomberg Daybreak Weekend, our global look if the 0:00:05.160 --> 0:00:07.440 top stories of the coming week from our daybreak anchors 0:00:07.560 --> 0:00:10.280 all around the world. Just to hand of the program, 0:00:10.440 --> 0:00:13.920 the FEDS December meeting is upon us. I'm John Tucker 0:00:14.040 --> 0:00:16.200 in New York. I'm Stephen Carl in London, where Central 0:00:16.239 --> 0:00:19.640 Banks and Frankfurst and London are considering easing open interest 0:00:19.720 --> 0:00:23.959 rate heights despite the continuing inflationary pressures. I'm Doug Chrisoner. 0:00:24.120 --> 0:00:26.759 We look at what's ahead for the Chinese economy. I'm 0:00:26.800 --> 0:00:30.240 Amy Morris in Washington. We're watching the continual ship in 0:00:30.280 --> 0:00:35.880 the political landscape after Christian cinema changes parties. That's all 0:00:36.000 --> 0:00:40.120 straight ahead on Bloomberg Daybreak Weekend on Bloomberg eleven three 0:00:40.120 --> 0:00:44.440 on New York, Bloomberg one, Washington d C, Bloomberg one 0:00:44.440 --> 0:00:48.199 oh six one, Boston, Bloomberg nine sixties, San Francisco d 0:00:48.320 --> 0:00:52.040 A B, Digital Radio, London, Sirius XM one nineteen and 0:00:52.120 --> 0:00:55.000 around the world on Bloomberg Radio dot Com and via 0:00:55.080 --> 0:01:02.120 the Bloomberg Business at Hi. Everybody, I'm John Tucker, and 0:01:02.200 --> 0:01:04.640 let's start today's program with the big fed mad in 0:01:04.760 --> 0:01:07.360 this coming week, joining us, how to frame the conversation 0:01:07.560 --> 0:01:11.480 as always has events on fold. Bloomberg Global Economics and 0:01:11.600 --> 0:01:15.960 Policy Editor Michael McKee, Uh, no surprise, we're going to 0:01:16.040 --> 0:01:19.760 get another rate hike from the Federal Reserve? Mike, Yes, 0:01:19.920 --> 0:01:22.840 we are. Wouldn't you like it if you knew what 0:01:23.080 --> 0:01:26.360 Santa or what you were going to get from which 0:01:28.720 --> 0:01:30.840 we we can shake the FED box and we know 0:01:30.880 --> 0:01:33.600 what's inside it, and we know the size. They've pretty 0:01:33.640 --> 0:01:35.560 much told us we're gonna do fifty basis points a 0:01:35.600 --> 0:01:38.920 half percentage point increase, which a year ago would have 0:01:38.920 --> 0:01:43.920 been considered very large because they hadn't done a fifty 0:01:43.920 --> 0:01:46.840 base point move in years. But now that we've had 0:01:46.880 --> 0:01:50.080 four seventy five in a row fifties, this seems like 0:01:50.080 --> 0:01:53.040 a slow down, a significant slowdown to some. But the 0:01:53.040 --> 0:01:55.240 Fed is continuing to raise interest rates, and that's the 0:01:55.280 --> 0:01:59.120 important thing that they keep going higher because they haven't 0:01:59.120 --> 0:02:02.720 won the battle of inflation yet. Now I keep asking 0:02:02.760 --> 0:02:05.760 you this question every time we get together. I'm like 0:02:05.840 --> 0:02:10.200 a broken record. Are they trying to torpedo the labor market? 0:02:10.400 --> 0:02:13.160 Is that what they have to do to bring inflation 0:02:13.320 --> 0:02:18.000 under control while they are trying to shave Shall we 0:02:18.040 --> 0:02:23.880 say growth by shaving demand, bring down demand some so 0:02:23.919 --> 0:02:27.640 that Americans aren't spending as much money, which then translates 0:02:27.639 --> 0:02:30.400 into less production at the companies that make the things 0:02:30.400 --> 0:02:35.799 that we're not buying, and therefore translates into uh, fewer jobs. Now, 0:02:35.800 --> 0:02:39.040 the Fed's view is, because there's so many job openings, 0:02:39.200 --> 0:02:41.839 they don't have to torpedo the labor market. They can 0:02:41.880 --> 0:02:44.920 slow it down. We can see a very small rise 0:02:44.960 --> 0:02:49.400 in the unemployment rate, and we can get a soft landing. 0:02:49.480 --> 0:02:53.079 That's their hope. In the past, they've never been able 0:02:53.240 --> 0:02:57.959 to manage the increase in unemployment once. There's a rule 0:02:58.000 --> 0:03:00.680 called the some rule that once it goes of half 0:03:00.680 --> 0:03:04.040 a percentage point change, then it takes off to about 0:03:04.200 --> 0:03:12.400 three percentage points. So i've some rule gamed after No, 0:03:12.480 --> 0:03:14.800 I'm not who who came up with this when she 0:03:14.880 --> 0:03:18.680 was at the New York head And basically, any increasing 0:03:18.800 --> 0:03:24.520 unemployment over half a percentage point would then not stop 0:03:24.639 --> 0:03:29.359 until you get to unemployment rate and it would bring 0:03:29.400 --> 0:03:31.720 on a recession. So they haven't been able to do 0:03:31.760 --> 0:03:34.639 it in the past. But even Claudia Sum says it's 0:03:34.680 --> 0:03:38.160 a guide, not a promise, So we'll wait and see. Okay, 0:03:38.240 --> 0:03:41.360 when we're talking about the rate of inflation and the increase, 0:03:41.440 --> 0:03:45.760 how much of that comes from labor costs, Well, it 0:03:45.800 --> 0:03:49.400 depends on the category you're looking at, because for service companies, 0:03:49.480 --> 0:03:53.000 it's about eighty percent of their overall costs is the 0:03:53.040 --> 0:03:55.800 cost of labor. So it is a very big part 0:03:55.960 --> 0:03:58.720 of services, and services is where the money is going 0:03:58.800 --> 0:04:01.520 right now. We yeah, that's the biggest part of the economy. 0:04:01.520 --> 0:04:03.320 That's the biggest part of the economy. But we bought 0:04:03.320 --> 0:04:05.200 a lot of stuff. We were sort of out of 0:04:05.200 --> 0:04:08.520 whack for two years because people couldn't go out, so 0:04:08.880 --> 0:04:13.600 they bought stuff and goods. Inflation went went way up, 0:04:13.640 --> 0:04:16.640 and then there were shortages and supply chain problems, and 0:04:16.720 --> 0:04:19.840 that contributed to the inflation that we're seeing. Now there's 0:04:19.839 --> 0:04:23.360 a shift away from that supply chains and normalizing somewhat, 0:04:23.839 --> 0:04:28.000 and goods prices are not rising anywhere near the cost 0:04:28.040 --> 0:04:30.240 of services. But as we go out, as we go 0:04:30.240 --> 0:04:34.960 on vacations and spend money at restaurants, Uh, we're seeing 0:04:35.000 --> 0:04:40.240 inflation there and that's largely driven by labor costs. They 0:04:40.279 --> 0:04:45.159 started raising rates earlier this year, and has it started 0:04:45.160 --> 0:04:47.279 to take effect yet. Certainly we've seen it in the 0:04:47.279 --> 0:04:49.680 housing market. I would we've seen it in the housing market, 0:04:49.760 --> 0:04:53.520 and we're seeing little bits of slow down in consumer spending. 0:04:54.040 --> 0:04:56.880 Part of the problem for the FED is there was 0:04:56.920 --> 0:04:59.920 so much fiscal support from the government during the PAS 0:05:00.040 --> 0:05:01.719 endemic that people have a lot of money in the 0:05:01.760 --> 0:05:04.640 bank that they can keep spending. So demand is not 0:05:04.760 --> 0:05:08.480 slowing as fast, perhaps as they hoped it might. Now 0:05:08.839 --> 0:05:11.200 the FED knows that at some point soon we should 0:05:11.200 --> 0:05:15.440 start seeing a much bigger impact on consumer demand, but 0:05:15.480 --> 0:05:18.480 they don't know when, and they don't know how big, 0:05:18.839 --> 0:05:22.799 and because this is an unusual situation, UH, they can't 0:05:22.800 --> 0:05:27.680 be sure. Also, in the years since we started looking 0:05:27.720 --> 0:05:32.200 for these lags, the development of companies like Bloomberg and 0:05:32.320 --> 0:05:35.839 others that provide data on the economy and consumers and 0:05:35.920 --> 0:05:40.240 companies UH may have shortened the lags. So that's one 0:05:40.279 --> 0:05:44.919 reason the FED wants to dial back. It's increases. What 0:05:44.920 --> 0:05:48.720 do you mean by that? The data increased visibility with 0:05:48.760 --> 0:05:52.400 the data has UH affected the lives The feedback effects 0:05:52.800 --> 0:05:56.200 become much faster because companies can see in real time 0:05:56.600 --> 0:06:00.240 what is happening out there. Okay, to what degree is 0:06:00.320 --> 0:06:03.880 j Powe worried about reputational damage to himself and to 0:06:03.960 --> 0:06:05.839 the FED at this point. Well, he's got to be 0:06:05.920 --> 0:06:08.839 concerned in the sense that the Feds getting blamed a 0:06:08.839 --> 0:06:12.640 lot for the inflation rate skyrocketing over the past year, 0:06:12.720 --> 0:06:16.839 much more quickly than the FED anticipated, because they thought 0:06:16.920 --> 0:06:19.960 that what would end up happening is when everybody went 0:06:20.000 --> 0:06:21.960 back to work, things would go back to the way 0:06:22.000 --> 0:06:25.000 they were pre pandemic, and the inflation they were getting 0:06:25.080 --> 0:06:28.840 was transitory, which obviously turned out not to be. Now 0:06:29.720 --> 0:06:32.320 the consensus is Powell and company have done a good 0:06:32.400 --> 0:06:36.359 job since then, and so we're waiting to see what 0:06:36.520 --> 0:06:40.000 kind of longer term credibility problem they have. Jay Power 0:06:40.000 --> 0:06:42.240 would tell you he's not worried about himself. He'd worry 0:06:42.240 --> 0:06:45.320 about the FED, because if the FED loses credibility, if 0:06:45.440 --> 0:06:47.160 people don't think they're going to do what they say 0:06:47.200 --> 0:06:49.000 they're going to do, or that they're not going to 0:06:49.120 --> 0:06:51.760 get the forecast right, then it's going to be harder 0:06:51.960 --> 0:06:54.640 for monetary policy to work, and you can get things 0:06:54.839 --> 0:06:59.480 like either skyrocketing inflation or deflation. So the FED is 0:06:59.520 --> 0:07:02.080 going to keep keep their foot on the brake, and 0:07:02.320 --> 0:07:03.720 that's gonna be the big thing to watch in two 0:07:03.760 --> 0:07:06.960 thousand twenty three. Markets think the FED will back down 0:07:07.000 --> 0:07:09.840 if we start to see unemployment rise, and Powell and 0:07:09.880 --> 0:07:12.280 company are saying they will not. So we will see 0:07:12.360 --> 0:07:15.320 what that showdown produces. And the bond market seems to 0:07:15.360 --> 0:07:18.920 be saying that there is going to be a recession. 0:07:20.280 --> 0:07:22.560 Is that? Is that what I'm reading? Well, that's a 0:07:22.560 --> 0:07:26.320 fair interpretation of what you're reading about. Is the inverted 0:07:26.400 --> 0:07:32.040 yield curves where longer maturity treasury bonds and notes are 0:07:33.200 --> 0:07:38.240 the interest rate on those is lower than short rutten treasuries. 0:07:38.600 --> 0:07:41.600 And that's because people think that either there's going to 0:07:41.640 --> 0:07:44.680 be a recession and interest rates will come down across 0:07:44.720 --> 0:07:47.920 the board, or they think that we're going to achieve 0:07:47.920 --> 0:07:50.440 the soft landing and inflation will come down. It's a 0:07:50.440 --> 0:07:54.040 little hard to separate, but the kind of the feeling 0:07:54.040 --> 0:07:55.920 in the bond market is it's going to be the 0:07:55.960 --> 0:08:01.440 recession scenario because that's general only what's happened in the past. 0:08:01.760 --> 0:08:04.000 What's the message that he's going to send at the 0:08:05.000 --> 0:08:08.200 FED policy meeting and what questions do you have for 0:08:08.400 --> 0:08:11.480 Chairman Powell. Well, it's gonna be sort of two messages. 0:08:11.600 --> 0:08:15.800 One is that fifty basis points as opposed to seventy 0:08:15.840 --> 0:08:19.280 five does not mean the Fed is loosening its conviction 0:08:19.320 --> 0:08:21.960 that interest rates have to go up, and two that 0:08:22.000 --> 0:08:24.480 it's going to be steady as she goes. He wants 0:08:24.520 --> 0:08:27.160 to reinforce the idea that the Fed is going to 0:08:28.240 --> 0:08:30.400 keep raising rates and they probably aren't gonna be done 0:08:30.440 --> 0:08:33.880 after December. They'll probably do some more in early, but 0:08:33.920 --> 0:08:38.280 then they're gonna leave them there for a very long time. Uh. 0:08:38.440 --> 0:08:41.160 We heard John Williams, the president of the New York Fed, 0:08:41.200 --> 0:08:44.120 say last week that he thought it would be throughout 0:08:45.760 --> 0:08:50.760 and maybe into and the bond market, as you pointed out, 0:08:51.080 --> 0:08:53.760 is not buying that right now, so he he will 0:08:54.160 --> 0:08:57.559 be trying to convince them. And I guess the uh, 0:08:58.000 --> 0:09:03.360 the overriding question for every one is, uh, how high 0:09:03.600 --> 0:09:07.120 do they think they have to go? At this point? 0:09:07.120 --> 0:09:10.040 We will get a new survey of all of the 0:09:10.080 --> 0:09:13.199 FED members and they'll give us a median dot plot 0:09:14.080 --> 0:09:16.600 that shows where they think they're going to have to go, 0:09:16.760 --> 0:09:19.559 But uh, we'd like to get more clarity on that. 0:09:19.720 --> 0:09:23.319 Remind ofpability what their target for inflation is. Well, two 0:09:23.360 --> 0:09:26.280 percent is the target, and Fed officials think it's still 0:09:26.320 --> 0:09:31.760 realistic the most most economists and the FED have projected 0:09:31.800 --> 0:09:34.560 we would get to about three and a half percent 0:09:34.800 --> 0:09:39.000 by the end of which is UH on the pc 0:09:39.800 --> 0:09:43.160 index measurement, not the c p I is the preferred 0:09:43.160 --> 0:09:46.240 measure for the preferred measure for the FED. Now, then 0:09:46.360 --> 0:09:48.920 after that three and a half, how much harder is 0:09:48.960 --> 0:09:51.120 it going to be to get down to two. That's 0:09:51.120 --> 0:09:54.360 a big argument among economists at this point, something that 0:09:54.440 --> 0:09:58.360 we could go down very fast and go below get 0:09:58.440 --> 0:10:01.439 some disinflation below two pers and and others think it's 0:10:01.440 --> 0:10:04.040 gonna be another year or two after the end of 0:10:04.840 --> 0:10:07.640 three before you can get there. So that's also started 0:10:07.640 --> 0:10:10.640 a debate about whether the FEDS should raise its target, 0:10:10.760 --> 0:10:13.400 But Fed's not buying that all right. The other big 0:10:13.480 --> 0:10:16.640 number is the terminal rate is kind of alluded to that. 0:10:17.120 --> 0:10:20.839 Where is that right now where the FED winds up. Well, 0:10:20.880 --> 0:10:24.559 we're at four percent going into the meeting, and the 0:10:24.640 --> 0:10:29.520 general consensus now is we will get to about five percent. Uh. 0:10:29.559 --> 0:10:32.760 Some members of the Open Market Committee that the decision 0:10:32.760 --> 0:10:35.840 makers think they're gonna have to go over five five 0:10:35.880 --> 0:10:39.080 to five and a quarter what poland Uh. Some of 0:10:39.120 --> 0:10:42.000 the leadership of the FED have said is we don't 0:10:42.080 --> 0:10:46.000 know um and there is this consensus out there and 0:10:46.080 --> 0:10:49.720 that might be right, but it's not going to keep 0:10:49.840 --> 0:10:53.240 us from going beyond it if we feel it's necessary. Mike, 0:10:53.520 --> 0:10:56.280 as always a pleasure, Michael McKee, And just to hand 0:10:56.320 --> 0:10:58.880 on Bloomberg Daybreak weekend, we're gonna head to Europe for 0:10:59.040 --> 0:11:01.720 a look at the neck central bank poise to raise 0:11:01.880 --> 0:11:05.760 interustrates this week. I'm John Tucker, and this is Bloomberg. 0:11:16.760 --> 0:11:19.480 This is Bloomberg Daybreak weekend, our global look ahead of 0:11:19.520 --> 0:11:22.120 the top stories for investors in the coming week. I'm 0:11:22.200 --> 0:11:25.280 John Tucker in New York. Coming up, look at the 0:11:25.360 --> 0:11:29.120 balance of power in the Senate after Senator Kirsten Cinema's 0:11:29.160 --> 0:11:32.880 flipped too independent. But first, the Federal Reserve isn't the 0:11:32.920 --> 0:11:37.400 only major central bank meeting of the coming days. In Europe. 0:11:37.440 --> 0:11:40.640 The Bank of England, the European Central and the Swiss 0:11:40.720 --> 0:11:44.800 National Bank will all announce rate decisions Thursday as they 0:11:44.840 --> 0:11:48.400 face massive inflationary pressures. And for more I let's said 0:11:48.400 --> 0:11:51.800 to London and bring in Bloomberg Daybreak Europe anchor Stephen Carroll. 0:11:52.000 --> 0:11:54.480 John and the central banks in London and Frankfurt are 0:11:54.520 --> 0:11:57.360 both facing double digit inflation. The Bank of England got 0:11:57.360 --> 0:11:59.800 a headstart on hiking rates a year ago there now 0:11:59.840 --> 0:12:02.520 at our highest level since two thousand and eight, while 0:12:02.559 --> 0:12:05.400 the ECB has been raising borrowing costs at a record 0:12:05.480 --> 0:12:08.520 pace for its relatively short history. Or we have our 0:12:08.559 --> 0:12:10.480 top team of central bank reporters with us to look 0:12:10.520 --> 0:12:13.160 ahead to this week's decisions. Yan Rando joins us from 0:12:13.200 --> 0:12:16.360 Frank Fertilizes on the ECB and Philipolitics here in studio 0:12:16.480 --> 0:12:18.800 in London watching the Bank of England. To get this 0:12:18.880 --> 0:12:21.280 conversation started, though, I want to bring you a bit 0:12:21.320 --> 0:12:23.079 of a chat that we had on Bloomberg Radio with 0:12:23.120 --> 0:12:25.320 Alex Brazier. He's a former director at the Bank of 0:12:25.360 --> 0:12:28.880 England now deputy head of the black Rock Investment Institute. 0:12:28.920 --> 0:12:31.400 Let's take a listen. We need to rethink the way 0:12:31.440 --> 0:12:34.000 central banks are operating these days. They're they're not the 0:12:34.000 --> 0:12:36.960 cavalry that's riding to the rescue when the economy turns down. 0:12:37.280 --> 0:12:41.439 They're actually deliberately creating economic damage. And that's because their 0:12:41.480 --> 0:12:44.920 economies are basically overheating because of supply constraints, and if 0:12:44.920 --> 0:12:46.560 they want to get inflation all the way down to 0:12:46.600 --> 0:12:51.120 two pc. They actually need to generate recessions, so that's 0:12:51.120 --> 0:12:53.079 what central banks are working with. Let's start with you, 0:12:53.120 --> 0:12:55.760 Philipolgic here in London, and the recession may well have 0:12:55.800 --> 0:12:58.520 already started in the UK. Will the Bank of England 0:12:58.600 --> 0:13:01.480 be easing up on the monetary breaks? Do you think? No? 0:13:02.360 --> 0:13:05.600 So they raised rates three quarters of a point um 0:13:05.679 --> 0:13:07.800 in November and they're expected to raise rates by a 0:13:07.800 --> 0:13:11.880 half a percentage point in December, so it's still, you know, 0:13:11.920 --> 0:13:15.520 all all guns blazing. There is some division though on 0:13:15.559 --> 0:13:18.440 the committee because two members didn't vote for the three 0:13:18.480 --> 0:13:21.520 quarter point rise and one member only wanted a hut 0:13:21.760 --> 0:13:24.640 a quarter point increase and warned that you know, we 0:13:25.280 --> 0:13:28.079 both of those members that actually are warning that, um, 0:13:28.120 --> 0:13:32.800 you know, two aggressive future moves will risk extending the 0:13:32.840 --> 0:13:35.400 recession and making what is projected to be a nasty 0:13:35.400 --> 0:13:38.360 period over three even even worse. And I think that 0:13:38.440 --> 0:13:41.400 effectively would do some of the work that rate rises 0:13:42.480 --> 0:13:45.599 will be are doing. So they would like to to 0:13:45.840 --> 0:13:49.040 to slow down. So the expectation for the moment is 0:13:49.400 --> 0:13:52.040 fifty basis points, are right? Yeah, that's right? Okay, So 0:13:52.120 --> 0:13:55.320 let's turn to Juyana and Frankfurt as well, so whereas 0:13:55.320 --> 0:13:57.640 we're looking at this sort of dilemma about slowing down 0:13:57.960 --> 0:14:00.079 rate rises, here it seems to be more so, and 0:14:00.240 --> 0:14:02.199 perhaps at the ECB is going sets foot off the 0:14:02.240 --> 0:14:06.160 break very much so. UM. What we're seeing is that 0:14:06.240 --> 0:14:11.000 the appetite for UM a third consecutive seventy five basis 0:14:11.000 --> 0:14:15.760 point move has UM has really dwindled. It's not really 0:14:15.800 --> 0:14:19.520 there UM. The market is pricing UM fifty as well, 0:14:19.640 --> 0:14:22.000 which um you know, if you read the minutes of 0:14:22.040 --> 0:14:25.880 the last meeting very closely, which was an argument in 0:14:25.920 --> 0:14:30.080 their last decision market expectations. So everything seems to be 0:14:30.160 --> 0:14:33.520 lining up UM for for a slight slowdown in the 0:14:33.520 --> 0:14:37.040 pace of tightening to fifty. That takes the interest rate 0:14:37.200 --> 0:14:41.080 UM of course to two, which is um you know, 0:14:41.400 --> 0:14:44.320 widely in the range of what people consider neutral UM. 0:14:44.520 --> 0:14:47.440 But what might actually even more important for the might 0:14:47.480 --> 0:14:49.240 actually be even more important for the e c B 0:14:49.520 --> 0:14:53.600 um uh at at their upcoming meeting is a decision 0:14:53.640 --> 0:14:57.880 on qt UH. They want to outline key principles for 0:14:57.960 --> 0:15:01.920 how they how they plan to tackle that UM details 0:15:01.960 --> 0:15:04.120 probably only arriving at this uh you know, at some 0:15:04.160 --> 0:15:07.840 point next year. But but that in itself is such 0:15:07.880 --> 0:15:12.400 an important decision. The e CP has never done it before. UM. 0:15:12.520 --> 0:15:15.040 You know, there is probably the one or two bargain 0:15:15.320 --> 0:15:19.760 uh to be made about the pace about the start date. UM. 0:15:19.800 --> 0:15:22.000 Maybe that will feature in the in the rate debate 0:15:22.040 --> 0:15:24.280 as well. Who knows. UM, it's not going to be 0:15:24.320 --> 0:15:27.400 straightforward at all, because of course, the CBS balance sheet 0:15:27.440 --> 0:15:30.000 is absolutely huge, so quantity of tightening could potentially be 0:15:30.240 --> 0:15:33.920 a massive shock to the Euro Area. UM. It could 0:15:33.960 --> 0:15:36.720 and it couldn't. It's interesting when when you talk to 0:15:36.760 --> 0:15:40.520 economists and watchers in general, they tell you, well, you know, 0:15:40.560 --> 0:15:43.600 if if one trillion rolls off the ECB balance sheet 0:15:43.640 --> 0:15:46.320 in terms of liquidity, that's actually not going to do much, 0:15:46.320 --> 0:15:48.800 which makes you wonder, of course, um, you know, why 0:15:48.920 --> 0:15:51.600 was that money out there in the first place. Um. 0:15:51.800 --> 0:15:54.880 But one other feature that that um, you know, we 0:15:54.920 --> 0:15:56.800 need to take a look at when when we talk 0:15:56.880 --> 0:16:01.600 about QT is of course the long term loan initiatives 0:16:01.840 --> 0:16:06.000 the ECB has uh you know, has has done over 0:16:06.040 --> 0:16:09.400 the past years. UM. A lot of that money is 0:16:09.400 --> 0:16:13.920 is expiring. UM. Banks have the option to repay um 0:16:14.040 --> 0:16:16.560 you know over the next month, um, all the way 0:16:16.600 --> 0:16:20.960 into into the first half of next year, and and 0:16:21.160 --> 0:16:24.040 that in itself might actually remove a lot of liquidity 0:16:24.080 --> 0:16:27.840 from the system. UM. Put QT on top of that, UM, 0:16:28.040 --> 0:16:31.800 it makes it makes a decision really really difficult. UM. Yeah, 0:16:31.960 --> 0:16:33.920 but all the more fascinating for us to be watching. 0:16:34.000 --> 0:16:37.760 Of course, back back here in in the UK, of course, 0:16:37.760 --> 0:16:39.800 the bank having and already started a quantity of tightening, 0:16:39.800 --> 0:16:41.680 should we expect to hear more about it this week? 0:16:42.080 --> 0:16:44.400 It's unlikely. I mean, we're sort of on a on 0:16:44.480 --> 0:16:47.920 a trajectory already. We're so bonds are maturing, so they're 0:16:47.960 --> 0:16:51.280 being rolled off and not being reinvested in guilts. So 0:16:51.320 --> 0:16:54.280 that's the passive aspect of quantitative tightening. But we're also 0:16:54.320 --> 0:16:56.600 doing active quantity of tining, which is we are we 0:16:56.640 --> 0:17:01.160 are now selling guilts which uh you know, at at 0:17:01.200 --> 0:17:03.760 market prices to to to basically shrink the balance sheet. 0:17:03.840 --> 0:17:07.360 The explanation for that, UM is that so in America 0:17:08.320 --> 0:17:10.680 the Fed is doing passive quantity of tightening, but because 0:17:10.680 --> 0:17:13.440 the bonds are rolling off so quickly, they are reducing 0:17:13.440 --> 0:17:16.040 their balance sheet at a at a rapid pace, where 0:17:16.200 --> 0:17:20.119 in the UK are just relying on maturities will reduce 0:17:20.200 --> 0:17:23.440 the size of the balance sheet relatively slowly. So they're 0:17:23.440 --> 0:17:26.359 doing the active sales basically to keep up, you know, 0:17:26.600 --> 0:17:28.880 with that this kind of pace of tightening that you're 0:17:28.920 --> 0:17:32.360 seeing at the FED. But it is a more complicated operation. 0:17:32.400 --> 0:17:36.199 And and the question I'm always wondering about with the 0:17:36.240 --> 0:17:38.920 with the QT operations is they say that quantity of 0:17:39.000 --> 0:17:41.040 easing the bank central banks say the quantity of easing 0:17:41.320 --> 0:17:44.879 was most effective when markets were in periods of volatility, 0:17:45.280 --> 0:17:48.560 so um, and what they're doing QT at a time 0:17:48.600 --> 0:17:51.520 when markets are, you know, seriously volatile at the moment, 0:17:51.640 --> 0:17:54.640 and yet they say it will have relatively little, if 0:17:54.680 --> 0:17:58.359 any impact on market pricing and market dynamics. They're obviously 0:17:58.400 --> 0:18:00.840 keeping an eye to to watch out for disruption, but 0:18:00.880 --> 0:18:03.359 there seems to be some kind of logical inconsistency in 0:18:03.400 --> 0:18:05.440 there the way the q E works and the way 0:18:05.440 --> 0:18:07.640 that QT will work. Obviously it's the it's the same 0:18:07.640 --> 0:18:10.840 set of guilts. One of the volatili volatile events I 0:18:10.880 --> 0:18:14.040 suppose we've had was everything around the ill fated Many 0:18:14.040 --> 0:18:15.960 budget at the end of September and everything that every 0:18:16.080 --> 0:18:18.840 everything that went wrong since then. Will the Bank of 0:18:18.880 --> 0:18:20.880 England kind of be telling us that that's all over 0:18:20.920 --> 0:18:25.960 and calm down now, yes, I think they they've been 0:18:26.080 --> 0:18:29.200 saying that already. I mean the fact that they did. 0:18:29.480 --> 0:18:31.440 There was a period where people believed that they were 0:18:31.480 --> 0:18:33.960 not going to press ahead with with the active QT 0:18:34.440 --> 0:18:37.280 operation because of the level of volatility caused by the 0:18:37.280 --> 0:18:39.560 Many budget, which which actually caused the long end of 0:18:39.560 --> 0:18:41.639 the guilt market to completely blow up and needed a 0:18:41.680 --> 0:18:45.399 rescue operation. But so the fact that they then pressed 0:18:45.440 --> 0:18:49.440 ahead with the QT operation, the active qut was was striking. 0:18:49.480 --> 0:18:52.879 So they do believe that you, even even at that point, 0:18:52.920 --> 0:18:55.000 the conditions were stable enough to go ahead, and they 0:18:55.040 --> 0:18:58.600 have proved to be so. So there's certainly no suggestion 0:18:58.640 --> 0:19:00.200 that they're going to They're going to say an think 0:19:00.200 --> 0:19:02.280 other than we think that these operations can continue and 0:19:02.320 --> 0:19:06.439 we've not seen any any undue stresses so far. M okay, Well, 0:19:06.480 --> 0:19:09.240 let's talk about I suppose the bigger picture of the 0:19:09.240 --> 0:19:13.360 the economic forecast or updates we'll get from these central banks, 0:19:13.640 --> 0:19:16.280 and let's hear from the Governor of the Irish Central 0:19:16.320 --> 0:19:18.800 Bank and member of the e CPS Governing Council, Gabrielle 0:19:18.840 --> 0:19:21.240 mcclufu's in speaking to Bloomberg in the past few days. 0:19:22.320 --> 0:19:26.520 We're likely to see the euro Area in a technical recession. 0:19:26.600 --> 0:19:29.960 I suspect that Q four this year, the one that 0:19:30.280 --> 0:19:34.800 we're in now, we'll see a very slightly negative GDP number, 0:19:35.840 --> 0:19:39.080 and we're likely to see that for Q one next year. 0:19:39.200 --> 0:19:41.679 On the other hand, my expectations were not going to 0:19:41.680 --> 0:19:46.680 see three as a year of recession. Okay, Philip Aldrick, 0:19:46.720 --> 0:19:48.239 our banking Think the Reporter. I thank you very much 0:19:48.240 --> 0:19:50.440 for joining me here in the studio. Thank you to 0:19:50.600 --> 0:19:53.920 Yana in frank first as well. I'm Stephen Carroll in London. 0:19:53.960 --> 0:19:56.240 You can catch us every weekday morning here for Bloomberg 0:19:56.280 --> 0:19:58.960 Daybreak Europe, beginning at six am in London and one 0:19:59.000 --> 0:20:02.160 am on Wall Street. John all right, Stephen, thanks a lot, 0:20:02.359 --> 0:20:05.919 and coming up on Bloomberg Daybreak weekend. Arizona Senator Kristen 0:20:06.000 --> 0:20:11.199 Cinemas switched from democratsy independent Democrats, tenuous grip on the Senate. 0:20:11.560 --> 0:20:23.680 I'm John Tucker. This is Bloomberg broadcasting live from the 0:20:23.760 --> 0:20:27.960 Bloomberg Interactive Broker Studio in New York. Bloomberg eleven three 0:20:27.960 --> 0:20:32.360 oh to Washington, d C. Bloomberg to Boston, Bloomberg one 0:20:32.359 --> 0:20:35.600 O six one to San Francisco, Bloomberg nine six to 0:20:35.680 --> 0:20:39.080 the country Sirius XM Channel one nineteen to London, d 0:20:39.240 --> 0:20:42.359 a B Digital Radio and around the globe the Bloomberg 0:20:42.359 --> 0:20:46.280 Business Act and Bloomberg Radio dot Com. This is Bloomberg 0:20:46.359 --> 0:20:55.480 Daybreak Weekend. I'm John Tucker, New York with your global 0:20:55.480 --> 0:20:57.840 look ahead of the top stories for investors in the 0:20:57.840 --> 0:21:01.600 coming week. Shifting political say asked for Democrats even after 0:21:01.640 --> 0:21:05.080 their big Senate win in Georgia. More, let's head to 0:21:05.119 --> 0:21:10.359 our Bloomberg newsroom in Washington and Amy Morris Amy, all right, 0:21:10.359 --> 0:21:12.919 thank you, John. We're coming off a wild week politically, 0:21:13.000 --> 0:21:16.359 with the Democratic win in Georgia followed by Arizona Senator 0:21:16.480 --> 0:21:20.440 Kirston Cinema's defection from the Democratic Party. She's now registered 0:21:20.480 --> 0:21:22.600 as an independent. We've got a lot of questions about 0:21:22.600 --> 0:21:26.200 what might happen next, even just in the next few weeks. 0:21:26.480 --> 0:21:29.120 Joining me now to talk about this Bloomberg Capital He'll 0:21:29.160 --> 0:21:33.919 reporter Stephen Dennis Stephen, thanks for taking the time. Okay. 0:21:33.920 --> 0:21:36.840 Senator Cinema has always been a bit of a magverick. 0:21:37.000 --> 0:21:40.840 She didn't always tow the Democratic Party line. Why is 0:21:40.840 --> 0:21:44.760 she doing this now? Yeah, So, if you look at 0:21:44.800 --> 0:21:48.719 the polls, all the polls this year of her standing 0:21:48.720 --> 0:21:53.520 in Arizona have been terrible with Democrats. You know, there 0:21:53.560 --> 0:21:56.800 was a pole way back in January showing her getting 0:21:56.840 --> 0:22:01.720 blown out by Representative rupen Diego in a hypothetical primary 0:22:01.800 --> 0:22:05.080 contest set four to sixteen. And then there was a 0:22:05.119 --> 0:22:09.320 poll right before the midterm elections by Civics that had 0:22:09.320 --> 0:22:14.560 her at seven percent approval among Democratic voters that you know, 0:22:14.760 --> 0:22:17.040 she basically if she tried to run for re election 0:22:17.080 --> 0:22:19.560 as a Democrat, she was going to get primaried and 0:22:19.640 --> 0:22:22.480 she was going to lose that primary. This might be 0:22:22.880 --> 0:22:24.840 the only chance for her to try to win re 0:22:24.960 --> 0:22:28.560 election is to try to appeal to independent voters, which 0:22:28.600 --> 0:22:31.800 is a growing election block, and to some Republicans and 0:22:31.920 --> 0:22:35.280 the moderate Democrats. Um, but you know it's going to 0:22:35.359 --> 0:22:39.000 be an uphill fight for her, and and really this 0:22:39.280 --> 0:22:45.760 complicates the Democratic efforts to keep their majority because if 0:22:45.760 --> 0:22:50.680 she creates a three way race and splits the Democratic vote, 0:22:51.280 --> 0:22:55.880 that could make it a lot easier for a Republican candidate, 0:22:56.000 --> 0:23:00.399 maybe Carry Lake or somebody else, to win that Senate 0:23:00.440 --> 0:23:03.480 seat in Arizona for the Republicans. So in the short term, 0:23:03.520 --> 0:23:07.200 it doesn't really change much for the Democrats on Capitol Hill. 0:23:07.200 --> 0:23:11.320 At least in the Senate, they still have a slim majority, 0:23:11.359 --> 0:23:13.919