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Speaker 1: Bloomberg Audio Studios, podcasts, radio News.

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Speaker 2: Good morning to you standing by alongside me. I'm very

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Speaker 2: pleased to say the IMF Managing Director, Kristina Georgava. Kristinina,

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Speaker 2: thank you so much for hosting us here in Washington, DC.

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Speaker 1: My great pleasure.

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Speaker 2: You and I've got a lot to talk about and

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Speaker 2: hopefully we've got enough time to talk about it all.

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Speaker 1: So let's start here.

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Speaker 2: The biggest risk of global stability right now? Is it

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Speaker 2: right here in the United States? Is it US policy?

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Speaker 1: Well, US policy has helped the world. Let's start from there.

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Speaker 3: During the pandemic, the fact that you has stepped up

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Speaker 3: meant a lot in terms of stabilizing the world economy.

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Speaker 3: And today when we are upgrading our growth projections from

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Speaker 3: three point one to three point two percent to a

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Speaker 3: great degree thanks to the United States. This being set,

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Speaker 3: all eyes are on the United States.

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Speaker 1: One. What is going to happen with the inflation and

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Speaker 1: it's interest rates?

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Speaker 3: To how is you US going to navigate this world

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Speaker 3: of more intrusive government policies.

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Speaker 2: Let's talk about the FX market to begin with. I

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Speaker 2: wonder how happy the Japanese are. I wonder how happy

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Speaker 2: the South Koreans are the Malaysians, the Indians. I go

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Speaker 2: through it one by one and the FX marketers, you know,

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Speaker 2: christin in and we've got a record low for the rupee.

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Speaker 2: The Malaysians have actually intervening in the FX market, the Japanese,

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Speaker 2: the South Koreans are threatening to Can you give me

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Speaker 2: just a decent impression of what that's been like at

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Speaker 2: the forum so far, the spring meetings?

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Speaker 1: What have they said to you about that? How loud

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Speaker 1: are the complaints?

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Speaker 3: Of course it is concerning because, as you said, when

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Speaker 3: the dollar is up, many other country currencies are down,

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Speaker 3: not all, but many other concurrencies are down. And what

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Speaker 3: that leads to is concern about how long.

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Speaker 1: That may last. So that's what I hear from trees.

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Speaker 3: How long would the fat be stuck with higher interest rates?

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Speaker 3: And when they start easing, can we expect that this

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Speaker 3: would take the interest rates in the United States down

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Speaker 3: a little faster?

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Speaker 1: And the answer to this two.

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Speaker 3: Questions is not an easy one. On the interest rates,

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Speaker 3: the fet is doing the right thing. They're watchful, keep

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Speaker 3: your eye on the ball, And at this point the

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Speaker 3: ball is bouncing up and down, and the fat is

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Speaker 3: not yet prepared and rightly so to cut. We still

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Speaker 3: remain optimistic that within this year conditions in the United

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Speaker 3: States would allow the fat to start cutting for how fast.

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Speaker 1: I don't think that we should gear.

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Speaker 3: Up for rapid decline in.

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Speaker 2: Interest and ask you what you think the source of

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Speaker 2: that optimism is what's behind that, what leads you to

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Speaker 2: believe that those interest rate carns are coming. Well.

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Speaker 3: What we're seeing is the economy is indeed.

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Speaker 1: Slightly overheated, but part of it.

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Speaker 3: Comes from the fiscal.

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Speaker 1: Stance of the United States.

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Speaker 3: So there is room to cool a bit the economy

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Speaker 3: just by being more watchful, and it would help the

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Speaker 3: United States overall, because as we know that is it

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Speaker 3: has gone up to seven percent. The second reason is

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Speaker 3: that so far the business environment in the United States

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Speaker 3: has not reacted very firmly to the interest rates being high.

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Speaker 3: But we see a little bit of softening underneath, especially

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Speaker 3: in SMEs, and that tells us that high interest rates

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Speaker 3: ultimately bite.

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Speaker 2: Can I change that out just a little bit more?

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Speaker 2: You're effectively saying to us that the US exceptionalism that

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Speaker 2: so many people are talking about is ultimately unsustainable.

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Speaker 3: I didn't say that, as I would tell you where

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Speaker 3: what are the sources of this exceptionalism, and I think

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Speaker 3: they're with us to stay.

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Speaker 1: One is very deep capital markets.

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Speaker 3: People are coming here not only because they can generate

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Speaker 3: more income with high interest rates. That are coming here

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Speaker 3: because the economy is very vibrant and capital markets are

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Speaker 3: a deep.

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Speaker 1: Second, innovation in the United States.

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Speaker 3: Move very quickly from idea to adventure and then to

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Speaker 3: scaling up. And truly, the US is tapping into a

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Speaker 3: very vibrant labor force right next door. What in the

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Speaker 3: eyes of many people is a problem, and I admit

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Speaker 3: there are elements of this flow of people that is

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Speaker 3: concerning is actually feeding into the labor market of the

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Speaker 3: United States in a way that keeps wages lower than

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Speaker 3: in some other countries and keeps the ability of businesses.

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Speaker 1: To grow basically unlimited.

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Speaker 2: You understand why that's a difficult political message, don't you.

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Speaker 3: Of course, And I would translate it in the following way,

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Speaker 3: something that I think everybody in the United States is

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Speaker 3: looking for good, sound, transparent in immigration policy the US.

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Speaker 3: If you look at these sources of growth on the

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Speaker 3: labor side front, it is more people coming from outside

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Speaker 3: that fed this exceptionalism of the labor market.

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Speaker 1: But it has to be regulated.

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Speaker 3: It has to protect the American people from those who

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Speaker 3: may be coming here with bad intentions.

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Speaker 2: I can tell you something that's politically popular in America,

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Speaker 2: and I swear too. It's going after china excess capacity

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Speaker 2: and potentially jumping goods on the international market. We're not

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Speaker 2: just hearing that complaint from the United States, We're hearing

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Speaker 2: that complaint from others as well. What's your message for

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Speaker 2: the Chinese government at these meetings with those concerns in mind.

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Speaker 3: I was in China recently, and my message there is

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Speaker 3: the same I would convey today.

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Speaker 1: China is on fork on the road.

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Speaker 3: They can continue with the traditional policy and that includes

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Speaker 3: industrial policy on scale towards export, or they can shift

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Speaker 3: gear and concentrate on domestic consumption, on picking up demand,

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Speaker 3: and on continuing with market reforms that serve them.

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Speaker 1: Well in the past.

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Speaker 3: We know from experience that industrial policy often produce misallocation

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Speaker 3: of capital and labor. We are today in a world

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Speaker 3: of weak growth prospects. The last thing we need is

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Speaker 3: more misallocation of capital and labor.

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Speaker 2: The last thing we need is exactly what we've got.

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Speaker 2: I'm afraid Crystillia, because we're seeing industrial policy takeoff in America.

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Speaker 2: We're seeing the Europeans trying to come up with their

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Speaker 2: own form of it. It might take them a while.

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Speaker 2: We know how Europe works. China has been doing this

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Speaker 2: for a while. What you just said about China I

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Speaker 2: heard a decade ago. You've heard for the last two

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Speaker 2: decades that they're going to shift this economic model. It

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Speaker 2: doesn't appear that they are. I think a big question

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Speaker 2: for us at these meetings, and I'd love for your

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Speaker 2: input on this. I call it with John Livsky this

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Speaker 2: morning and I said, how does the IMF retain regain

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Speaker 2: some relevance in this conversation to help reshape these outcomes

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Speaker 2: because we're drifting away from free trade, we're breaking away

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Speaker 2: from cooperation, We're going somewhere else.

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Speaker 1: Well, two responses.

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Speaker 3: One, how do we I wouldn't say regain because I

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Speaker 3: think we've had quite a lot of relevance on that

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Speaker 3: conversation on fragmentation and the benefits of an integrated global economy.

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Speaker 3: We just have to continue to bring the facts in

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Speaker 3: objective manner, and the facts are that when we go

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Speaker 3: excessively in protectionism in industrial policy measures, we risk to

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Speaker 3: actually affect negatively prospects for growth, and we certainly create

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Speaker 3: a wave, a down spiral, because experience tells us every

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Speaker 3: measure of protectionist nature has seventy five probability percent probability

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Speaker 3: of reciprocity.

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Speaker 1: And then where do we end?

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Speaker 3: But the second point I want to make, and I'm

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Speaker 3: making it more sincerely. We are in a world that

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Speaker 3: is faced with massive transformation, the digital transformation, the clean

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Speaker 3: economy that we aspire for. There is some value in

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Speaker 3: using industrial policy to accelerate the carganization, to make it

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Speaker 3: so that the benefits of the digital economy are more

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Speaker 3: fairly shared across society.

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Speaker 1: In other words, when there is a.

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Speaker 3: Market failure, yes it is justified, you take a measure

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Speaker 3: to correct it. Our worry is that when we looked

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Speaker 3: at the massive increase of industrial policy measures, a good

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Speaker 3: chunk of them do not to reflect the market failure.

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Speaker 3: So we will continue to speak truth to power.

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Speaker 2: Let's talk truth to power right now. I've got some

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Speaker 2: spies around here. They know they saw you with the

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Speaker 2: Central Bank Governor of China yesterday evening. Can you tell

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Speaker 2: me what you said to them?

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Speaker 1: What I told him is twofold.

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Speaker 3: One is that China needs to continue to seriously address

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Speaker 3: the problems of the property sector that have been handled

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Speaker 3: somewhat but not resolved.

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Speaker 1: They need it.

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Speaker 3: For domestic consumer confidence because many Chinese people think of

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Speaker 3: their apartment as they're saving for old age.

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Speaker 1: They also need it.

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Speaker 3: Because a sector of that significance cannot be put on hold.

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Speaker 3: The second thing I told him is that we are

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Speaker 3: now starting our article for consultation.

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Speaker 1: This is our annual.

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Speaker 3: Taking the post of each economy with China, and that

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Speaker 3: it may be very useful for China if we do

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Speaker 3: more analysis on how they can boost domestic demand, how

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Speaker 3: they can exercise their own decision for a dual circulation economy.

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Speaker 3: And I was delighted that he sees value from the

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Speaker 3: Fund to get deeper in these issues and provide China

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Speaker 3: with appropriate advices.

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Speaker 1: They're coming up.

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Speaker 2: The pressure you know that are politically not just from

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Speaker 2: this administration, Secretary Allen, but potentially another trend administration as well.

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Speaker 2: Do you have any concerns that lean towards the FCS

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Speaker 2: market and just seek out a weaker currency.

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Speaker 3: Well, we haven't seen signs of.

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Speaker 1: That, but what I do believe is that.

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Speaker 3: Yes, if China builds over capacity and pushes expert that

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Speaker 3: create reciprocity of action, and then we are in the

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Speaker 3: world of more fragmentation, not less. That ultimately is not

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Speaker 3: good for China. China wants an integrated global economy. Therefore,

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Speaker 3: what I want to see China doing is to get

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Speaker 3: serious about reforms, get serious about demand and domestic consumption.

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Speaker 2: We've got so much to talk about, but unfortunately, I

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Speaker 2: know you've got other things to do. Let's consider this

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Speaker 2: conversation through the Christillina, thank you so much, and congratulations

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Speaker 2: on a new term.

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Speaker 1: Thank you, look forward to KADII. Thank you so much.

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Speaker 2: The IMF Managing Director, Christillina gio Gava