Your morning briefing, the business news you need in just 15 minutes.
On today's podcast:
(1) Britain bounced back strongly from a shallow recession, providing some relief for Prime Minister Rishi Sunak who has so far struggled to deliver on his promise to grow the economy.
(2) President Joe Biden’s administration is poised to unveil a sweeping decision on China tariffs as soon as next week, one that’s expected to target key strategic sectors while rejecting the across-the-board hikes sought by Donald Trump, people familiar with the matter said.
(3) Israeli Prime Minister Benjamin Netanyahu struck a defiant tone against President Joe Biden after the US withheld a shipment of bombs as a warning to its top Middle East ally not to invade the southern Gaza city of Rafah.
(4) After months in which the Bank of England and markets have been at loggerheads over the direction of interest rates — with the US Federal Reserve more powerful in shaping expectations than words from the UK central bank — they have now fallen roughly into line.
(5) Arm Holdings shares tumbled after the chip designer gave a lukewarm revenue forecast for the fiscal year, raising concerns that the tech industry’s artificial intelligence spending spree is slowing.
(6) In a small side room, roughly 40 people, including some of Wall Street’s most senior executives of color, crowded around a rectangular array of tables for an invitation-only panel and confronted hedge fund manager Bill Ackman for his attacks on diversity, equity and inclusion, or DEI, initiatives, according to five attendees.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:10):
This is the Bloomberg Daybreak Europe podcast, available every morning
on Apple, Spotify or wherever you listen.
Speaker 1 (00:15):
It's Friday, the tenth of May in London. I'm Stephen Carroll.
Speaker 3 (00:18):
And I'm Lizzie Burden. Up Today, the UK economy exits
recession with the strongest quarter of growth in over two years.
Speaker 2 (00:25):
The United States is poised to announce major new tariffs
targeting China strategic sectors.
Speaker 3 (00:30):
Plus Benjamin Netanya, who says Israel will continue its war
against Hamas despite US warnings.
Speaker 1 (00:36):
Let's start with a roundup of our top stories.
Speaker 3 (00:39):
The UK has exited recession with the strongest quarter of
growth in nearly three years. GDP expanded by zero point
six percent in the first quarter, beating all estimates. The Chancellor,
Jeremy Hunt claims it's proof the economy is returning to
full health for the first time since the pandemic.
Speaker 4 (00:54):
It's encouraging that the UK economy is growing faster, not
just than France, Germany or Italy, but actually faster than
the United States. But I think what's more encouraging is
the longer term data. Since twenty ten, we have created
more jobs in the UK than any other country in Europe.
Speaker 2 (01:13):
Whether GDP data comes as the Bank of England and
markets are now roughly in line about the prospect of
a June rate cut. This after months of divergence between
investors and policymakers over when borrowing costs will be lowered.
The Bank of England held rate steady yesterday. Governor Andrew
Bailey said a loosening of monetary policy may come soon.
Speaker 5 (01:31):
With the progress we've made to make sure that inflation
stays around the two percent target, it's likely that we
will need to cut bank rate over the coming quarters
and make Marjory policy is somewhat less restrictive over the
forecast period, possibly more so than currently priced into market rates.
Speaker 1 (01:47):
Andrew Bailey speaking there.
Speaker 2 (01:48):
Following his remarks, investor bets and a June rate cut
rose to over fifty percent, now at fifty seven percent
in terms of data. Two sets of inflation and labor
market releases are due in the UK before the next
BOE decision on the twentieth of June.
Speaker 3 (02:02):
Elsewhere, US President Joe Biden will unveil tariffs against China
as soon as next week, targeting key sectors including electric vehicles,
batteries and solar equipment. Bloomberg has learned that the policies
which would mark one of Biden's biggest moves against Chinese trade,
are scheduled to be announced next Tuesday. Bimbog's chief North
Asia TV correspondent Stephen Engel says it's the latest sign
(02:24):
of how Chinese subsidies are causing a global backlash.
Speaker 6 (02:28):
What we're hearing from sources in this scoop is that
these new tariffs would be very targeted at the three
key green industries that Hi Jinping has essentially earmarked as
priorities for investment, the new Three, as he called it
at the National People's Congress in March, and that is
electric vehicles, batteries, and.
Speaker 3 (02:47):
Solar Biden's plans are a contrast to Donald Trump's pledge
to leva sixty percent tax on all Chinese imports if
he wins the November election. The move comes after a
stabilization of ties with China and flurry of diplomatic engagements.
Speaker 2 (03:02):
Benjaminnettannia, who says that Israel will fight alone even without
US help and must continue its offensive against Hamas in Raffa.
It comes after President Biden said on Wednesday that he
would stop additional shipments of offensive weapons to Israel if
it launches a ground invasion of the southern Gaza city
Bendamnetta naw Who told the American TV program Dr Phil
(03:24):
he has to protect his country.
Speaker 7 (03:26):
I've said in the Holocaust memorial service that we had
the other day. I said in the Holocaust we stood alone,
but we were defenseless. And today, if Israel has to
stand alone, we'll stand alone.
Speaker 2 (03:41):
The Israeli prime ministers said Israel would do its utmost
to make sure civilians leave RAFA. White House officials insisted
the US stands by its ally while urging Netanya Who
to refrain from an assault on RAFA. Concerns echoed by
the UK.
Speaker 3 (03:54):
To Spanish banking Now Sabadel is accusing BBVA of breaking
Spanish laws with its twelve billion dollar hostile takeover bid
for the bank. Tensions are running high between the two
lenders after bbva's offer, which rival Sabadel says introduces incomplete
information that may affect the market. The Spanish government is
(04:14):
also opposed to the merger, saying they have the final
word on approving any potential deal. Hostile BID's are a
rarity in European banking, and a spokesperson for BBVA had
no comment when contacted by Bloomberg.
Speaker 2 (04:27):
Pershing Square founder Bill Ackman was criticized for his attacks
on diversity and inclusion policies in a closed door panel
discussion at the Milken Conference in Los Angeles. Ackman has
previously labeled DEI initiatives as inherently racist and illegal. About
forty people, including some of Wall Street's most senior executives
of color, confronted him about these views at the meeting.
(04:48):
At least one speaker said as comments reflected a poor
understanding of the civil rights movement. In a statement issued afterwards,
Ackman said he has written thousands of words about his
nuanced views on this important topic and asked people to
read them to fully understand his perspective.
Speaker 3 (05:04):
And finally, ARM shares tumbled on Thursday after a tepid
review revenue forecast for the fiscal year raised concerns about
a slowdown in the tech sector's AI spending. The UK
Chip based, the chip designer whose Upbate forecast sent shares
soaring three months ago, said revenue in the year to
March twenty twenty five is going to be lower than
analysts had forecast. ARM CEO Renee Hass has been speaking
(05:27):
to Bloomberg's Caroline Hyde and Ed Ludlow about why he's
optimistic about their rate of growth.
Speaker 8 (05:32):
We're actually forecasting even higher growth this year and north
of twenty percent, and we also signaled to the markets
yesterday that in twenty five, twenty six, twenty seven, we
see that growth continuing. So we have incredible visibility into
our business and we're very very confident of this growth
rate going forward.
Speaker 3 (05:49):
That was the ARM CEO Renee Hass, speaking with Bloomberg there.
Now in a moment, we're going to dig into that
latest UK GDP data and yesterday's Bank of England decision.
But first, even a marketing campaign for the Apple iPad
pro garnering fifty five million views on Tim Cook's x account.
It had a big slab bearing down on musical instruments,
(06:10):
books and paint and cameras and video games like piano,
all sorts of creative tools, and then they exploded and
were crushed and it seems this ad is not going
to play on TV. It's been a bit of a
disaster for it.
Speaker 2 (06:24):
For Apple yeah, it has because of the image that
it gives of crushing creativity and replacing them with an iPad.
Essentially davely our opinion. Colum must have been writing about
this tone deaf, he says. The ad is he said,
it's hard to believe that nobody on Apple's marketing team
saw this coming, and perhaps they were too timid to
speak up. But it certainly hasn't gone down very well,
and it's sort of a rare misstep from Apple on
(06:47):
its marketing campaigns. And I think a lot of perhaps
those views are people tuning in to see what was
wrong with it.
Speaker 3 (06:52):
I mean, how much time do you spend playing the
piano compared to on your phone.
Speaker 1 (06:57):
Well, I can't play the piano, so not very much.
Speaker 3 (06:59):
It's the answer I used to and now I don't.
But let's go back to the UK economy. We had
the latest GDP numbers this morning, beating expectations both for
March and the first quarter recession. Now in the rear
view mirror. They come hot on the heels of yesterday's
BOE decision which opened the door to a June cut.
And we can get analysis now from our chief UK
economist Dan Hansen, Dan, I want to start with the
(07:21):
GDP numbers. Do they delay a rate cut from the
Bank of England.
Speaker 1 (07:27):
I don't think they.
Speaker 9 (07:27):
Do, so I still think I still think June's I mean,
the market's got sixty percent.
Speaker 1 (07:31):
I think it might be a.
Speaker 9 (07:32):
Little bit higher than that in terms of the probability.
But I think, as we heard from at the press
conference yesterday, it's really about services, inflation, pay growth and
headline CPI as well, and I think if those things
come in line with the Bank's forecast, I think it
will be it will it will cut in June. I mean,
I think the thing about this number for me at least,
(07:54):
is it says something particularly of this sort of well
certainly of this pace of growth is madeained. It says
something about how far the bank might be able to
cut rates beyond June, and it says about sort of
tells us something about potentially the terminal rate, that the
economy might might be able to withstand a higher interest
rate than sort of the widely perceived sort of view.
(08:14):
I think in the market that the neutral rate of
interest is somewhere between three and four. It might actually
be closest to the top end of that range, and
so there's less there's less run to cut rates before
you start essentially stimulating the economy and take all the
restriction out of the policy stunts.
Speaker 1 (08:29):
What is the implication of the economy of the neutral
RASO is that much higher?
Speaker 10 (08:33):
Some very good question soon how long have you got Well,
I mean, just purely in terms of just sort of
thinking about the here and now.
Speaker 9 (08:44):
I mean, the answer is what I just gave is
that the bank doesn't need to cut by won't need
to cut by much. And I think what we'll find is,
and I think you can look at the US and
see something this sort of story potentially evolving where you've
got rates at five and a half percent, you've got
growth at three percent, you've got basically full employment, and
(09:07):
you've got the exactly And so that tells you that
the neutral rates probably not two and a half three.
It may be significantly higher if you just take that
as read. I mean, there are plenty of other reasons
why that dynamic is potentially playing out in the US,
but just purely through the sort of lens of the
neutral rate and thinking about it like that. Of course,
(09:28):
the other big implication of a high neutral rate is
the fiscal implication of it all as well. You know,
the hope, certainly when we're thinking about the UK is
the interest rate as interest rates for that will create
more fiscal space potentially for a fiscal event in the
autumn where more tax cuts can be announced, or for
the next government to potentially sort of think about investing
(09:50):
more in the economy's future. It's the neutral rates higher,
it's obviously going to take their interest payment's going to
take a lot more of the fiscal space that the
UK as and that obviously has significant implications for all
the rest of what goes on the fiscal side, tax
and spending decisions. So actually, yes, there are monetary policy implications,
(10:11):
but it has significant fiscal implications as well well.
Speaker 3 (10:13):
Since you brought up the politics down, what about the
politics on the Monetary Policy Committee? Dave Ramsden dissenting, making
him the first of the internals to go against the
pack and go for a cut rather than a hole.
Do you think he'll be in trouble for doing that
or do you think he was kind of a signal
to the market. Was he the sacrificial lamb of the committee?
Speaker 11 (10:33):
There?
Speaker 9 (10:34):
Zack Official Dove, I think, I mean I you know,
I'm not going to speak for Dave's decision. I mean,
I think it there were merits in both sides of
the argument this time. You know, historically the vote split
has been a signal. One observation I would make is
that Dave has led the pack in this recent hiking
(10:56):
cycle that we've had before and before as well, but
notably sort of November twenty twenty one he went for
a hike, then they hiked in December February twenty two
he went for fifty bases points, so and they ended
up going for fifty basis points later that year. So
you know, there, you know, there's arguably a signal there.
(11:17):
But I think I don't think he's going to be
in trouble. You know, we're you have to choose whether
you want groupthink or whether you want, you know, a
diversity of views, and I think we probably want the
second one. And I think it's good, particularly good that
it's it's an internal member, because that's that's sort of
the preconceived idea, isn't it that they all all the
internals vote together and the external externals are meant to
(11:40):
put the cat amongst the pigeons. But I think it's
it's good that we've we've seen that sort of that
difference of views, and it is clear in the minutes
they all have very different assessments of what's going on
on the inflation front.
Speaker 2 (11:51):
Just coming back to today's GDP figures stronger than expectors
starts of the year, does this do anything to the
kind of longer term outlook for where growth is for
the UK?
Speaker 9 (12:01):
So I think one quarter to the next, it's very
hard to sort of change your view about that. I mean,
I think arview for a very long time is that
trend growth sort of around the point three point four mark,
So that's how fast it can grow on a quarterly
basis without stoking in inflationary pressure. So it's obviously point
six is above that. Do I think this sort of
(12:21):
pace could be maintained sort of indefinitely into the future
and it not calls a headache for the Bank of England.
Speaker 1 (12:28):
No, I think it.
Speaker 9 (12:29):
Would be end up being inflationary. So I think, you know,
for us it's still this is sort of an above
trend growth reading. I mean, interestingly, it jars quite considerably
our view with for example, the obr's view, which are
they're a lot more optimistic on the outlook, particularly for
productivity growth. The Bank of England are much closer to
(12:49):
our view. But I don't think to answer your question directly,
I don't think it changes the sort of longer term
picture for the UK.
Speaker 3 (12:57):
Dan Ans and our chief UK economists, we thank you
for that analysis of the GDP number this morning on
the Bore decision yesterday.
Speaker 1 (13:06):
Now it in exclusive Bloomberg story.
Speaker 2 (13:07):
President Joe Biden will unveil tariffs against China as soon
as next week, targeting key sectors including electric vehicles, batteries
and solar equipment. Joining us to discuss our greater at China,
Executive editor John Liu.
Speaker 1 (13:19):
John, great to have you with us. What exactly are
we expecting the US to announce.
Speaker 12 (13:24):
We are expecting President Biden next week to announce that
he is going to be imposing tariffs on a number
of strategic industries. As you said, electric vehicles, batteries, solar
These are all industries where the United States has expressed
concerns about overcapacity in China. The China would be trying
(13:44):
to export its way out of that overcapacity problem, and
that would intel extremely low priced products going into the
United States and other markets. Such a step, I think
is important to note, would be unlike what presidential can
that Donald Trump is proposing, which is just a broad
tariff on anything made in China coming into the United States.
Speaker 3 (14:07):
We had a guest on earlier saying, you know, these
aren't the first tariffs, they're not the last tariffs. It's
kind of what we expected, a tit for tat trade battle.
I wonder how significant you think they are, but how
significant especially you think they are in terms of China's
response and what China is going to do about it.
Speaker 12 (14:24):
I think this is going to put a lot of
pressure on the relationship. Since the meeting in San Francisco
late last year between Presidents Biden and She, the bilateral
relationship is stabilized.
Speaker 1 (14:37):
At the very least. Both sides have.
Speaker 12 (14:40):
Been trying to find a way to improve things. But
I think the general condition of the relationship is one
of rivalry now and that is going to continue to
surface this time in the sense of tariffs. We've also
seen it when it comes to the South China Sea,
We've seen it when it comes to Taiwan, chips, lots
of different sectors. I think we will see that continue
(15:02):
to manifest, and it'll be up to the two governments
to try to find a way to compete without that
competition evolving into some sort of conflict.
Speaker 1 (15:13):
John, should we expect what should we expect? Rather? In
terms of a response from China to this, I.
Speaker 12 (15:19):
Think the Chinese, I think there will have to be
some sort of response from Beijing. They will feel they
need to show that domestic audience here in China that
they are doing something to protect the interests of Chinese companies,
Chinese citizens, the country at large. I think they will
be trying to fine tune that response so it is reciprocal,
it is of the same scale. So, for example, the
(15:41):
tariffs that President Biden has also called for on steel
and aluminum exports from China to the US, that probably
is not going to affect China very much, and so
if the Chinese were going to respond to that, they
probably would do something that is likely not going to
have as big of an impact on the US or
US company.
Speaker 2 (16:00):
Well, this is Bloomberg Daybreak Europe, your morning brief on
the stories making news from London to Wall Street and beyond.
Speaker 11 (16:08):
Look for us on your podcast feed every morning, on Apple,
Spotify and anywhere else you get your podcasts.
Speaker 2 (16:14):
You can also listen live each morning on London DAB Radio,
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Speaker 11 (16:19):
Our flagship New York station, is also available on your
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I'm Caroline Hepka and.
Speaker 2 (16:28):
I'm Stephen Carol. Join us again tomorrow morning for all
the news you need to start your day right here
on Bloomberg day Break Europe
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:10):
This is the Bloomberg Daybreak Europe podcast, available every morning
on Apple, Spotify or wherever you listen.
Speaker 1 (00:15):
It's Friday, the tenth of May in London. I'm Stephen Carroll.
Speaker 3 (00:18):
And I'm Lizzie Burden. Up Today, the UK economy exits
recession with the strongest quarter of growth in over two years.
Speaker 2 (00:25):
The United States is poised to announce major new tariffs
targeting China strategic sectors.
Speaker 3 (00:30):
Plus Benjamin Netanya, who says Israel will continue its war
against Hamas despite US warnings.
Speaker 1 (00:36):
Let's start with a roundup of our top stories.
Speaker 3 (00:39):
The UK has exited recession with the strongest quarter of
growth in nearly three years. GDP expanded by zero point
six percent in the first quarter, beating all estimates. The Chancellor,
Jeremy Hunt claims it's proof the economy is returning to
full health for the first time since the pandemic.
Speaker 4 (00:54):
It's encouraging that the UK economy is growing faster, not
just than France, Germany or Italy, but actually faster than
the United States. But I think what's more encouraging is
the longer term data. Since twenty ten, we have created
more jobs in the UK than any other country in Europe.
Speaker 2 (01:13):
Whether GDP data comes as the Bank of England and
markets are now roughly in line about the prospect of
a June rate cut. This after months of divergence between
investors and policymakers over when borrowing costs will be lowered.
The Bank of England held rate steady yesterday. Governor Andrew
Bailey said a loosening of monetary policy may come soon.
Speaker 5 (01:31):
With the progress we've made to make sure that inflation
stays around the two percent target, it's likely that we
will need to cut bank rate over the coming quarters
and make Marjory policy is somewhat less restrictive over the
forecast period, possibly more so than currently priced into market rates.
Speaker 1 (01:47):
Andrew Bailey speaking there.
Speaker 2 (01:48):
Following his remarks, investor bets and a June rate cut
rose to over fifty percent, now at fifty seven percent
in terms of data. Two sets of inflation and labor
market releases are due in the UK before the next
BOE decision on the twentieth of June.
Speaker 3 (02:02):
Elsewhere, US President Joe Biden will unveil tariffs against China
as soon as next week, targeting key sectors including electric vehicles,
batteries and solar equipment. Bloomberg has learned that the policies
which would mark one of Biden's biggest moves against Chinese trade,
are scheduled to be announced next Tuesday. Bimbog's chief North
Asia TV correspondent Stephen Engel says it's the latest sign
(02:24):
of how Chinese subsidies are causing a global backlash.
Speaker 6 (02:28):
What we're hearing from sources in this scoop is that
these new tariffs would be very targeted at the three
key green industries that Hi Jinping has essentially earmarked as
priorities for investment, the new Three, as he called it
at the National People's Congress in March, and that is
electric vehicles, batteries, and.
Speaker 3 (02:47):
Solar Biden's plans are a contrast to Donald Trump's pledge
to leva sixty percent tax on all Chinese imports if
he wins the November election. The move comes after a
stabilization of ties with China and flurry of diplomatic engagements.
Speaker 2 (03:02):
Benjaminnettannia, who says that Israel will fight alone even without
US help and must continue its offensive against Hamas in Raffa.
It comes after President Biden said on Wednesday that he
would stop additional shipments of offensive weapons to Israel if
it launches a ground invasion of the southern Gaza city
Bendamnetta naw Who told the American TV program Dr Phil
(03:24):
he has to protect his country.
Speaker 7 (03:26):
I've said in the Holocaust memorial service that we had
the other day. I said in the Holocaust we stood alone,
but we were defenseless. And today, if Israel has to
stand alone, we'll stand alone.
Speaker 2 (03:41):
The Israeli prime ministers said Israel would do its utmost
to make sure civilians leave RAFA. White House officials insisted
the US stands by its ally while urging Netanya Who
to refrain from an assault on RAFA. Concerns echoed by
the UK.
Speaker 3 (03:54):
To Spanish banking Now Sabadel is accusing BBVA of breaking
Spanish laws with its twelve billion dollar hostile takeover bid
for the bank. Tensions are running high between the two
lenders after bbva's offer, which rival Sabadel says introduces incomplete
information that may affect the market. The Spanish government is
(04:14):
also opposed to the merger, saying they have the final
word on approving any potential deal. Hostile BID's are a
rarity in European banking, and a spokesperson for BBVA had
no comment when contacted by Bloomberg.
Speaker 2 (04:27):
Pershing Square founder Bill Ackman was criticized for his attacks
on diversity and inclusion policies in a closed door panel
discussion at the Milken Conference in Los Angeles. Ackman has
previously labeled DEI initiatives as inherently racist and illegal. About
forty people, including some of Wall Street's most senior executives
of color, confronted him about these views at the meeting.
(04:48):
At least one speaker said as comments reflected a poor
understanding of the civil rights movement. In a statement issued afterwards,
Ackman said he has written thousands of words about his
nuanced views on this important topic and asked people to
read them to fully understand his perspective.
Speaker 3 (05:04):
And finally, ARM shares tumbled on Thursday after a tepid
review revenue forecast for the fiscal year raised concerns about
a slowdown in the tech sector's AI spending. The UK
Chip based, the chip designer whose Upbate forecast sent shares
soaring three months ago, said revenue in the year to
March twenty twenty five is going to be lower than
analysts had forecast. ARM CEO Renee Hass has been speaking
(05:27):
to Bloomberg's Caroline Hyde and Ed Ludlow about why he's
optimistic about their rate of growth.
Speaker 8 (05:32):
We're actually forecasting even higher growth this year and north
of twenty percent, and we also signaled to the markets
yesterday that in twenty five, twenty six, twenty seven, we
see that growth continuing. So we have incredible visibility into
our business and we're very very confident of this growth
rate going forward.
Speaker 3 (05:49):
That was the ARM CEO Renee Hass, speaking with Bloomberg there.
Now in a moment, we're going to dig into that
latest UK GDP data and yesterday's Bank of England decision.
But first, even a marketing campaign for the Apple iPad
pro garnering fifty five million views on Tim Cook's x account.
It had a big slab bearing down on musical instruments,
(06:10):
books and paint and cameras and video games like piano,
all sorts of creative tools, and then they exploded and
were crushed and it seems this ad is not going
to play on TV. It's been a bit of a
disaster for it.
Speaker 2 (06:24):
For Apple yeah, it has because of the image that
it gives of crushing creativity and replacing them with an iPad.
Essentially davely our opinion. Colum must have been writing about
this tone deaf, he says. The ad is he said,
it's hard to believe that nobody on Apple's marketing team
saw this coming, and perhaps they were too timid to
speak up. But it certainly hasn't gone down very well,
and it's sort of a rare misstep from Apple on
(06:47):
its marketing campaigns. And I think a lot of perhaps
those views are people tuning in to see what was
wrong with it.
Speaker 3 (06:52):
I mean, how much time do you spend playing the
piano compared to on your phone.
Speaker 1 (06:57):
Well, I can't play the piano, so not very much.
Speaker 3 (06:59):
It's the answer I used to and now I don't.
But let's go back to the UK economy. We had
the latest GDP numbers this morning, beating expectations both for
March and the first quarter recession. Now in the rear
view mirror. They come hot on the heels of yesterday's
BOE decision which opened the door to a June cut.
And we can get analysis now from our chief UK
economist Dan Hansen, Dan, I want to start with the
(07:21):
GDP numbers. Do they delay a rate cut from the
Bank of England.
Speaker 1 (07:27):
I don't think they.
Speaker 9 (07:27):
Do, so I still think I still think June's I mean,
the market's got sixty percent.
Speaker 1 (07:31):
I think it might be a.
Speaker 9 (07:32):
Little bit higher than that in terms of the probability.
But I think, as we heard from at the press
conference yesterday, it's really about services, inflation, pay growth and
headline CPI as well, and I think if those things
come in line with the Bank's forecast, I think it
will be it will it will cut in June. I mean,
I think the thing about this number for me at least,
(07:54):
is it says something particularly of this sort of well
certainly of this pace of growth is madeained. It says
something about how far the bank might be able to
cut rates beyond June, and it says about sort of
tells us something about potentially the terminal rate, that the
economy might might be able to withstand a higher interest
rate than sort of the widely perceived sort of view.
(08:14):
I think in the market that the neutral rate of
interest is somewhere between three and four. It might actually
be closest to the top end of that range, and
so there's less there's less run to cut rates before
you start essentially stimulating the economy and take all the
restriction out of the policy stunts.
Speaker 1 (08:29):
What is the implication of the economy of the neutral
RASO is that much higher?
Speaker 10 (08:33):
Some very good question soon how long have you got Well,
I mean, just purely in terms of just sort of
thinking about the here and now.
Speaker 9 (08:44):
I mean, the answer is what I just gave is
that the bank doesn't need to cut by won't need
to cut by much. And I think what we'll find is,
and I think you can look at the US and
see something this sort of story potentially evolving where you've
got rates at five and a half percent, you've got
growth at three percent, you've got basically full employment, and
(09:07):
you've got the exactly And so that tells you that
the neutral rates probably not two and a half three.
It may be significantly higher if you just take that
as read. I mean, there are plenty of other reasons
why that dynamic is potentially playing out in the US,
but just purely through the sort of lens of the
neutral rate and thinking about it like that. Of course,
(09:28):
the other big implication of a high neutral rate is
the fiscal implication of it all as well. You know,
the hope, certainly when we're thinking about the UK is
the interest rate as interest rates for that will create
more fiscal space potentially for a fiscal event in the
autumn where more tax cuts can be announced, or for
the next government to potentially sort of think about investing
(09:50):
more in the economy's future. It's the neutral rates higher,
it's obviously going to take their interest payment's going to
take a lot more of the fiscal space that the
UK as and that obviously has significant implications for all
the rest of what goes on the fiscal side, tax
and spending decisions. So actually, yes, there are monetary policy implications,
(10:11):
but it has significant fiscal implications as well well.
Speaker 3 (10:13):
Since you brought up the politics down, what about the
politics on the Monetary Policy Committee? Dave Ramsden dissenting, making
him the first of the internals to go against the
pack and go for a cut rather than a hole.
Do you think he'll be in trouble for doing that
or do you think he was kind of a signal
to the market. Was he the sacrificial lamb of the committee?
Speaker 11 (10:33):
There?
Speaker 9 (10:34):
Zack Official Dove, I think, I mean I you know,
I'm not going to speak for Dave's decision. I mean,
I think it there were merits in both sides of
the argument this time. You know, historically the vote split
has been a signal. One observation I would make is
that Dave has led the pack in this recent hiking
(10:56):
cycle that we've had before and before as well, but
notably sort of November twenty twenty one he went for
a hike, then they hiked in December February twenty two
he went for fifty bases points, so and they ended
up going for fifty basis points later that year. So
you know, there, you know, there's arguably a signal there.
(11:17):
But I think I don't think he's going to be
in trouble. You know, we're you have to choose whether
you want groupthink or whether you want, you know, a
diversity of views, and I think we probably want the
second one. And I think it's good, particularly good that
it's it's an internal member, because that's that's sort of
the preconceived idea, isn't it that they all all the
internals vote together and the external externals are meant to
(11:40):
put the cat amongst the pigeons. But I think it's
it's good that we've we've seen that sort of that
difference of views, and it is clear in the minutes
they all have very different assessments of what's going on
on the inflation front.
Speaker 2 (11:51):
Just coming back to today's GDP figures stronger than expectors
starts of the year, does this do anything to the
kind of longer term outlook for where growth is for
the UK?
Speaker 9 (12:01):
So I think one quarter to the next, it's very
hard to sort of change your view about that. I mean,
I think arview for a very long time is that
trend growth sort of around the point three point four mark,
So that's how fast it can grow on a quarterly
basis without stoking in inflationary pressure. So it's obviously point
six is above that. Do I think this sort of
(12:21):
pace could be maintained sort of indefinitely into the future
and it not calls a headache for the Bank of England.
Speaker 1 (12:28):
No, I think it.
Speaker 9 (12:29):
Would be end up being inflationary. So I think, you know,
for us it's still this is sort of an above
trend growth reading. I mean, interestingly, it jars quite considerably
our view with for example, the obr's view, which are
they're a lot more optimistic on the outlook, particularly for
productivity growth. The Bank of England are much closer to
(12:49):
our view. But I don't think to answer your question directly,
I don't think it changes the sort of longer term
picture for the UK.
Speaker 3 (12:57):
Dan Ans and our chief UK economists, we thank you
for that analysis of the GDP number this morning on
the Bore decision yesterday.
Speaker 1 (13:06):
Now it in exclusive Bloomberg story.
Speaker 2 (13:07):
President Joe Biden will unveil tariffs against China as soon
as next week, targeting key sectors including electric vehicles, batteries
and solar equipment. Joining us to discuss our greater at China,
Executive editor John Liu.
Speaker 1 (13:19):
John, great to have you with us. What exactly are
we expecting the US to announce.
Speaker 12 (13:24):
We are expecting President Biden next week to announce that
he is going to be imposing tariffs on a number
of strategic industries. As you said, electric vehicles, batteries, solar
These are all industries where the United States has expressed
concerns about overcapacity in China. The China would be trying
(13:44):
to export its way out of that overcapacity problem, and
that would intel extremely low priced products going into the
United States and other markets. Such a step, I think
is important to note, would be unlike what presidential can
that Donald Trump is proposing, which is just a broad
tariff on anything made in China coming into the United States.
Speaker 3 (14:07):
We had a guest on earlier saying, you know, these
aren't the first tariffs, they're not the last tariffs. It's
kind of what we expected, a tit for tat trade battle.
I wonder how significant you think they are, but how
significant especially you think they are in terms of China's
response and what China is going to do about it.
Speaker 12 (14:24):
I think this is going to put a lot of
pressure on the relationship. Since the meeting in San Francisco
late last year between Presidents Biden and She, the bilateral
relationship is stabilized.
Speaker 1 (14:37):
At the very least. Both sides have.
Speaker 12 (14:40):
Been trying to find a way to improve things. But
I think the general condition of the relationship is one
of rivalry now and that is going to continue to
surface this time in the sense of tariffs. We've also
seen it when it comes to the South China Sea,
We've seen it when it comes to Taiwan, chips, lots
of different sectors. I think we will see that continue
(15:02):
to manifest, and it'll be up to the two governments
to try to find a way to compete without that
competition evolving into some sort of conflict.
Speaker 1 (15:13):
John, should we expect what should we expect? Rather? In
terms of a response from China to this, I.
Speaker 12 (15:19):
Think the Chinese, I think there will have to be
some sort of response from Beijing. They will feel they
need to show that domestic audience here in China that
they are doing something to protect the interests of Chinese companies,
Chinese citizens, the country at large. I think they will
be trying to fine tune that response so it is reciprocal,
it is of the same scale. So, for example, the
(15:41):
tariffs that President Biden has also called for on steel
and aluminum exports from China to the US, that probably
is not going to affect China very much, and so
if the Chinese were going to respond to that, they
probably would do something that is likely not going to
have as big of an impact on the US or
US company.
Speaker 2 (16:00):
Well, this is Bloomberg Daybreak Europe, your morning brief on
the stories making news from London to Wall Street and beyond.
Speaker 11 (16:08):
Look for us on your podcast feed every morning, on Apple,
Spotify and anywhere else you get your podcasts.
Speaker 2 (16:14):
You can also listen live each morning on London DAB Radio,
the Bloomberg Business app, and Bloomberg dot Com.
Speaker 11 (16:19):
Our flagship New York station, is also available on your
Amazon Alexa devices. Just say Alexa Play Bloomberg eleven thirty.
I'm Caroline Hepka and.
Speaker 2 (16:28):
I'm Stephen Carol. Join us again tomorrow morning for all
the news you need to start your day right here
on Bloomberg day Break Europe
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