decisions. bracing for florence, the hurricane weakens as it moves to make landfall, but rain, flooding, and storm surges threatened. , the s&p bear warning falls into a bear market if the u.s. imposes a 10% on all imports. it is starting to quantify the trade impact. no rate decision is out, change at 75 basis points. david: checking their it gdp growth estimate. they see more growth, greater uncertainty around brexit. that is a surprise. uncertainty is going up, not down. alix: more options bet on an interest rate cut in 2019, interesting. increased global risks from trade and emerging markets. detail ining further what they say about that. any other rate hikes will be

gradual. david: the turkey central-bank coming out now. they have raised the one week repo rate to 24%. lira rosee time, the after that decision, so it strengthened the lear as they repo rate.e alix: it feels like president ertl one said i don't like higher interest rates. you have to lower them. they are going all the way to 24%. let's go to istanbul, yousef gamal el-din is there. we just saw this cross. explain what happened. >> this day looked like it would take on historic portions. for the central bank to reassert credibility. the rate at 24% for the one week repo rate.

that is the upper side of estimates. widelyges were varying to 25% and more. the average was 21%. ing was looking for 21%. td securities said the bank would disappoint. a very clear signal from the central bank, saying there will be further tightening, and that will be delivered when it is needed. they acknowledged that consumer demand is slowing. the meeting was attended by six members. the bank has to find a balance between making sure not to kill the growth that is left, well regaining confidence from foreign investors. we had the controversial comments from the turkish president an hour or so, saying high interest rates cause inflation, calling banks to reduce interest rates and saying they are a tool of exploitation. amidst the commentary, what was

buried was the comment the central bank is independent and can make its own decisions. upsideprise to the confirms that messaging and a clear signal the bank is waking up to the reality of double digit inflation. you can see it as you walk across the street in istanbul. of course, growth slowing. the latest data for the second quarter this week. david: we have been watching the reaction in turkey. the stock market is up. the lira is up. the good news at the same time, there is a recession. what will this do to gdp growth in turkey? you are looking at a slowdown overall. >> the numbers we got for the second quarter were 5.2%, a slowdown from the quarter before. the forecast for 2019 are possible scenarios of stagflation.

there was enormous pressure on the central bank to move decisively and when confidence from investors. we heard this from the turkish government a few hours ago, that they will move clearly towards trying to reduce what they see as manipulation. the rate in the foreign exchange market for the turkish lira is not the most realistic and accurate pricing. there is less liquidity in this trade. they fixed some of the management tools that the central bank can operate, and now, the signal is clear they will be able to actually make a move in terms of trying to win back some foreign investors. david: thank you for your reporting from istanbul. , the central bank in turkey has raised the repo rate to 24%. that is more than expected. the lira is climbing. the central bank said it would longn with tight policy as

as inflation remains at the level it has been in turkey. markets areemerging also extending gains against the dollar. that is setting the tone for emerging markets. the other decision was from the boe. , third-quarter growth estimates have been raised 2.5% due to consumption and stronger pay. they still see future rate hikes as limited and gradual. on that news, the cable rate hitting the highs of the day. joining us now is our bloomberg economics senior editor. let's start with the boe. what is your reaction to the decision? >> there was not a lot of surprise around this decision. interesting they have increased the growth forecast at the same time as highlighting increased uncertainty around brexit. people have been

thinking the net result of all the back-and-forth around brexit over the last few weeks and months was possibly we were looking at a deal with europe and a softer form of brexit. you might have expected them to say the uncertainty was the ise, or even better, but it a reflection of reality that they are faced with this big , the firsts forecast half of next year. they don't know how brexit will play out. until we have that, there is a question about everything else. question, raises the rate hike one and done, or are they on the road to normalization? on how weit depends see that brexit date when britain formally leaves the eu play out, how it affects the economy. the most recent news was the

economy maintain momentum in the second half and was not being affected by the uncertainty around brexit. have had a step down in growth because of that referendum decision, but it does not seem to be getting worse, the data is better, and wages are going out. the market is expecting that rate hike the spring of next year. they are not pushing back against that yet, but we are looking at a slow path of tightening, even one small rate rising year. carm markyou suggest, mr. carney has a devilishly difficult job. it's not just uncertainty with brexit. they mention trade and emerging markets. they are not sure where those are going either. >> the irony of the brexit debate is the u.k. as a market is most exposed to global trade,

and open economy dependent on trade, and the stock market is extremely dependent on global trade and emerging markets. investors think of the u.k. as an honorary emerging-market because it moves closer with em than other developed countries. the trade story is starting to affect the global momentum. we are seeing it in people's forecasts now. it is more important for the u.k. than other european countries. and: let's move to turkey the decision to hike repo rates to 24%. is reaction in the markets clear, very positive, the lira jumping, other currencies moving as well. is this going to be enough when you look at argentina and they are at 600 basis points? >> this is much more interesting , and certainly more surprising,

then the boe move. it is fascinating. this is an independent central-bank action. we will see how independent it can continue to be. this morning, the president talking about interest was too high, needs to be cut, was a tool of exploitation. he has announced reductions in the ability of turkish companies to price contracts in dollars and other foreign currencies. yet, you have a central bank that has gone beyond market expectations and what we thought they would be able to do. that has to win it some credibility as long as it is allowed to continue with its independent path. i don't recall a situation where a central bank has taken such a sharp move at all its their own president on that date. , what about the ecb?

we will hear from the ecb and 36 minutes. what are we expecting out of them? >> more humdrum than turkey. not the same questions about the ecb independence. it is thinking about its future leadership. are going to be weaker on the growth side, but not much different on the inflation side. we are seeing more wage growth was so that will net out and we will not see a big change in the language around the growth outlook. maybe as since there are more downside risks than balance risks, but that could be a debate in the committee. i suspect we will not see a dramatic change in the messaging around future policy out of this statement, and certainly no change in policy today. alix: stephanie flanders, thank you so much. in the general market, s&p futures are up by five points.

the point is, do central banks have the ability to fight fed rate hikes? by .2e the ftse off percent as sterling jumped on the boe talking about better growth for the third quarter. turkish stocks up 1% as the central bank takes action. the question is will it be enough and will it be sustainable? the currency go to market, the lira erasing gains. nothing happening in the bond market. crude up 1%. this is paring back expectations of big changes from hurricane florence. it is now a hurricane two, so a little has been taken off recruit. david: there aren't that many oil fields and refineries in north carolina. coming kazakhstan up, hurricane florence does weakened

to a category two storm, but damaging rainfall and flooding expected. this is bloomberg. ♪ expected. this is bloomberg. ♪

>> this is your bloomberg business flash. a rough year for bill gross. he has leveraged up his fun through the use of futures, but suffered big losses on interest rate. $153ond fund had almost million in losses in interest-rate futures. that was a big dent in a $2 billion fund. another high-ranking finance executive is leaving tesla. the vice president of worldwide finance and operations is leaving the electric carmaker.

no one is saying why. last week, tesla's chief accounting officer quit. facebook ceo mark zuckerberg says the social network is better prepared for the november elections. in a post today, he said states have been -- steps up and taken to fight attacks. he said the company had considered banning political ads altogether, but decided against it. that is your bloomberg business flash. alix: thank you so much. three headlines we are watching closely. central banks, hurricane florence, and goldman's warnings on trade. we are joined by our guests now. we have so much central-bank action today. this chart highlights what it is. the white line is the fed. the fed is hiking. are having a banks hard time, and that is reverberating and emerging markets.

how does this play out? >> it continues. one of the things people need to realize, if you go back historically and look at the federal reserve and their interest rate decisions, the fed follows the market. only in times of crisis or itrgency situations those lead. bernankeok back to ben , taking us up 17 times, that was keeping pace with the market. the fed is acting as if we are in a crisis. they are trying to get rates to a place where they are comfortable. banks are notral in a position because they're not seeing the same growth as we are seeing in the u.s.. david: the equity markets are taking it in stride. >> a lot of that is the action in the dollar. it is manifesting itself in

currency diversions. u.s. stocks tend to perform better than the rest the world, but it puts pressure on emerging markets. we are seeing that play out in real time now. 97-98, sone instance, , it does not look so bad in emerging markets. it becomes a potential drag on global growth? i don't know. right now, the markets seem a short the fed will hike two more times this year. in 2019, you get more uncertainty. dependent more data in 2019, more growth, more tariffs, persistent emerging-market weakness. there ise place where some certainty is in north carolina and south carolina. comings a hurricane

ashore. it is quite dramatic. is h go to my terminal, it ur . northernacross carolina, south carolina, then fears up. respond to akets hurricane like this? >> they will if it hits. last year is a good example. we had high cost hurricanes, relief packages. you saw the automobile stocks move last year. we were going to have this huge replacement cycle. if it hits and it is damaging, you can see insurers move, construction and engineering companies. a lot of it depends on the impact. in advance, it is difficult to predict, but you start to see

the impacts following the event. alix: we see the conversation turning to nuclear. this is a chart of the nuclear plants in the middle of the storm's path, starting at the coast and going as high as virginia. walk me through the power issue. losing power, that is the big issue for the oil world last year. >> oil has gone out. it is not so much that usually you see this hit if it is going into the gulf. when people are looking at the distribution of gasoline byproducts, power becomes an issue. we saw this in puerto rico. it is not going to be as dramatic. we can get people. the national guard has been sent to north carolina. people mucho

quicker. we have seen nuclear power plants shut down. the restart will be an interesting question. that is always the iffy part. you have to believe these companies have plans in place to deal with this stuff. alix: moving on to our third story, goldman sachs trying to quantify the impact of a trade war on the s&p. the big call is a bear market, a 10% levy on all imports into the u.s. how are you looking at this as the u.s. and china may talk again? >> right now it is all speculative as opposed to any reality, and that makes it difficult as an investor. when operating margin forecasts start to turn over, it has been difficult for stocks in the subsequent six to 12 months. operating forecasts have peaked.

they tend to be moving sideways. they are reflecting some trade uncertainty. how much will price pressures feedthrough. while the mentions of tariffs and trade were high during earnings season, the actual trade wasterrorist tariffs and minimal. realwe start to see impacts going forward is still a big question. haveompany seems to absorbed risk because the economy is growing rapidly. alix: guys, thank you very much. appreciate it. david: apple shares are up after announcing its new product line, but will it last? more on what comes after that announcement. this is bloomberg. ♪ ♪

david: apple didn't have any surprises when it announced its new lineup.

the new phones span a wider range of prices, but are more expensive. the question is will they drive sales and profits higher? apple is little changed as analysts pored over the announcement. idcre joined now by the research director and analysts. what did you come up with? >> there are several things i like. number one, everybody loves new hardware. from the wall street perspective, it will keep apple from that market space. because people will be replacing their phones this year, every to do it. is the time there is a lot like from the announcement. david: what is the overall goal of this particular announcement. of prices,er range features, things like that?

tide peoplegh to over? is that the plan? >> having, staggering new features, this year, we will not see anything truly groundbreaking, but it will be enough for people to replace their iphones, especially phones that are two years to two and a half years old. expect millions of units going out the door. , of the threeg models coming out, expect the two most expensive models to be the most popular ones. , where are you in your cycle? alix: four years. i had to get the same phone. david: it counts. alix: i have the five se.

i am their target audience for a refresh cycle. which phone do i want to buy? >> you are in the same demographic as my wife. she likes it for the size. likewise, small pockets. she wants to be able to hold it comfortably. grab the big 6.5 inch or 6.1 inch phone, but what you want to look at is not so much the screen size, but what is the experience going to be like for you. after several years, things will slow down. the battery in your phone is starting to give way. do you want to live with a full day, or keep looking for a place to plug in your charger? david: apart from iphones, wearables and the watch to monitor your pulse, is this a new vista for apple? to 10, thise of one

is an 11. right now, apple took that step to become a medical equipment company. if you look at the approval process to get through the fda, the margin of error is slim. for instance, if you are a cardiac patient and are having report thatyou can bacteria cardiologists. now -- back to your cardiologist. now we have hard data. i think this is a major step for apple and the wearable industry at large. alix: thanks very much. i can take notes on my phone with one hand.

it could be challenging. david: ok, a new tweet from the president, responding to jamie dimon saying he could eat him in him in a -- beat race for president. jamie dimon was at a philanthropic event yesterday. he said i can beat him because i am smarter than he is. morganimmediately j.p. said he made a mistake. this is why you love jamie dimon as a journalist. he will say anything on his mind. that's why his communications director says don't say things like that.

david: the following quote from jamie dimon. alix: it's like, president trump, just ignore it. jamie dimon will not run for president in the next two years. he can't do that. let it go. go work on trade and figure out what we are going to do with china before we have a bear market. fight, donaldin a trump in a fight with rosie o'donnell. he went back-and-forth. i said, just leave it alone. let it go. alix: he wasn't running a country. it was a different kind of publicity he was getting. it does set the stage for the midterms and the election in 2020, just how violent it could become in terms of rhetoric and how it will be something. i asked republican

strategist that question. he said it will get worse in terms of the rhetoric, really nasty, really partisan. alix: alix: i think there is a reaction function, too. if everything is great and trump -- everything is doing well, trump's approval rating will show that. why would he do anything? for thee is waiting game, and it does not go away. it took him a little bit of time to respond to jamie dimon. s&p futures up by about six points, around the highs of the session. waiting for the ecb rate decision coming out in about 15 minutes. the ftse flat on the day. the cable rate got a pop after the doe upgraded forecast.

turkish equities up by 1.5%. you did get a move from the central bank, hiking rates to 24% despite the fact that erdoga n said he wanted the rate cut. euro-dollar flat on the day. the lira continuing to gain. you're looking at the dollar-lira down by 2.5%. yields go nowhere in the u.s. crude getting wrapped up in hurricane florence. onid: time for an update outside the business world. emma: the governor of north carolina warns disaster is at the doorstep. hurricane florence is set to park it's a false the carolinas and will dump more than two feet of rain. ed to category 2, but it is still looking to cause catastrophic flooding. millions of residents will lose

power in damage could approach $20 billion. suspects in the poising of a former russian spy in the u.k. say there is a straightforward reason they were attacksown where the took place are they said they were visiting salisbury as tourists and left because of the snow. the u.k. has identified the men as spies. that has been denied. the trump administration trying to avoid further escalation in the trade war with china. bloomberg has learned senior stevenls, led by mnuchin, extended an invitation to their chinese counterparts last week. last week, president trump sent to impose tariffs on almost all chinese products. global news 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. david: a busy day for central banks. turkey's central banks raising 24%.ate to

the ecb coming out in about 13 minutes from now. joining us from london is david owen, jeffries chief european analysts, and we also have esther reichelt joining us. the lira is climbing. explain how this is developing. i think we could have seen a much bigger move by the turkish lira if president erdogan had not talked this morning, saying he is not making this rate hike looking fors still a rate cut. the central bank has cut like a storm, but the market will debate whether this will be sufficient and whether they will be up the go further with further rate hikes. time, are we same seeing contagion and to other emerging market fx cross-ice?

-- crosses? >> quite understandable. the big question is about the central bank credibility. thethe turkish lira, markets did not expect the central bank to do what is necessary on the right side to prevent inflation expectation increasing in the future. now they have shown that they are going to do something. this strengthens the belief in the market that other central banks such as south africa are russia, which have had a much more credible monetary policy, will follow forward. alix: david, the conversation was, are we seeing fed rate hikes permeate in emerging markets and the will not be a to stem some sort of real crisis? did turkey change that narrative? >> no, i don't think so.

i am not an emerging markets expert, but we are watching events very closely. we had a situation in the eurozone were italian spreads were also widening out sharply. that is actually encouraging. we are watching the eurozone very closely. where some ofde the major central banks will continue raising rates. if they did not today, maybe they cannot. they are on track to continue raising interest rates. the ecb is heading towards the exit, winding down qe. that will have a major impact on markets going into 2019. alix: this chart points out the main central banks, and the top line is the fed. you can see them hiking. do you feel like we're still and a g4 central bank conversions world? >> yes, we are.

i you look at the wage data, mean, the market is focusing on the pickup in the wage data in the u.s. announced on friday, but we are seeing a similar trend in the u.k. , regular wage races, and the u.k. are at the highest rates now since november. said the eurozone have picked up decisively over the last year or so, now back to almost precrisis levels. the ecb is not in a position to raise rates in coming months. but i think the story in 2020 is, where will rates in the eurozone go? probably a lot higher. david: before we get to 2020, talk 2019. what are the prospects the euro may strengthen and that em comes off and -- i am sorry, the quantitative easing comes off?

>> i think the prospects are quite well. today's decision has been well prepared, and we expect them to announce the end of quantitative easing. the markets still remember past expenses. when tapering was well underway, the fed say they would -- said they would end quantitative easing. everybody knew the next step would be rate hikes. the government -- the environment is not giving room for rate hikes anytime soon, but we expect ecb to start in 2019, and the market will anticipate that. the second half of 2019, we are expecting a stronger euro. what that versus boe, does for things like the pound and the euro. >> with sterling, so much is about brexit, the strength rate

of the sterling against the dollar. with heightened uncertainty about brexit, it is very high. but the bank of england will continue trying to raise rates against the backdrop. the ecb, the first rate rise will be next year. the biggest story will be once mario draghi steps down in 2020. will try tobanks normalize interest rates. david: this is sort of day to dy or month today month, but jpmorgan says we might be looking at a downturn globally in the future. this shows the pattern, and they for thatwe are due

because of a variety of factors. what will central banks be able to do if that happens? >> if that happens, it would be very unwelcome news, particularly for the ecb. it hinges on the recovering of the eurozone. it affects spreads and german bund yields. in terms of a more general outlook for cycles, we are seeing very desynchronized recoveries. the u.s. led the way. the eurozone is starting to pick up momentum domestically. we are encouraged that we will not see a major slowdown in the global economy. but everything does really hinge on em. from what happens once qe the ecb stops entirely, so those

moves will be quite significant. alix: the question becomes the my how much money still needs to be recycled back into the u.s.? from your perspective, how much does? >> sorry -- alix: i was talking to esther. how much money would be recycled back to the flows are going to set the pace for the u.s. dollar. looking at the u.s. yield curve,

longer-term, the potential for the u.s. dollar is limited. sooner or later, the effect is in the capital flow. relatively speaking, the potential is much better for the euro if the ecb will start the rate hiking cycle next year. alix: both of you are sticking with us. it was global trade and emerging-market selloffs that opec warned yesterday about the risk of global oil demand. watch my commodities shall later on at 1:00 p.m. we will discuss that in the potential supply gap we may see. the pioneerown with natural resources cfo and talk about how his company is dealing with specific permian issues. coming up in just a moment, we will break down the ecb rate decision and look for any clues on the central bank's policy trajectory. that is coming up next. this is bloomberg. ♪

daybreaks is bloomberg . i am emma chandra.

uber ceo.later, the this is bloomberg. alix: we are a few minutes away from the latest ecb rate decision. it will be on the margin what color we are going to get from mario draghi. will the ecb tie monetary policy to trade, potentially the midterms? european stocks getting a boost. ftse a little weaker. lead there.ing the it is a mix dollar story. euro-dollar flat, waiting for that ecb rate decision. the lira in the ground. could it have been more and erdogan said he did not want to raise interest rates. p auction,a weaker bc so i tiny bit of margin for italy. ec -- crude off by about 1%.

questions will come from the press conference and will be in terms of the macro that mr. draghi will have to answer to. david: and the statement, whether it is balanced risk, upside and downside. we're waiting for the announcement, and it is a few seconds late. there it is. zero, and the conciliatory rate at -4%. keep rateswant to unchanged through the summer of 2019. they need to keep rates unchanged as long as they need to for inflation. and reinvestments will last as long as necessary. summer?tion is, what is it august, september? david: which maturing debt will they reinvest?

will it stay with the country that is maturing? there interesting questions to be addressed. alix: at the end of the bond buying, it will be contingent on income it data. they will be reducing bond buying to 16 billion euros. it anticipates and end to asset purchases in december. david: that is new purchases as opposed to rolling over. alix: joining us is matt miller from outside the ecb. this was sort of the backdrop for the press conference, but what will be of the core of what we need to hear from mario draghi? matt: what we need to hear is how he explains his lower growth forecast. expected tosts lower those rates, and inside the ecb's sources have told us off the record that they expect that to come down. officially cute,

bond purchases from 30 billion euros a month down to 15 billion euros a month in october. on the one hand, you have them lowering growth rates, something you do when the economy is doing poorly, and cutting back on quantitative easing, something you are supposed to do when the economy is strong. juxtaposee to sort of those things and make it seem like they can continue on this path to raise rates at the earliest in september. they said they will much change ntil -- through the summer of last year, so they have to keep them study until at least september of 2019. david: what will be the key thing you are looking for? would it be he continues to see the risks are roughly balanced? or he could see something given the diminishment and growth. matt: i will be looking for what

he says about the risks, not so much the risk to growth, the risks to inflation. remember, they have a target at 2%, and right now they are forecasted for 1.7% inflation this year and the next two years. really close enough, you would expect to raise rates. core is expected to be much weaker than that. i want to hear what he has to say about inflation. if they're going to lower their growth forecast and leave inflation forecast the same, that is another question of why that mario draghi will have to deal with at the press conference. david: we will come back to matt miller in frankfurt shortly. still with us are david owen of jefferies and euro-area -- and esther reichelt of commerzbank. we are looking at a chart of inflation in the eurozone. headline inflation a little bit above are right at 2%, the white

line on the right. inflation.it on core how do you see the inflation picture right now in the eurozone? payrolls in the ecb measure is running at 2.2%. it has had a pretty decisive pick up. that will lead to a conversation for the employee. wage inflation will generally rise in the eurozone. that is one key thing to focus on to it core inflation is still running around 1%. at the prop of the day, i think the ecb will have more confidence -- at the end of the day, think the ecb will have more confidence. that matt wasdp talking about, that is all about the history, not about where we go from here. loan growth in the eurozone remains reasonably robust. mario draghi should not talked

on the recovery. wage inflation is the key. alix: a couple of the sentences lookingabout they are at incoming data when it comes to bond purchases and they anticipate to end asset purchases in december. it seems to me that they are hedging a little bit. -- athat take in air print near-term catalyst off the table for the euro? >> yes, i think that is their intention. they want the biggest amount of flexibility as possible. .hey are still unsure the downgrade in the growth forecast shows there are headwinds. but they hope there will be other places of strength. waiting.stors are also can the ecb go forward or are these headwinds picking up and the euro will stay down a little

while longer? david: david come on the growth picture in europe overall, focus on trade -- david, the growth picture in the europe -- and when you focus on germany, they are dependent on trade. there is this trade uncertainty, largely because of the united states. >> exactly right. more so even em. germany is exposed everything in the emerging market universe. the thing about the eurozone, i block. -- a we saw world trade rolling over, and it did not really grow at all in the second quarter this year. that is the major headwinds in the eurozone. the recovery has broadened up into domestic demand. the housing market has been

recovering. there is more confidence domestically. there is a recovery and train. world trade, if it continues to seriousthat will be problem for ecb. david: david owen and esther reichelt, thank you very much. ecb left rates unchanged. all left unchanged. but they said they anticipate ending asset purchases in december. they also said it is contingent on incoming data, leaving a little bit of an open door. they said they will keep present unchanged at least through the summer of 2019. when does summer end? but they said they will keep rates where they are through 2019. we will take the news conference right here on bloomberg television. coming up, goldman sachs shares have fallen for 11 days straight, their longest losing streak ever.

that is what i am watching. we will tell you why, next. this is bloomberg. ♪

david: i am watching goldman sachs or dirt shares down 11 straight trading days, the longest it has ever been that they have been in a downturn. it is not a lot, but it is down. compared to financials, they are chilling financials pair the question is, why is that? according to an analyst from bernstein, he says both goldman and morgan are going to have to deliver because they're looking at some really soft trading. if anything, it makes it worse because citi

but that is also because of tax cuts and job cuts. they signaled trading and investment banking were softer in the third quarter. david: goldman depends on trade. alix: there was an interesting "new york times was quick article on tuesday about a whistleblower and pressure from the incoming ceo leading complaints go. david: somebody went to the whistleblowing line, and lawyers said don't worry about it. he ended up leaving. alix: it has been a negative seed in the market. goldman sachs down 11 days in a row. coming up, more on the morning central-bank decision. megan greene will break down the ecb, turkey, and see yeley -- and boe. this is bloomberg. ♪

alix: central-bank bonanza.

ecb keeps rates unchanged through at least the summer of 2019. boe of grace its q3 growth forecast. bracing for florence, the hurricane weakens as it moves to make landfall in the curling less -- the carolinas. wouldn warning the s&p fall into bear market if the u.s. opposed a 10% tariffs on all imports. to quantify the trade impacts. david: welcome to "bloomberg daybreak." i am david westin alongside alix steel. i think we will call it central-bank day. alix: turkey has been the most interesting. mario draghi's press conferences about half an hour away. s&p futures up by about 7%, getting a boost as turkey hiked interest rates. euro-dollar flight. not a lot of -- euro-dollar flat. not a lot of movement in the

stigma, but ending bond buying march us is will be data dependent, they say. little bit ofin a hawkish and of us and -- and dovish talk at the same time. yields go nowhere. david: time for the morning brief. fromunder half an hour now, we get u.s. cpi numbers for august, giving as a freshman of inflation in the u.s. and mario draghi holds his news conference in frankfurt, and he will be asked about european growth and the banks repurchase plan. later, the u.s. treasury will auction $50 billion in 30-year bonds. now let's get headlines from outside the business world. hurricane florence is being called a once-in-a-lifetime storm. the hurricane has lost some power as it approaches the coast of carolinas, now a category 2. it is expected to stall before making landfall and will bring catastrophic winds it up to 40

inches of rain, expecting it to trigger historic flooding and storm surge. landfall is expected over northern south carolina tonight or early tomorrow. firing backump is at the jpmorgan ceo who claimed he could beat the president in a n election to it he later said he should not have made that statement. president trump responded saying that jamie dimon does not have the smarts and is a poor public speaker and a nervous mess. otherwise, he is wonderful. i've made a lot of bankers and others look much smarter than they are with my great economic policy. the two suspects in the poisoning of a former russians plan the u.k. gave reasons why they were in the town where the tech took place, saying they were visiting as tourists and left because of the snow. u.k. has identified the man as spies. moscow denies that. global news 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more

than 120 countries. i am emma chandra. david: the turkish is strengthening against the dollar after turkey's central-bank countered president erdogan's comments earlier and raised the benchmark interest rate. we have the anchor of "bloomberg daybreak middle east." back to the question of president erdogan, did it takes something away from the announcement that he says he would like it to go away? >> it has been a real roller coaster ride today of historic proportions. froms an initial bashing the president on the concept of higher interest rates and what it does to an economy. he believes higher interest rates cause can't -- confidence to come down. we get the central big decision,

which you pointed out, 24%, that is on the upper end of estimates. the average estimate was around 21% for the one-week repo rate. of what weld variety heard a bloomberg. the central bank will -- woke up to a reality with inflation at 15-year highs. economic growth is moderating. deceleration and domestic demand is more visible, and they opened the possibility of a tight stance in monetary policy to be maintained until the inflation a look makes a significant improvement. 21%.as looking for the its of relief you are seeing across the markets, the central bank is able to direct to real economic data again and perhaps push aside momentarily the the combative rhetoric from the president.

upset scenario for investors looking to go along on this trade. david: thank you so much for that report from istanbul. alix: is it going to be enough? come inside the bloomberg the bottom panel is what we're looking at when it comes to turkey. the white line is the repo late, 24%. the purple line is the dollar lira. as of today, it is getting what it wants. a different story for argentina on the top panel. the currency still struggles to gain steam. it make injuring is the manulife asset-management chief economist. --m chicago, bob brown making is the manulife asset management chief economist. and bob brown is joining us from chicago. is it enough? >> argentina has made the correct policy moves.

turkey has done the opposite. it is made the wrong move spirit they are both in trouble here at even if turkey's earth to make the right moves, the hike was bare minimum requirement. there is a question about the strength of institutions in turkey, the fact that turkey was massively overheating, particularly in the run-up to the elections. reforms need to be pushed through. countries and argentina more recently, at a certain point, if you push through a reform plan, investors are worried about growth. damned if you do, damned if you don't. either you are serious about getting your house in order and investors get some confidence. never grows will again and your debt is unsustainable. this is a good start. we saw the lira strengthen significantly, but it has already lost to some of those improvements. lob, you are underweight

emerging markets. what would unit -- bob, you are underweight emerging markets. what would you need to see that would be more constructive? >> more time to get policies in place to see their effectiveness. we would like to see an important macro catalysts from the usa. it is hard to be optimistic on emerging markets as long as the fed is still on a tightening cycle. once the fed pauses and we see on domesticof time poses coming into effect in emerging markets, that would be a good signal to get back in. right now, there are better places to make money. emerging markets is not one of them. david: help from the fed, what are you looking at? we're about 23 minutes away from cpi. are those the sorts of numbers you look at to see whether there might be pressure for the fed to slow down hiking? not payingthey are too much attention to short-term

inflationary data. over the longer term, we look at where we think inflation will be over the next two to three years, and we do not see it as a problem. we think the fed should pause much sooner than what it is indicating or is discounted by the market. after september, we think they should stop right there and then and wait and see what the key militant affect has been up until now. our -- what the cumulative effect has been up until now. the risk is that the fed goes too far. we're not worried about these cyclical upticks in inflation. we think there are structural forces and place a keep inflation relatively low through the cycle. that is over the next two to three years. the fed has to look out into the environment with the economy will be a year from now. david: the fed is one thing and interest rates are one thing, but then there is trade and challenges for em. that isa larger factor

driving people to the dollar as a safe haven? >> i think that is what has catalyzed volatility in em over the last couple months. more recently, pressure has been taken off the dollar. but if we implement another 25% tariff on $200 billion of imports from china, you could see the pboc allow the currency to weaken further. sachs analyst said worst-case scenario, you get a 10% tariff on all imports. 2230ill see a bear market, . if you see a 25% tariff on just chinese goods, you are looking at growth wiped up from the us of the and 2019. how do you look at it? >> that is a very explicit forecast. it is a $20 trillion economy. despite that, the u.s. is a relatively close economy.

i think those tariffs have a bigger impact on the emerging markets. the u.s. has proven itself to be pretty self-sustaining. it may slow things down but not to the degree that goldman is suggesting. any factor that slows down the economy more to what we think is better sustain long-term growth in the u.s. of about 2% to 2%, 2.5%,s better -- 2% to that is better for long-term growth. the biggest risk is that the fed overreact to short-term economic growth and short-term inflation and does not see these other forces potentially in place that will naturally take the growth and keep to 2.5% inflation under 2%. alix: megan greene and bob browne are both sticking with us. we're going to look at the economic impact of the storm and how it could affect power in the southeast. this is bloomberg. ♪

emma: this is "bloomberg daybreak." i am emma chandra. the facebook ceo says the social network is better prepared for the november elections. he listed steps facebook has taken to fight attacks from foreign sources the want to spread misinformation and division. he says the company had considered banning political ads altogether but decided against it. morgan stanley creating ways for clients to play the digital currency market. the bank will offer trading in complex derivatives similar to bitcoin. they can go along or short and price returns. a one-time bond fund king, bill

buts, leveraging his funds, he severed big losses on twitter interest rates. adam oates 153 million dollars of losses on interest-rate futures, a big dent on what was a $2 billion fund at the time. alix: thank you. to acane florence weakened category 2, but it is expected to bring massive flooding a threat of ocean surges. this is the track of hurricane florence. i want to highlight the nuclear power industry. the green circles are where the nuclear plants are. they are all throughout the storm's path. jacob meisel, the spoke investment group chief weather analyst, joins us. staying on the power issue, how big of a threat is the storm going to be to nuclear power on the east coast? >> these nuclear power plants

are built to withstand category 5 hurricanes. they might have to shut down because of the amount of flooding is it my be safer for workers to move to and from the plants. those are things the electric bridge should be up to handle. we are approaching the fall nuclear maintenance season anyways. you see natural gas burn pick up to replace of the demand. you will see some clients shut down that are in the path of the storm, but you see a lot less power demand anyway. there are a lot of in regulation. power lines will get knocked down from the winds. airthe rain and cooler decreases cooling loads overall, so not expecting a major impact. alix: fairpoint. how to -- fair point. how does it compare to like the five-your average? >> a lot depends on the path of the storm in the amount of flooding. we should see nuclear averages pick up above the five-year average.

how much? we have to wait for the storm to ride out. maximumtill have the capacity in the region, especially with the decreased power demand. is where weite line are right now in terms of plant outages. five-year.e is the david: if it is shut down, how long does it take to get back up, and how expensive is it? >> these plants are used to these kinds of shut downs. it is a relatively short amount of time. i have even heard some of these plans are on two-hour cycles. every two hours, they will check maintenance and how everything is up and running. if the forecast changes, they are ready to go. these plants are prepared for this. after fukushima, there was an in depth review of all of our plans to make sure they're up to standard. david: are the costs passed on to ratepayers? >> yes, these plants often shut

down multiple times a year already. it is not like this is something that is new or something they're not prepared for. that cost is passed on, and there is really no significant impact on power prices for the region. alix: natural gas plants are in the area, as well, and two pipelines that take supplies to the northeast coast. want me through that and the power burn. >> we recently saw natural gas power burn tightened dramatically. many were surprised to be natural gas prices bounce this week ahead of a hurricane. this appeared to care independent of the hurricane. we saw the market tighten and prices are firmer. we are to see that demand fall back off. as the hurricane is unsure, you have a trifecta of evacuations cooling,power, rain and widespread power outages.

it is a very strong storm with a large swath of wind. the natural gas plants will potentially come off-line to shut down. this is some of our mixed flexible plans, so they're able to shut off and come back on if needed. always good meisel, to have you here, except you bring bad weather with you. we're still with megan greene of manulife asset management and bob browne. i have a chart that shows jobless claims overtime, and there is a spike every time there is a hurricane, but it comes right back down in terms of jobless claims. what effect on employment is something like florence expected to have? temporary. with the nonfarm payroll data, it will probably not be seen. if you work for an hour in a week, you are on the payroll. it should not affect that. i am more worried about the

the number ofn hours worked falling because of a hurricane, and if you reduce the denominator, the overall average hourly earnings should go up. and there was a strong number last month. people might be excited about wage growth, but i would not assume that. david: what about gdp growth? this a few dig a hole and fill in,nk, and make -- fill it mx gdp go up. helpdium-term, it should gdp growth. it is not necessarily productive growth. it is like throwing baseless through windows in them to replace them. natural disasters are usually bad for the micro economy so bad for business is in the short-term but good for the macroeconomy. alix: what this highlights is the continued risk in the market, that is hard to price in. we know the hurricane is kind of a one-off, but there is trade risks and perceived increase of

wages on a hurricane. what is your best idea on how to hedge this market? >> first of all, you have to think about what risk you want to get paid for and where you're getting paid for it. for us, that is high-yield. u.s. high-yield is attractive, risk-adjusted return. that is how we think about it. and we are not getting paid for the risks as emerging markets, and we avoid those areas. we think things are hurricane sent to be relatively short-lived. it obviously affects the micro economy, as megan said. it could be a tragedy for certain folks. hopefully it will not be. but it does not really have a long-term impact on the broader economy. one thing we learned from hurricane harvey and houston last year as the flooding did wipe out about half a million cars that ultimately had to be to beed, so it turned out a larger than expected boost to the automobile sector. even that tends to wash out over time. david: take a longer view about climate change and the extent to

which have a change could affect longer-term portfolio's as you have these risks. you cannot a tribute any particular hurricane to climate change, but scientists say there will be more and more weather disruptions. i am sure a doubt, insurance companies will be updating models again to take into account how these so-called one-off events are becoming a bit more consistent, especially in the gulf area and up and down the east coast. we very much believe climate change is real. we evaluate companies based upon that. and we absolutely believe it needs to be seriously considered. rage inunds are all the my industry. on the economy, we had a lot of storms last year. theystorm will not -- be the same as what we

were accustomed to last year. tune in later today 1:00 p.m. when we talk about the different implications of all commodities. sweet potatoes apparently going to get hit. a lot of areas today sect. did not know that. i have already learned something . coming up, the european central bank holds rates steady, but what will mario draghi say about the policy trajectory? we go to frankfurt and the ecb news conference. that is next. this is bloomberg. ♪

alix: the ecb standing pat on rates. clear moments away from mario draghi's news conference. what will he say about the balance of risk in growth? joining us outside the ecb is matt miller.

it will be interesting to see what they expect for growth in the european economy over the next three years. right now, estimates are for 2.1% this year, trending down to 1.7% in 2020. we expect them to pull those forecasts back a little bit. there are also expected to forecast inflation at 1.7% a year for the three-year period. if they reduce their growth forecast, how can they justify leaving the inflation forecast where they are? it will also be interesting to see when they expect to end their bond reinvestment program. they have said that they will cut their real -- their purchase program in half starting october, and they expect to end it near the end of the year, december maybe. but they are going to keep reinvesting the interest rate

payments they get until they think it is no longer needed. also, they are not going to raise rates until inflation is close enough to the target. we keep talking about them raising rates as soon as september of next year, and the market is forecasting september or december. maybe if inflation does not take up, they're not going to be able to. alix: matt miller has to run into the press conference. still with us are megan greene and bob ground -- bob browne. what are you looking for? >> i want details on the reinvestment plan. it is comforting that the ecb will be reinvesting a not selling off assets. i would like to know details with how they're going to reinvest. david: what are they going to reinvest in? germany? what happens with greece? >> they might

want to give italy some reprieve . we have no details on how they can do that. we know they technically legally have a lot of wiggle room to help countries, particularly italy given that it is in an investor's cross hairs. alix: what would be your number one question to mario draghi? >> i would ask if he's looking at the fed exit strategy and using that as his own playbook. to what degree is he using the fed's success or potential failure and its rate tightening cycle as an influence in what the ecb is thinking about over the next year or two? about the macro picture when it comes to trade and -- of course, there will be questions about what will happen between the u.s. and they eu. the idea of how they factor in trade for the lower growth forecasts. figures it fed, ecb

is not their lane, so they will try to stay out of it as much as possible. but it will feed into their growth forecasts. it looks a little bit less for theeu than it does for u.s., because it is unclear what tariffs might come into play in the eu. there was a classical european think they did last year and dayed about tariffs one down the line, and that took the pressure off. there is still uncertainty out there. i think the ecb is more concerned about the structural decline in their growth. we should not be surprised. dear zone has been growing way above their potential gdp growth, so -- the eurozone has been growing way above their potential gdp growth. david: is the divergence going to continue? anything mario draghi can do to stop it? >> probably not. we certainly think that over the

next five years the u.s. will have the higher growth rate than europe. that is probably a consensus view. i think the main goal for mario draghi is not to be the lead story of the financial times tomorrow. i think he would rather be in the background and prefer the turkish central bank decision to be the lead. the ecb monetary policy is much more significant. to the extent he can meet market as muchions and avoid volatility as possible, which seems to be happening thus far, coming from their own decision-making, he would be pretty happy the following morning. alix: he is early. i cannot believe it or it usually he is late. mario draghi taking a seat at the press conference. he will be making his statement, and then there will be a q&a. you,nt to break cpi for which is about 20 seconds away. a downside surprise for ppf. -- ppi.

after those numbers, we will take you to the press conference. reinvestment will be key, as well as macro factors, and what they make of italy and the new government. yields have been inching a little bit higher. back out year on year, food and energy, still similar to the ppi. a miss.2.2%, eking out a gain if you back out food and an energy, .1%. david: less than what we expected. alix: the dollar index now flat on the day. you can see that steep decline. this matches with what you and bob are talking about, that we will not get the pickup in inflation that we necessarily thought. how much of this is restorative and how much of it is real lack of stickiness for an overshoot?

>> trade feeds into ppi but not cpi so much. if anything, trade would push it up. not surprised about one-off factors. cell phone replacing. those things of pushed it up. not surprised we got a softer number this time around. those are statistical quirks, not really structural factors. alix: does that mean overshoot of inflation? >> i think we have had overshoot of inflation. some moderatee overshoes, but i do nothing we will jump into this late cycle surge in inflation that lots of economists are looking for. david: we're watching mario draghi at the ecb with his opening statement. we will be taking that and full when he starts answering questions. thee is inflation given

substantial growth in the united states? >> we do not worry about inflation longer-term. we are prepared for a slight cyclical uptick, certainly not your typical surge in inflation. we think the wage pressures are good for consumer confidence. it presents a political problem for the fed. they continue to tighten because of wage inflation, assuming that will be to broad-based inflation, which we do not expect. then i think they should be rightly challenged. their job is to manage price stability probably across the economy and not focus on specific sectors, let alone what a particular wage runner is making. northern browne from trust and megan greene of manulife asset management. a miss in consumer prices. 2.2%. a goldilocks scenario permeating.

weaker dollar. bonds going nowhere here at theks at the highs of session. mario draghi is reading his statement at the ecb. make asset purchases until the end of the year. regrade as is associated reinvestment and by enhanced over guidance on the key ecb interest rates. governingnt, the council stands ready to adjust all of its instruments as inflatione to ensure continues to move towards the governing council's inflation rate and a sustained banner -- manner. let me explain the assessment in greater detail, starting with economic analysis. gdp increased by quarter in the second quarter of 2018,

following growth at the same rate in the previous quarter. despite some moderation following the strong growth the latest in 2017, economic indicators and survey results overall confirm ongoing broad braced -- broad-based growth of the euro area economy. on monetary policy measures, they continue to underpin domestic demand. private consumption is supported by ongoing employment gains, which in turn partly reflect past labor market reforms and by raising wages. business investment is fostered by the favorable financing conditions, raising corporate demand.ility, and solid housing investment remains robust. in addition, the expansion a global activity is expected to demand. continue supporting euro area

exports. this assessment is broadly 2018cted in the september ecb staff macroeconomic projections for the euro area. these projections for see annual real gdp increasing by 2% in in8, 1.8% in 2019, and 1.7% 2020. compared with the june 2018 euro system staff macroeconomic projections, the outlook for real gdp growth has been revised down slightly for 2018 and 2019, mainly due to a somewhat weaker contribution from foreign lands. -- demands. can still be assessed as broadly balanced. at the same time, risks related

to rising protectionism, vulnerabilities in emerging markets, and financial market volatility have gained more prominence recently. according to euro stats /estimates, euro area annual inflation was 2% in august 2018, down from 2.1% in july. on the basis of current futures prices for oil, annual rates of headline inflation have her around the current level for the remainder of this year. what measures of underlying -- while remain measures of underlying inflation remain generally muted, they have been increasing from earlier lows. capacityls of utilization and tightening labor markets, which is pushing up wage growth. uncertainty around inflation

outlook is receding. looking ahead, underlying inflation is expected to pick up towards the end of the year and thereafter to increase gradually over the medium-term, supported by our monetary policy measures, the continuing economic expansion, and rising wage growth. assessment is also broadly reflected in the september 2018 ecb projections for the euro annual edgeforeses -- which for see annual inflation to be unchanged from the june 2018 euros systems staff macroeconomic projections. turning to the monetary analysis, broad money and growth declined to 4% in july 2018 from

4.5% in june. apart from some volatility monthly flows and free growth is increasingly supported by bank credit creation. narrow monetary aggregate remained the main contributor to broad money growth. the recovery in the growth of loans to the private sector observed since the beginning of 2014 is proceeding. of loansl growth rate to loan financial corporations stood at 4.1% in july 2018, while the annual growth rate of loans to households stood at 3%, both unchanged from june. the pass-through of the monetary policy measures put in place since june 2014 continues to conditionsly support for firms and households, access

to financing, in particular for small and medium-sized enterprises, and credit flows across the euro area. up, a cross check of the outcome of the economic analysis with signals coming from monetary analysis confirmed that an ample degree of monetary accommodation is necessary for the continued sustained convergence of inflation to levels below the close to 2% over the medium term. in order to reap the full benefits from our monitoring -- monetary policy measures, other monetary areas must contribute more decisively to raising the longer-term growth potential and reducing vulnerabilities. the implementation of structural reforms in euro area countries needs to be substantially stepped up to increase resilience, reduce structural

unemployment, and boost euro area productivity and growth potential. policies, theal broad-based expansion calls for rebuilding fiscal buffers. this is particularly important in countries where common debt adherenced which full is critical for safeguarding positions. likewise, the transparent and consistent implementation of the eu's fiscal and economic governance framework over time and across countries remains essential to bolster the resilience of the euro area economy. improving the functioning of economic and monetary union remains a priority. the governing council urges specific and decisive steps to andlete the banking union

the markets union. and we are now at your disposal for questions. >> yes, bloomberg news. mr. draghi, first question is, you decided to reduce bond purchases from october, but you still left the ending of the program and the end of the year open are dependent on incoming data. could you walk us through the arguments behind that decision, why leaving the ending of the program still open? my second question would be, based on the forecast you received today and the discussion you have had, would you say that the output in the or isne is already closed close to be enclosed this year or do we still have to wait for that to happen next year? answer to the second

question is we have seen growth rates now for some time above growth potential. to the first question, basically, we have not discussed this. my reading to the second here, what is will reduce the monthly pace, and we anticipate that subjective and coming data. it would then end net here purc. that is what we have discussed it we have not elaborated on that. let me make clear that this does not mean our monetary policy stops being accommodating. the amount of accommodation would remain very significant. investment our policy and our forward guidance and interest rates. thank you. >> thank you. i am from "washington journal." your new forecast suggests inflation will hover around 1.7% the next two and a bit years.

is that consistent with the ecb mandate in the decision to fade out qe? in relation to moshe the ecb -- in relation to the second question, shouldn't the ecb and for an overshoot on inflation, rather than an undershoot, given that it has been a target for so long? mr. draghi: yes, it is consistent. convergence, and that is what the discussion today confirms. convergence of the inflation rate to our aim. we're confidence this is monetary policy, which remains accommodating. second, on the underlying strength of the economy, the improving conditions of the -- the last will

number is quite significant. the latest number of employment says 9.2 million jobs being created in the euro area since 2013. and rising wages. thee're confident that monetary policy stance is consistent with our aim. second point, our objection -- an inflation is rate close to or below 2%. we're staying with that. that is our objective. >> i am from "financial times." we would like to ask about the em, whether or not there was any discussion or even a discussion of when you will have a discussion on the reinvestment policy, and i would be interested in your personal view of this idea floating around of an operation twist style be tailoredat could

to the needs of specific eurozone member states. thank you. mr. draghi: frankly, we have not discussed and have not even discussed when we going to discuss it. having said that, we haddiscusso meetings before year-end. we other discussed next time or in december. it is just a matter of taking the decision in the coming days. it will be at the level of committees first and foremost because it has to be properly prepared. other than that, the reinvestment statement is exactly the same as before. discussed the operation twist or whether to reinvest in different maturities , but i think what i said last , and i can confirm that even the we have not discussed it come i the council would be unanimous.

the key will remain the guiding principle. >> even if it looks open-ended, like say that qe is about to end, and there is confusion in italy about what qe has been all about. some people think the qe is a sort of securities markets qegram and that the end of will mean that italy will be -- [indiscernible] i do not know if you want to comment on what qe is all about. mr. draghi: two black. -- thank you. it was a common with different context.

the mandate of the ecb is price stability in the medium-term. qe has been one of the tools we used to pursue this task. asked,past, the ecb was why are we keeping, for example, interest rates negative and from depriving the savers their income, or why are we hurting insurance companies, banks through low interest rates? it is not the mandate of the ecb to protect bankers profits or insurance company profits. in this case, responding to your question, it is not to ensure that government deficits will be financed under all conditions. our task is to pursue price stability. that is what -- mr. president, you mentioned

increasing risks concerning emerging markets. argentinacy crisis in and turkey same to have contagion effects on other emerging markets. formuch of a threat is that the euro zone economy and the world economy? my second question is, the current problems in the emerging be related, at least partly, also to the tightening of monetary policy in the u.s. and the withdrawal of liquidity. the ecb also anticipates to stop purchases next year. what kind of risks do you expect when the two main central banks

reduce liquidity? mr. draghi: considering the first question, the increased uncertainty and some emerging that as toone factor the general uncertainty in the world markets. having said that, so far, the spillovers from turkey and argentina to other countries have not been substantial. once again, as we have seen two or three years ago with similar crises in emerging markets, once again it has shown that the countries that are most vulnerable to can change in other countries which have the weakest fundamentals, namely high current account deficits, high inflation, high budget deficits. marketer emerging countries that have better fundamentals have not been affected. that is one key consideration, which is also, in a sense, it is

seen from the perspective of the eurozone as shoring. contagion,te limited at least in the aggregate. we can have individual situations of significant exposure to local crisis, and that is different. that would affect individual entities but not in the aggregate. think three sources of uncertainty, one is the general change in the situation of emerging markets, which does not include only argentina and turkey. big changes are also happening in china, of a different kind, however, not financial stability related. the second source of uncertainty -- weeed the potential have not seen much yet, but it is one of the risks we are looking at and monitoring, the potential financial market volatility generated by changes

gradual, changes in monetary policy in the main jurisdictions . this is one potential risk of enhanced financial volatility. and we are also monitoring that. major source of incentive that we see in global rising it comes from the protectionists, and that is the major source of uncertainty. that is reflected in the current macroeconomic projections, only to the extent of the measures that have been implemented already. so the current projections to not reflect measures that have been announced, measures that have been threatened. clearly, we have to look at may thistors that uncertainty more severe.

see, we havee to to assess the extent of an escalation. we have to factor look at. and the so-called confidence effects onsides the prices and quotas and volumes in trade and so on, what is going to be the effect on general confidence of an extended trade war? certainly a second factor. the third factor that makes any assessment difficult is to assess what the implications are on the international value chain of changes in tariffs or significant growth of a significant proportion. i am with cnbc.

i would like to ask would you think about the remarks by the head of the european commission in his state of the union address. he was calling for the euro to be an international reserve currency which could potentially rise along with the u.s. dollar. would you support that at the ecb as an institution? and let me bring you back 10 years ago when the lehman crisis was just happening. the anniversary is this sunday or saturday. if you think back them a was the biggest challenge for you and also in the years after to fight the crisis? draghi: the answer to the first question is we are really interested to see what the proposals are of the commission, and we stand ready to cooperate and the commission on this

enhancing of the international role of the euro. it is not out of our mandate, but we stand ready to work with the commission and with the other member states. thise second question, answer could be very long. what i wouldou like to remember from that time, first of all, for us, the crisis actually started before lehman. the first serious signs of an impending crisis actually date back to september 2007. so much so that by the end it 2007, the g7 and right after that, the g20, decide to cut what was called the financial stability forum, the precursor

of the financial stability board with a response to the crisis. the fsf created at that time a working group with -- across countries. recommendations, most of which had been implemented, and others are still in the way of being implemented. of that instance -- what i remember about that instance is the extraordinary work of the international cooperation and a world level. even before lehman, it was quite clear that the financial crisis haveoming and it would unprecedented proportions and it was worldwide. and this is what was at the basis of this unprecedented and international effort.

then, there has not been one aspect of the banking business that has not been touched by the regulators and the supervisors. all this effort was crowned by the agreement that was governor's at the end of last year, so it took 10 years to chris -- to crystallize the effort, which was already in many parts of this, already introduced in the supervisory practices and in the regulation. current developments are also worth looking at. in other jurisdictions, we could sort of here backtracking to a world with less regulation.

in the european union, we do not see that danger. we do not see that danger. matter of fact, banks are stronger. the common equity tier one ratios were something like around 8%, 8.5%, in 2008. now 15.6% for the banks. the leverage ratio was 3.7% way back then, and now it is over 5%. , riskliquidity management governance have all been overruled by the legislators, by the regulators, and by the supervisors. all in all, the banks are stronger today. be can we actually complacent? the answer is no, because in the

meantime, a lot of this business has migrated from the banking world to the nonbanking world, shader banking. the next step would be to ensure that equally strong regulation course onesion, of has to take into account differences in institutions, would also be applied to the nonbanks. thank you. back to policy. did you discuss changing your policy message to save the balance of risk was still due to the downside? and italy, on yield severs and in recent months. how is that affecting financing >> the answer in the first

question is no, we have not changed the balance risk about be ah and it could still assessed as broadly balanced. relating to rising protectionists have gained more prominence recently. the balance risk has not changed. why hasn't changed? because we have seen the series alsownside risk, there is upside risks and one of which is fiscal policies. as the policies of several euro area countries are going to be less neutral than we had expected some time ago. is one in, but the much more important consideration is that we are considering -- the underlying strength of the economy that lets us think that the downside risk will be mitigated by the

improvement in the labor market and the rising wages. private consumption is supported exactly by these two drivers primarily and only secondarily in increasing household wealth. investment has also been rightted by the accommodating of financial conditions and even though they have tightened somewhat since the last meeting, the lending conditions to firms and households remain very, very favorable. the second question was about italy? yeah.