mario draghi must address weaker growth. survives, returning to her brexit battle after surviving a vote of no-confidence. trumps tradewinds, china buys soybeans, a one off or a thaw in the trade war? david: i am david westin with alix steel. day. more than ecb it is only one of five central banks. banks,f you look at two it does not look good in terms of their outlook. s&p cut its forecast and said the currency remains fragile. one bank said it adjusted its rate have lower. to comet is too soon off the crisis management monetary policy.

turkey is up 24%. they are saying we may have to go higher. like they are saying we will do it later. david: we know what president everyone thinks about that. erdogan president thinks about that. alix: a risk off field developing come s&p futures down .1%, banks front and center. december,down 11% in the worst monthly fall since january 2016. how do you have a sustained rally without banks? euro-dollar flat on the day. the 10 year yield at 2.9%. it was a confusing auction. coming out later

today. crew down 1.2%. i am excited for my show. david: you are speaking to a god of oil. alix: i did not make that up. it is andy hall. he is a famed oil investor. ull that didl not pan out. we will talk about why it's so hard to be trader right now. david: it has something to do with computers and now grew them? alix: it is also shale and other factors. 30 minutes of andy hall. david: that will be exciting. now for the bloomberg first take. were joined by lisa abramowicz and michael mckee. ecb, andews is the what mr. draghi has to say.

chart showing a the economic conditions he is confronting. mine is pmi's above -- the white above 50.i's this is headline inflation, not 2%, inflation, went up to now coming down to 2%. >> the argument is the economy is slowing down, so why do you want to stop buying net new securities as part of their qe program? you could argue it is not working and they are putting money into a policy that is in providing inflation. ecbmberg news reporting the staff will come out with new lower growth and inflation forecasts today. it does not seem to be a policy with a particular purpose. they will still be buying as many bonds as they buy now.

the bonds they bought will start maturing. they won't be adding at this point, but it may not make a difference. alix: what is the single biggest questions investors have? >> distribution of what they end up buying a month the italy issues and tensions between brussels -- alix: in terms of sovereign credit? >> in terms of credit, they did something unconventional, taking a page separate from what the u.s. did in terms of buying corporate bonds. even the prospect of them slowing down has led to a dramatic underperformance of european credit. on can see credit spreads european corporate bonds have widened dramatically more than u.s. spreads minus european spreads. corporatee european bonds are yielding the most in relative yields going back to

2013, relative to u.s., and this has to do with the ecb backing off, so you have to wonder how much the market has been distorted. can this be a soft landing? alix: let's go to our second story. i'm in trouble for not having a chart today. alix: brexit, theresa may survives. ,he note last night was amazing basically saying theresa may was like wile e coyote. >> that is an interesting question. the coyote continuously survives. we don't know what will happen to theresa may. she still has to bring the brexit vote in parliament. willes not look like she succeed. she is in brussels now. that looks like an interesting summit. she is trying to come up with some site agreement to the

treaty that would not have legal enforcement, but the kind of document that if you went to court, you could say maybe this is what the intent of the framers was, and their intent was britain would not stay indefinitely in the customs union. will that be enough? most analysts say she will still lose the vote. then what happens? goldman sachs and the odds of the second referendum have gone up dramatically. david: it is difficult politically. saying we willom not move in brussels in parliament saying you have to move? she has to find some wiggle room. >> there needs to be a number of other potential brexit plans put out there. she needs to fail, then be able to get in some of the other points, but she has 100 days without an extension to get a new deal across. you heard what that was like in parliament.

do you think they are ready to embrace whatever she comes up with? golem playingsee theresa may? google it. it is amazing. , we watchedime china and the united states. we are focused on tech issues 2025.his by china the first move may be with soybeans. soybeans were the first victim of what happened in the trade it appearssterday they are starting to buy u.s. soybeans again and maybe there is some hope. >> did you read the story that farmers are stockpiling soybeans , and they are rotting, and storage fees have skyrocketed.

that is what markets do, right? can china by enough soybeans to rescue farmers? we have had a down cycle in the farming community in the u.s. it is unclear how much they will accelerate. brazil has been cashing in. i have to wonder how much this ploy versuserm something that will help the farming industry. alix: farmers are storing it because they want a better price. they want to wait for higher prices. >> the question is are they going to get it and how much is spoiled in the meantime? alix: mike, little movement or big shift? >> a little movement, but it suggests there is a bigger move coming. chinese officials this morning saying the u.s. has reached agreement with china in the number of areas and the details will be rolled out. it seems ludicrous to think they

reached specifics, but the chinese may have agreed to get retaliatory tariffs on automobiles, buying more so soybeans, so it does suggest some pressure on china is working, particularly with the chinese economy slowing down. do they really shift the made in china 2025, really open up the market, stop stealing technology? those are questions that would take a while to answer. alix: there is that point because they do need the money. thank you very much. you can find all the charts we use at gtv on your terminal, browse features, gtv . wells fargo securities head of fx. this is bloomberg. ♪

>> this is "bloomberg daybreak." here is what is happening. apple will expand its operations in austin, texas, building a new employee campus big enough to house 15,000 workers. apple will build facilities and seattle, san diego, and new los angeles, plus expanding sites in pittsburgh and colorado. japan post buying a stake in aflac. 7% topost will acquire a 8% stake. it is looking for ways to boost long-term profits.

aflac is saying that it remains in talks. gam are plunging. it predicted a $931 million loss for the year. assets tumbled fall of the suspension of a star bond manager. leading to a restructuring program to cut costs by more than $40 million. that is your bloomberg business flash. david: it is quite extraordinary. $930 million, wiping out eight years of earnings. the fees they were are in this year will be 3 million swiss francs. figure before was 44 million swiss francs. that is stunning. alix: wow. not a great time to be an asset manager. alix: it is a bad time. at what point will you get a bid?

about atere is a piece what point does somebody come in and buy them. until they start making money, it will be hard to sell. the ecb announcing its latest rate decision 30 minutes from now. the bigger news will be what mario draghi has to say in his news conference about the changing economic situation in the eurozone and what the ecb staff shows in its productions. joining us now is the chief economist for pine ridge investments, the wells fargo security head of currency strategy. on thetart with you situation in europe and the situation mario draghi is facing. alix: i got it for you. david: there it is. it shows gdp growth, the blue line. pmi's above 50, but not much. inflation above 2%, then came

back down. core inflation is around 1%. draghi, it is disappointing on the growth side and inflation side. they probably will soften the rhetoric today, but there are other interesting developments, wage growth has picked up, so they will probably be looking at that as a future signal of inflation. be oknk gdp growth might because you're getting some employment and wage growth. there is some concern now, but they will be constructive about next year. what is your base case? >> i think the ecb is on autopilot. they were in the asset purchase program this month. there is some at volatility and the political scene has changed. none of that has deterred the anythinghint that different, so the ecb for the next couple of years is a

relatively boring story. asset purchases will end this month. alix: doesn't it have a huge impact on the bond market, geographically, credit versus sovereigns? >> i don't think so. look what happened in the u.s. in the eurozone, i expect somewhere around 30 or 40 basis points, but that is it. david: let's make this more interesting. what about forward guidance? draghi has, mario signaled september is the first time you have a rate hike. will he stick to that or pushoff to 2020? >> i don't see any reason to change it at this point. i don't think the ecb wants to get to dovish. they want to normalize monetary policy. ,egardless of today's meeting it is still a milestone meeting, the end of asset purchases, so it is an important milestone in

terms of the ecb moving on, but in terms of reaction to today's event, it might not be huge, but it is an important date. david: we looked at the economic numbers, but what about the geopolitical issues? how much has the world change the last time we heard from them in terms of brexit, italy, and now france having some real difficulty? >> it is the latter one that ought to be concerning for the ecb. brexit has been going up and down for the last two and a half years. on the pathto be everybody was expecting them to be once the market and forces a little discipline. they may come out with a new fiscal target of 2%. the french situation is different. fuse thatlong-burning will not blow up until 2022 and the next elections in france, so

the ecb has a lot of time to raise interest rates and generate the cushion the fed is looking for an order to react to a potential crisis down the road. alix: meanwhile mario draghi is like, guys, i'm on the beach. we looked at what happened with euro-dollar, pretty much range down. what is appropriate priced in? >> not a lot today. if theyrises would be mention something on the reinvestment side, maybe extending little bit. that would be a hawkish surprised, extending further down the curve and allowing the short rates to increase. is one point 13 appropriate leave pricing the growth in europe and the policy the ecb wants to have next year? >> it is mildly underpriced. it is probably ok for today, but if you look at inflation, it

will rise. looking at household and income growth come it will probably do a little better, so the euro should be higher from where we are. david: what about the expectations of convergence between the fed and the ecb? is that in jeopardy at this point? >> i don't think so. you can call it convergence. that not thought about it way, convergence in terms of t give urgent in terms of policy. that would have an impact on the fx market. i think europe is fairly priced because the political risks are not really there, but once that takes up next year, i think the euro will strengthen and the will be a weaker dollar. alix: don't miss that press conference. stay with us. you will be sticking with us.

up, china buys soybeans after exports tumble 98% this year. is this sign -- a sign of a thaw in the trade war? that is next. this is bloomberg. ♪ is bloomberg. ♪

david: one of the places where we have seen the effect of the u.s.-trade dispute is an soybeans, with prices falling in stockpiles going out. the chinese would start buying soybeans again. with us are our guests. said china is one of the big issues we should be paying attention to. how badly is china being hurt, or could it be hurt, by this trade dispute? >> prettily badly. it is a double whammy. it is also their deleveraging policies over the last two years. chinaak to our clients in

, and some of them are big insurance companies. we get a good sense of what is happening on the ground. it is difficult to analyze china purely through the numbers out of new york. we were there after the summer and things look really really bad. we are more confident that china's government is doing the right things, but this situation there as we have seen in the reactions to the trade war, it has been much more dire about the numbers. david: chinese growth is slowing , but is it more than what we realize? >> yes, i think so. the pmi numbers are still above 50. the composite numbers are in the 52-range. we don't worry when we see those numbers in europe or the u.s. certain parts of the economy hurt by deleveraging and the trade war. hear something

like this soybeans story, how do you read that? china needs to make the effort because of the risks regardless of trade? i the whole trade issue, would not overplay it. ,t is a bad problem for china but the more significant problem is the domestic economy is struggling. do they need to do that? yeah, i think they want to maintain their trading relationship. we have the soybeans, the lng, the idea they might reduce automobile tariffs, so this is helping china, the currency, and other emerging markets in currencies. david: i'm not sure if this is good news or bad news. it might make it more likely a trade deal gets done, but even if they got done tomorrow, it would not address the fundamental underlying issues with china. >> i think it would. it has been the catalyst for

policy changes in china. restraintraging, the of credit to small companies is already changing. credit is more widely available. the government is pursuing the typical policy. if we could remove trade barriers, it would be quite positive for china. it is an easy deal to do, because china needs to buy soybeans anyway. they don't care where they buy them from. alix: they can't buy them from brazil because there is no more left. there is that. china also needs money. they need full capital -- foreign capital. >> yes, they do. they are still in a growth phase. some of that, they need that through the export side of things to maintain this markets, and they want to attract foreign investment. china's does still have a lot of policy room to respond.

they can lower their reserve requirement ratio. stablehile maintaining a level in the yuan? >> yes, they still have lots of room they can move on the fiscal side, the monetary side. you stay with us. wholee at 1:00, and the -- andy hall at 1:00 p.m. he never talks. you have to tune into this. david: it is a great get. alix: this is bloomberg. ♪ ♪ there's no place like home ♪

argh! i'm trying... ♪ yippiekiyay. ♪ mom.

♪ unstopand it's strengthenedting place, the by xfi pods,gateway. which plug in to extend the wifi even farther, past anything that stands in its way. ...well almost anything. leave no room behind with xfi pods. simple. easy. awesome. click or visit a retail store today. brussels for the eu summit that kicks off today. >> we will be addressing the european council later. i will be showing the legal and political assurances that we need to assuage the concerns that members of parliament have on this issue. i know the 27 will be discussing

no deal planning and the government of the u.k. is discussing no deal planning. the best arrangement for everybody for the u.k. and the eu is to get this deal over the line. >> [indiscernible] >>. yes -- yes. in my heart i would love to be able to leave the conservative party in the next election, but they feel they would be better in the next election with a new leader. >> [indiscernible] about the next general election is in 2022. i think it is right another party leader takes that general election. to getnow is to ensure this deal over the line. it's in the best interests of both sides, the u.k. and the eu, to agree to a deal by

recognizing the strength of concern in the house of commons. that is what i will be putting the colleagues today. i don't expect an immediate breakthrough but we will start work as quickly as possible on the assurances that are necessary. thank you. david: that is u.k. prime minister theresa may arriving in brussels for the eu summit, talking to the camera briefly, saying everyone has to be prepared for no deal but the preferred course is to have a deal for the u.k. to exit from the european union. she was asked about standing in the next election. she said she recognizes that is probably not in the cards. i want to go over to francine lacqua. she is just outside parliament. i hope you can hear what she was saying. it is clearly a battle tested prime minister. she has been through a lot and now she goes back to try to do a negotiation. what is your strategy as far as we know?

francine: good morning to you. there are two schools of thought. delay the vote, to dangle the specter of a possible no deal brexit in front of parliament in hope they sign up to this deal. i would be clear what she will get today is legal assurances about the backstop. it is a most impossible for her to get a new deal as we have heard from numerous sides on the brussels side. we have a prime minister is survived yesterday. she is in office. that shecure enough doesn't have any more power. reduce thiso amazingly complex situation down to a simple issue. is it a question of control? we have the problem with northern ireland border. we will have to put off dealing with that. in the meantime, the u.k. will adhere to most of the rules.

point wees at what can't get it done and we will break? it seems like brussels says we get to keep you. parliament says we can't live at that. is that the central issue? francine: it is. i would say the concern we saw with the vote on her confidence yesterday is within her own party -- she is 117 mps that voted against her. you have a deal. if you split the parliamentarians, somewhat to remain in the eu. they were against the referendum. somewhat a harder brexit. -- some one a harder brexit. until there is a crashing out or things turned ugly, actually have the parliament thinking what if this happened, they will pull in their own direction and not actually sign up to the deal. remember a lot of people want a second referendum.

a lot of people want a harder brexit. they are left with a deal that is a mishmash of what different parties and different views want. david: it is quite extraordinary this late in the process where she has 100 days left, we will go down to march 29. we have to go down to the midnight deadline? francine: we understand the vote in parliament will be before january 21. i think some people say in the meantime theresa may will try to rally the troops, speak to mps. is crucial she get support of the opposition mps to get the deal to go through. certain people said there is a chance the u.k. crashes out, which means a no deal brexit. but we could see a theresa may that leaves at the 11th hour in january.

this is their mps only option to avoid a hard brexit. david: that is francine lacqua from westminster. alix: theresa may was speaking in brussels, saying it is right she will not be the leader after the next election. she is preparing to get the deal over the line. she is still trying to toe that line. david: you have to respect her tenacity. alix: what does the market have to show the u.k. and parliament to say you need to get this done now? what is the market stress we need to see? nick: probably the pound below 120 against the u.s. dollar. maybe a 10% decline in equities.

it is not clear they will have a vote before the end of this year. prime minister may left the clock running sometime running in january. i don't know if it will be that many choices for the u.k. parliamentarians. alix: now there seems like a lot. seven different options and all of them have lots of different sub areas. how do you frank them? them?k >> theresa may negotiated be un-negotiable. she did it. she agreed. all we are debating is the hypothetical case the two-year transition does not result in a trade deal. we are debating what happens than. that is what some people are upset about. it is unbelievable they are risking the path opening up to brexit for a hypothetical event

after the transition period. the risk is parliament could decide to pull out. u.k.ow from the ecj the can unilaterally withdraw article 50. we will stay. nothing else is to happen. the eu does not have to consent, nothing. parliament simply decides it is too much of a mess or risk. they pull it and they do a number -- another referendum in five years. timeart to go back to the free brexit referendum -- pre- brexit referendum. they are risking that brought hypothetical after the transition period? extraordinary. david: how much damage has been done and how much is left to be done? what about companies making decisions already, assuming there will be a hard brexit?

we talked it ceo after ceo says we have to assume a hard brexit. nick: if you have a no deal brexit, there is more damage that can be done. we have seen some stories about headquarters and movements of operations. still, there is more of that to come. i think they will be a lot more damage. especially if the deal is not close to what is on the table. alix: what will that wind up doing to volatility? volatility is spiking. watching theen three-month volatility. it is going to the moon. that is unlikely to come down before the 21st of january. it will remain extremely elevated. there are several different options and opinions -- there are 600 parliamentarians in different countries.

it is not surprising to volatility is as high as it is. you asked about the market. i don't think there is any market discipline. the pound falls below 120. remember black monday? the u.k. was celebrating the fact there currency was falling. they are looking at the prospect of being more competitive in the export industry. alix: marcus schumer and nick k, we'rerg -- banenbroo looking at the ecb rate. a little bit of a nowhere. dow jones up by about four points. futures up by about two. is the support getting a direction from the market, except for italian equities. apparently we are looking at

2.04% because of a technical analysis that allows them to do that. other asset classes all living for what will happen in brussels with mario draghi. sterling up by .2%. -- .3%. crude up by about 1% dealing with the extra supply. this is bloomberg. ♪

>> welcome to bloomberg daybreak. coming up, priya misra. stay with us for that. this is "daybreak." ♪

alix: this is "bloomberg daybreak," moments away from the ecb for a decision. markets pretty much going nowhere unless you are italian equities. fines from the eu. cable is moving that everything else is at a standstill as we wait for the right decision. 10-year yields down by about one basis point. crude down by .9%. looking forward to that conversation with andy hall on my commodities show, the god of oil. we had more hedge fund closures this year. he is a big oil bull. it is interesting to talk about why. it can get very difficult to trade if you're a fundamental person right now. david: a true legend in the business. at citi he got paid so much

money and it was notorious. alix: then he moved his hedge fund. david: he just does not talk on camera. alix: it will be interesting to hear from a fundamentals gu how hard it is to trade right nowy. we have a great decision. %.changed at -.4 no surprises. there has been a hold in the asset purchase program. that feels very anticipated. there will be maturing debt for an extended period. david: we did not expect to get a lot of news. is what mario draghi answers and that news conference, and the economic projections come out at the end of that news conference. debt will beuring

raised as long as necessary. you want to make it a nice kind of optimistic statement? david: how do you reinvest? how do you distribute it? let's go to london for matt miller. he is in london today. it covers the ecb. he knows this stuff called. great to have you with us as always. tell us what your take is. i am can i briefly say incredibly psyched to see the interview with andy hall. that will be awesome. i have never seen an interview with that guy, at least not in the last five or 10 years. now to the ecb. we did not get anything unexpected in the headlines, in the prepared statement. they say it will not raise rates as long as inflation needs than the hold steady. they related to anchor inflation.

they have done that pretty well since june by saying they won't raise rates until at least the end of the summer. now it looks like expectations are for them to raise until 2020. can they keep a slightly hawkish tone, even as the data has turned dovish? we expect that the lower their inflation forecasts. they expect now 1.7% this year, next year and the following year . that could come down. they even lower growth expectations a little bit. 1.8%expect now 2%, 1.9%, over the next two years. it will be difficult for mario dovishto keep up a less tone when he talks about these things because the market already has expectations way past what the fed has been talking about in previous meetings. david: the one piece of data involving wages may be gives him some basis for avoiding being a total doves today. d dove today.

matt: that is on his side as far as trying to tilt hawkish. they are trying to normalize rates. that is what we are getting from central banks around europe. this is the sixth central bank decision out today. they will probably raise in march. snb is trying to tilt hawkish although the have the lowest interest rates in the entire world. draghi wants to be with that pack. it is more difficult as the fed starts to slow down. a lot of people are saying the fed maybe missed it's time to normalize, but it will really try to do that. that is why the statement will be so important. inflation expectations will be so important and the q&a session will be so closely followed. alix: still with us on set, marcus and nick.

did we learn anything, marcus? marcus: not really. it is kind of what we expected earlier. i said autopilot. i still think they are on autopilot. matt is right. the ecb missed the launch for policy normalization. they should have started last spring when the economy was doing well. nobody would have worried if you took away negative interest rates. give us a little sliver of positive interest rates. real rates in the eurozone are extremely low. monetary policy is extremely accommodative. if you shave a little off, it does nothing to the economic outlook. now the economy has slowed. a negative quarter in italy and germany. it is harder to sell it. i don't think it will prevent them from doing that. something much more serious has to happen. i don't think the rate hikes are pushed into 2020. david: to be unfair to mario draghi, at this point we cannot

get growth through monetary policy. what does it have to be? nick: i don't think there is a lot more they can do. grown, not ass fast as they would like, but they don't have deflation. fiscal policy could ease in other countries like germany. that would be helpful. there has not been much reaction so far. what is interesting in the press conference, do they see them to the downside or more broadly balanced? everyone says the numbers are soft. if they hold the line and say things look balanced, even if they downgraded forecast, i think that would be positive for the euro and reaffirm that rate hike strategy. alix: they said they are enhancing reinvestment. pressl be a short

conference where they ask 17 different ways about their reinvestment strategy. marcus: everybody is asking two questions now, is the problem. there is so much to talk about. brexit will be an issue, italy would be an issue, the french riots will be an issue. mario draghi will have to deal with a huge amount of different questions, and we may hear much less than we expect about the modality of their reinvestment. alix: nick is looking for the economy to the downside. marcus: these are template statements. the ecb cannot change those statements and say we are leaving rates at extremely low levels until the end of the summer. you have to change the risk assessment somehow in conjunction with what you are trying to do with rates. not so much to do with what is going on, but what you are doing on rates. david: what is driving what?

are they making the decision saying let's justify the decision? if you look at the situation in europe, how can you not say there is some shift to the negative? marcus: how can you cannot make a change in your forecast? well, leaving rates until the fall. david: what should they say first? marcus: the decision. it is laid up for the next couple of years. the fed has the same issues. do you stick to it as long as you can and modify the language only partially to what has happened in the real world to stick with your decisions. otherwise you make a change for guidance, the question becomes why did you change your for guidance?-- forward mario draghi will want to raise rates before he leaves. alix: was the actual neutral rate for the ecb? nick: the neutral rate? alix: what is the pilot get them

to? -- where does the pilot get them to? to 2%, would say to get over three or four years. alix: shorter-term? is we thinkrecast zero. three 20-point basis rate increases. alix: it is bananas we are like, 2%? david: they better get started. alix: marcus and nick, that you so much. it was a pleasure to have you on set. to recap, nothing happened with the ecb statement. they will leave rates unchanged. they are talking about maybe changing forward guidance and they will reinvest maturing debt for as long as necessary. literally no move in the market on that.

questions will be happening at 8:30 with the ecb press conference. i don't envy mario draghi and the barrage of questions he will be getting. january for two weeks? -- can't you wait for two weeks? david: we will turn from the ecb to general electric. shares are surging right now in premarket trading. for more on what is by the moves we welcome robert browne, a bloomberg. opinion columnist columnist hashe j.p. morgan analyst been one of the biggest bears on ge. does not quite look like a stable company as far as cash flow generation, grazing mean a full questions about the business units that have played out. he is keeping his price target at six dollars, but upgrading his view to neutral.

this is not necessarily a resoundingly bullish call but not as much of a negative call. planting at the bloomberg news report, they have a problem with the leverage on the balance sheet. is that right? general electric could get to the markets and say please buy more of our stock? >> there is a growing contingent of investors that think ge should do and equity capital raise, and i agree because they could get the monkey off of lyrical's back -- larry colt's back. look at baker hughes. the timing was not ideal for the stock bouncing around the bottom after the 2017 merger. he could take a step back and say what is the best structure for ge going forward? of cash bring in a lot and maybe more thoughtful about some of these moves. if you look at what he is doing, adding on the $18 billion of debt, that is in a way and

equity raise. this would be another avenue. david: the glimmer of light for general electric. brooke: basically. david: brooke sullivan, thank you very much. alix: half an hour before mario draghi's press conference. a lot of questions on france, italy in their reinvestment program. no change is expected. raising rates sometime after the summer of 2019. they will continue the reinvestment program while up to the point they raised rates. more details later. coming up, priya misra will join us. this is bloomberg. ♪

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they will continue reinvestment after the first rate hike. we're waiting for mario draghi's risk assessment. may survives. she survived a vote of no-confidence in her party is european leaders convene in brussels. no support for financials. investors puzzled by the dangerous slide in asset managers and regionals reading tea leaves. david: welcome to "bloomberg daybreak." we have a decision now. no changes from the ecb. now the big event, mario draghi. alix: nothing happened. in all seriousness it will be a tough thing. do have current data a little softer. wage inflation still strong. you don't necessarily want to change what you will do in september or after that, or make changes to your assessment of risk when you don't know the outcomes for things like france and italy in brexit. david: he thinks he will be interesting to see what he says

about france. brexit has been percolating around. there is a lot to be addressed. the question is how many mario draghi will address. alix: they are talking about ford and guidance -- forward guidance. we had that rally yesterday in equities. we were facing some kind of santa claus rally. futures up by 2. euro-dollar now unchanged for the day but a teeny bit stronger into the ecb announcement. basis down by one point in the u.s.. the 10-year was ok. crude off by 1%. that sets up my big interview kind of of my day and of my career. david: a huge interview. alix: he is literally called god in the oil community. andy hall. oil god.

he will be coming on and about half an hour. we will talk about the markets and how he is trying to find a leg up in a world where it is difficult for fundamental oil traders to make that. david: you don't have people that know an area that well you never hear from on camera. that is really a rare combination. you virtually never get that. alix: you had a big interview yesterday also. david: sitting down with david as lofty runs discovery. we talked about what makes discovery special. here is part of what he had to say. supernks of himself as a fan. >> our channels are really affinity networks. people that watch hdtv or food or id, they want to the way someone who loves fox news might watch it. it becomes like home to them. david: you can watch more of that interview coming up on "balance of power" at 12:00 p.m.

eastern time. top: regardless of over the or whatever, distribution platforms, there is so much content out there with amazon prime and netflix, how do you compete with something like that? david: discovery has been so successful but as a basic cable outlet. you are on a melting iceberg. the question is how do you get to the next one? he did not think of it that way that it is not going up. alix: i am on a melting iceberg. thanks david. cb out with the latest policy decision moments ago. no big surprises. they will keep rates unchanged until at least december of 2019. it would keep its reinvestment program extended until it starts raising its key interest rates. joining us now is priya misra, and bob browne. so good to see you. your reaction?

priya: on ecb? they delivered what they had to. that is why you are seeing no market reaction. aroundstion is ru forward guidance and rate hikes. it's a pretty big rate rise in the fourth quarter of the year. is the ecb still on track? what do they say about the growth slowdown? they have been dismissing the growth slowdown all year. it was the weather, and of the weather got warmer but the data did not improve. our view is the ecb is somewhat optimistic that growth will pick up. the reaction function is what we are watching. if you continue to see a slower move, do we extend the forward rate guidance a little beyond? more his body language. i think we are dealing with less

for guidance from all central banks -- forward guidance from all central banks. not --bob, how can you maybe with buddy leonard which -- but how can you not? i will put something that indicates the economic numbers and whether it is pmi's or gdp growth or even inflation, headline inflation. it is all coming down. the headline inflation got up over 2%. core is always at 1%. this is not a progrowth story. bob: no it is not but most investors will be happy if he confirms the current view. the horizon will satisfy people because they know it is likely to be extended. thes difficult for him as head of the central bank to make a commitment the on that. a lot can happen between now and the year. he is playing it right down the middle.

this decision give the market what it wants in the market reaction is typical. beingaghi wants to avoid on the front page of the ft the next day. he does not want to be a cause of concern for the market. my guess is he will a compass that at the press conference. alix: if you are getting a lack of forward guidance from all central banks, how do you make an intelligent, sustainable call on rates? priya: the more nimble and more opportunistic. we have to get used to some volatility. the flat, which i push for the entire year as a structure, i'm not so sure that is a trade for the year. you have smaller targets. you have to be more nimble. but central banks are telling us is the data will guide us. data has significant uncertainties in terms of trade, what happens with brexit.

we have to respond to the data because the banks are telling us they will respond to the data. david: tell us about what unthinkable, in the news conference. the reinvestment plan. a lot of people are asking questions. how are you going to reinvest? where? used?ountry's bonds were what do you expect to be said? bob: i expect them to say it is more of the same. they will continue to reinvest the proceeds to maintain their commitment to invest across all basis.es on a weighted i don't think he will say anything to surprise the market. he will avoid any commitment that strays from the current path. investors,line for from today's decision and the press conference is whether or not the ecb is in an accommodative mode or pivoted

towards a slight tightening posture? are veryusion is they much in an accommodative mode and they will be for a long time. priya: i wonder if they need more flexible he. ability -- need more flexibility. i hope he can signal more flexibility so they can buy across the year. in terms of credit, if you do have some issue on credit, can the ecb become more flexible? bu a little us government bonds .ndy bunds -- bonds and bunds i think it the ecb pitch is it more based on financial conditions and not affecting the market, the overall impact may not be that much. january, weil in can do it in january as well is as february. david: we don't have to reinvest

as quickly as we have. we will get ourselves time to let this play out. bob: i would agree with that. they can garnish more flexibility out of the reinvestment program, that would remove some of the technical constraints they had to deal with as by far the most dominant buyer of the european markets, especially on the credit side. i think they will try to avoid any sense this represents a significant change in policy. as opposed to a technical adjustment. the tone will very much be on the latter versus the former. david: priya misra and bob browne will both stay with us. we will bring you mario draghi's news conference coming up with at 8:30 this morning eastern time. alix: here is some of the really interesting headlines coming out. he said the economy needs loosening policy and the fed is

more unpredictable and the rate hike cycle than months ago. the data dependency, the same kind of idea. it is harder to get a big longer-term right. the yuan exchange rates limits. yes, the economy is a little weaker and you want to have stimulus that you have a weaker yuan. it is a rock and a hard place in a way. david: if you going to support the economy, you have to withstand external shocks. andaid president xi president trump had successful talks in argentina. that is part of the shocks the economy is suffering from. the banks are in a bear market. the sector fighting of support this year investors confused by this slide. this is bloomberg. ♪

uma: this is the bloomberg business flash. shares of general electric climbing in premarket trading after the stock's biggest b ear upgraded the company. theould help address leverage issue and also protect the balance sheet. the lowest price target for ge on the street, six dollars per share. billion tospend $1 expand operations in austin, texas. they will build a new employee campus that is biggest the house 15,000 more workers to they announced they will build facilities in seattle, san diego and your los angeles.

sites inhing pittsburgh in boulder, colorado will be expanded. deutsche bank is not commenting on bloomberg's report the german government is looking into ways you can help and a potential merger of the lender and commerzbank. it did point to a previous promise by the ceo that he does not make -- plan to make any strategic moves over the next 18 months. the merger talks are at an exploratory stage at this point. that is your bloomberg business flash. back to you. david: it is interesting to me. everybody seems to want deutsche bank and commerce back to get together except deutsche bank and commerzbank. alix: and some analysts. one wrote that any deal which are a painful and costly restructuring. it would cost about 3.8 billion euros. david: the german government is behind it. 22,000 people losing their jobs. that is not very appealing from

a political point of view. alix: change the rules. that makes sense. change the rules to make it work out. david: the main acid deutsche bank has is its name. the german government will not let deutsche bank fail. we have to change some roles, we will change some roles. staying with banks. it has been a brutal to much for andasset managers, thanks. the conversation a couple of weeks ago was like market selloff, flatter yield curve, and our ports that i am actually worried. this is a dangerous selloff in banks. priya: i think it is a bunch of things. growth slowdown will be extremely negative for banks. credit losses pick up. and the flat curve comes in the pressure. a lot of bank cfos brought up

deposit data. at what point does money leave deposits ago to treasury bills? it's a positive real rate. if that happens banks will have to stop deposits. even and a strong economy it starts compressing. i am a little worried about with happening with the fed bank sheet. as that is happening reserves are shrinking. some banks are having to pay out increasingly more and more to get those reserves. another issue. and alsoh aspect bank-specific issues with the flat yield curve and having to pay more for reserves, it is ultimately a headwind for the sector. here? what went wrong today donald trump was elected president you would say banks would do well because of deregulation and economic growth and mark lending going on.

now it seems not to be working out that way. it is all the fed's fault. bob: if there is a recession a year from now, i would say it is the fed's fault. they have clearly gone too far. the president, i think there is some merit to his argument the fed has every reason to pause. they moved quickly in the wake of the phenomenal, horrific financial crisis. they seem to be trying to normalize policy at a time when we are not in a normal world. the recovery remains fragile despite the strong headline data. banks as a leverage play on future economic growth are very much potentially a lead indicator of that turning point. it is another reason for the fed to be cautious here. david: you said is basically a structural issue.

why regional banks more than big banks? what are the big banks -- what are the asset managers -- they were having a terrible time. is it a coincidence they are all down this year? priya: it is a question of what asset managers want. it has been a great trade over the last 10 years. i risk premiums increase would argue as the fed gets a neutral, they have to go up. i wonder if asset managers just did not have enough treasuries. the risk and returns are not that exciting. essentially they were generally shorting treasuries. they were all long risk assets to we had a risk off environment. ultimately that is filtering through into the asset managers as well. alix: how can you have a sustained rally with the s&p that is not its only participated with by financials? bob: clearly the financial

performance is telling you the weakness in the s&p is going to be sustained. we are seeing a general reevaluation. asset managers are a prime example. this industry used to trade in the high teens earnings when they have positive operating leverage. that is no longer the case. most of them are losing assets in a traditional active business. this structural change is going on. more broadly across many financials. even though they are earning attractive returns on capital, the pe's are getting revalued by the marketplace. alix: taking into account the structural issues for the banks, is the fed aware of it? they will hike it less. are they aware of the problem it potentially creates for banks

and for the economy? priya: i think they are aware. the recent speeches from the fed suggested they don't think it is a problem yet. they don't see any scarcity on reserves in aggregate. i'm not sure there is a problem in accurate. -- aggregate. i think what they heard from chairman powell is this idea of regaining optionality, getting the flexibility. if things do work, if you do find more and more banks having to pay up for the reserves and the economy slowing down, they can respond. that is the message we have heard in the last three speeches, what i hope will get reinforced next week. the idea that we will respond. we are watching everything out there. we have the ability to respond. we are not committed. alix: and shorter traits. -- bobisra, bob grahame

browne, both of you are sticking with us. we will bring you the mario draghi press conference next. this is bloomberg. ♪

alix: this is "bloomberg daybreak." yesterday there was a rally in the s&p. we pretty much flat into the ecb rate decision. nothing really changed. now up by .2%. european stocks holding flat. the italian equity market getting a nice boost. potentially italy can look at a 2.04% budget deficit. becauseirt some fines of a technical analysis that allows them to book differently. other asset classes, euro-dollar for the much flat on the day. avoided disaster is the headline

i read last night after theresa may survived the no-confidence vote. crude off by .8%. i feel like it will be interesting to see how mario draghi does not answer any questions. not about france, italy, reinvestment. david: his goal is not to make news. we will see how successful he will be. alix: how many times he can say, i will not answer that. londonwe will go over to before the ecb conference for mario draghi will come in at about six minutes. matt miller is in london. what do you think he will address and what will he not address? matt: you are 100% right. his goal is not to make news. in one since the ecb really wants to put things on autopilot biggest draghi feels they have done their job. they say the euro and they want

now to pass the baton on to governments. they would like to see the fiscal side of things start to take care of a growth impetus. on the other hand we could hear draghi get a little dovish. he is prone to being naturally dovish. you can't ignore the slowing of the european economy, especially if he's going to issue lower growth forecasts and personally issue lower inflation forecasts, which is what we expect to hear him do. he does not want to make news. he wants things to be on autopilot, at least through december of 2019. he will not be able to avoid the lower forecasts he will get before the q&a. david: if he literally says we are not changing anything, isn't that a hawkish move given what has happened with the economic data? you have to change something. no, we will stick to the course.

isn't that hawkish? matt: that would be incredibly hawkish. that would allow the ecb to achieve what they want to, which is policy normalization. bloomberg news learned this morning and broke a great scoop that they plan to lower the inflation estimates that the inflation forecast. in the last meeting when they give us forecasts they said they thist inflation to be 1.7% year, next year in 2020. they will bring that down a little bit. they expect growth to be 1.8% in 2019. they will probably have to bring that down a little bit as well. these forecasts did not even capture the biggest drop in oil prices. they are not even going as far as they could go. that is why draghi is likely to send a little dovish of the get go. whether he can nullify that through the q&a with all the no comments. he will not say anything about

italy. he does not like to comment on the situation there. that is what we're watching very closely. o's.ill watch new tell tr david: we will find out the answer in about three minutes from now. matt miller over in london, great to have you on as always. alix: still with us is priya misra and bob browne. if the takeaway is the ecb's balance sheet will not shrink anytime soon, what is the new rate differential? priya: it has increased all through the year. the u.s. the issue was was growing much higher than the rest of the world. next year there will be more of a convergence. if growth does improve and the u.s. growth starts to slow down, the rate differential should start to compress. it has impressed recently because u.s. treasury's rallied

-- treasuries rallied. possibility?he if they don't, it can be frustrating to put in that compression trade. 18 significant amount of reinvestment that has to go into the bund market. andep going back to bunds jjb's. investors for years tried to short that. because of lack of structural growth, bunds are now back up. i don't know if the spread is going anywhere back to the last couple of years. david: to what extent is there a feedback loop with the fed? the ecb will not be moving up. it may be slower than they said. does they get room for the fed to back off in a way that is sensible? bob: they should. one reason the market has been selling off as the fed is ignoring the feedback loops they get from the so-called wisdom of

crowds. see the low rate environment and the low inflationary environment around the world. the expectation growth will be lower in the u.s. it struggles to keep pce above 2%. the fed has plenty of reasons to hold off here. many in the marketplace are hoping for a dovish hike. we think they should do a hawkish pause. they should not move at all. have a narrative that gives them the flexibility they want. they can always move in march. itthey do more of the same, tells the market they are ignoring the feedback loops. i think that is a bad position for the fed to be in. priya: i think they have to connect week because of the negative signal that might give to the risk markets. what does the fed know that we don't know? the market is almost one of 2% price for a hike. 100%almost -- almost

priced for a hike. they are in the range of neutral. , give it 300 reinforces idea of one and a dark room walked slowly, the functions change a little bit. uncertainty is high. you have taken rates up to neutral. then you can wait and see if inflations start to accelerated. the idea on october 3 were far from neutral and go about neutral, they need a walked back from that i would argue. alix: we are waiting for mario draghi's press conference. we have some economic data in the u.s. the jobless claim coming in at 200,000. lower than estimated. there have been concerns. they still want of living higher. on the margins taking potentially a risk, you can see

mario draghi walking in to the press conference. i love how he sits down and shovels his papers for 20 minutes. he will face a lot of hard questions. how dovish kidney sound? cap -- can he sounds and hawkish kenny sound with out ignoring the data we have seen? thankmisra, bob browne, you for breaking this down for us. they will continue to reinvest their program after they hike rates. guess, france, italy and brexit will all be questions but he will not answer it. they talk about having to change forward guidance. we are looking for any kind of challenge or trait in the risk assessment, either broadly balanced or to the downside. the market not really doing that much. european markets pretty flat. the bond market over in europe,

not a lot of movement there. mario draghi getting prepared to speak. >> the vice president and i are pleased to welcome you to our press conference. we will never report on the outcome of today's meeting of the governing council, which was also attended by the president of the euro group. a regular economic and monetary analysis, we decided to keep the key ecb interest rate unchanged. we continue to expect them to remain at the present levels at least the summer of 2019. and any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below but closer to 2% of the median term.

regarding nonstandard monetary -- december of 2018, at the same time we are r forward ou guidance on investment. we intend to continue reinvesting for the principal payments from maturing therities purchased under asset purchase program for an extended period of time past the date when we start raising they key ecb interest rates. in any case, for as long as necessary to maintain favorable liquidity conditions and an ample degree of monetary accommodation.

while incoming information has been weaker than expected, reflecting softer external demand, but also some country and sector-specific factors, the underlying strength of domestic demand continues to underpin the euro area expansion and gradually rise in inflation pressures. this supports our confidence that the sustained convergence of inflation to our aim will proceed and will be maintained even after the end of her net asset purchases. -- over net asset purchases. uncertainties related to geopolitical factors, the threat of protectionism, vulnerabilities in emerging markets and financial market volatility remains prominent. significant monetary policy

stimulus is still needed to support the further buildup of domestic price pressures and headline inflation developments over the medium term. r for guidance -- forward guidance reinforce what the sizable stock of acquired assets continues to provide the necessary degree of monetary accommodation for this sustained convergence of inflation to our aim. in any event, the governing council stands ready to adjust all of its instruments as appropriate to ensure that inflation continues to move towards the governing councils inflation and in a sustained manner. let me now explain our assessment in greater detail,

starting with the economic analysis. euro area real gdp increased by 0.2% quarter over quarter in the third quarter of 2018. following growth of .4% in the previous two quarters. the latest data and survey results have been weaker than expected, reflecting a diminishing contribution from the external demand and some country and sector-specific factors. while some of these factors are likely to unwind, this may suggest some slower growth momentum ahead. at the same time domestic demand, also backed by our accommodative monetary policy stance, continues to underpin the economic expansion in the euro area.

the strength of the labor market as reflected in ongoing employment gains and rising wages still supports private consumption. moreover, business investment is benefited from the initial -- domestic demand, favorable financial conditions and approving balance sheets. residential investment remains robust. in addition, the expansion and global activity is still supporting continue euro area exports, although at a slower pace. is broadlyment reflected in december 2018 euro system microeconomic projections for the euro area. annualrojections for see real gdp increasing by 1.9% in

2019, 1.7% in 2020, and 1.5% in 2021. compared with the september 2018 projections,omic the outlook for real gdp growth has been revised slightly down in 2018 and 2019. risk surrounding the euro area growth outlook can still be assessed as broadly balanced. risk is the balance of moving to the downside, owing to the persistence of uncertainties related to geopolitical factors, the threat of protectionism, vulnerabilities in emerging markets, and financial market

volatility. to estimates, euro area annual hicp inflation declined to 2% in november 2018 from 2.2% in october. reflecting mainly the decline in energy inflation. featuressis of current prices for oil, headline inflation is likely to decrease over the coming months. measures of underlying inflation remain generally muted, but domestic cost pressures are continuing to strengthen and broaden amid high levels of capacity utilization and tightening labor markets. it is pushing up wage growth.

underlying inflation is affected to increase over the medium term. supported by our monetary policy measures, the ongoing economic expansion and rising wage growth. this assessment is broadly reflected in the december 2018 euros system macroeconomic projections for the euro area, which foresee annual a jcp inflation -- hicp inflation at one point he percent in 2018, 2020, 1.8%9, 1.7 in in 2021. compared to the september ecb market projections, the outlook for hicp inflation has been revised slightly up for 2018 and down for 2019.

turning to the monetary analysis, broad money and free october,ood at 3.9% in after 3.6% in september. apart from some volatility monthly flows, growth continues to be supported by frank credit creation -- bank credit creation. the aggregate remain the main contributor to broad money growth. in line with the upward trend observed since the beginning of 2014, the growth of loans to the private sector continues to support the economic expansion. loansnual growth rate of to nonfinancial corporations stood at 3.9% in october 2018. after 4.3% in september.

while the annual growth rate of loans to households remained unchanged at 3.2%. the pass-through of the monetary policy measures put in place since june 2014 continues to significantly support borrowing conditions for firms and households access the financing. for small and medium-sized enterprises and for credit flows across the euro area. up, a crosschecked of the outcome of the economic analysis with the signals coming from the monetary analysis confirmed that an ample degree of monetary accommodation is still necessary for the continued sustained convergence of inflation to levels that are below the close to 2% over the medium term. to reap the full

benefits of the monetary policy measures other policy areas must contribute to more decisively raising the longer-term growth potential and releasing vulnerabilities. the implementation of structure and reforms in the euro area countries needs to be substantially stepped up to increase resilience, reduce structural unemployment, and boost euro area productivity and growth potential. , --rding fiscal policies this is potentially important a s are critical for safeguarding sound fiscal positions. likewise, the transparent a consistent implementation'of the eus 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 the economic and monetary union remains of priority. the governing council welcomes the ongoing work and urges further specific and decisive steps to complete the banking union and the capital markets union. further information on the technical parameters of the investments will be released at 3:30 right after this press conference on the ecb website. and now we are at your disposal for questions. >> can i ask about the details

released at 330. when it comes to reinvestment, you can let us know how flexible reinvestment will be and whether you're planning to phsase -- capitalt or not key or not. thank you. pres. draghi: on the first question i think you have to wait for the press release at the end of this press conference. what i can do is to read you one of the decision-making points, -- the onethank you you are probably asking for. the governing council decides , the publiche pspp sector purchase program, as a rule redemptions will be reinvested in the jurisdiction in which principle repayments or may. the portfolio location across

jurisdictions will continue to be adjusted with a view to bring pp portfolio the ps into closer alignment with the respective national central bank subscription to the ecb capital key. the rescue will learn from the press release. your second question was about the risks. that was the total point of the governing council discussion, what sort of assessment with the governing council give about. if i have to draw a conclusion about this sense that transpired from the discussion, i would summarize it with just a few words. namely continuing confidence with increasing caution.

that is the interesting thing that happens. it just happened before coming here. i will quote to you the results of the survey in a moment. they seem to say the same thing. first of all, when we look at what it is today, we see monetary policy remains very accommodative. as a matter of fact i think there is some sort of confusion here about termination. he continues. it does continue because we are committed to maintain the stock for an extended period of time. we have announced our forward guidance. when you look at the economy, you see the drivers of this a recovery are still in place. consumption continues to grow. supported by the increase in real disposable income which is

that historical highs in six years or something. and households as well. business investments continue to grow. residential investments is robust. external demand has gone down but still grows. when we look at the drivers of the recovery, yes it is true. it is just weaker. it is not just one. it has been weaker for a while now. that is in a sense the discussion. clearly we ask ourselves how quick this is, how weak this is, and what caused this weakness. we get some excellent nations and we started discussing this last time. there are factors in some countries and some sectors which probably are transient.

there is also a permanent component to this, which is the landing of the eurozone economy potential.loser to year. in 2017 an unusual aw there is some lending on closer path to potential. what are the causes for this? -- theernet restatement introductory statement said geopolitical uncertainty, economies and vulnerabilities, financial markets volatility and perhaps another cause. the point is -- yes, the threat of protectionists. the other point i was discussing, all these are specific factors of uncertainty. generally speaking the factors

may change. the trade situation based on the latest statements, it is probably better than it was two months ago. some emerging market vulnerabilities are now less urgent or less dangerous than they were two months ago. in the meantime, others are blooming up. the overall environment, the overall atmosphere has become one characterized by increasing , which takestainty the shape of different phenomenon. this is at least considered by the council one of the reasons, if not the main reason for this weaker data. you can see this because if you -- if you look back when we took this decision to

terminate the net app purchases. back in june -- since then you see financing conditions that have been by and large the same, if not even more accommodative. interest rates went down, but risk premium has increased. that is at the root of some of the declines in asset prices. that is the sort of discussion, and it is a discussion of continued confidence with increasing caution. it is interesting. in our usual periodic survey with a small and medium-sized in septemberit's and they say basically the results are consistent with the economic expansion, which continues to be supported by accommodative financial conditions.

signaledess, sme's concerns on their business environment. a large share of sme's reported higher turnover, but the percentage of firms indicating increasing profits declined. -- all theselly are news of lower growth, but not low growth. key.was the the other results are basically two-phasedwith this assessment of the situation. >> thank you. president, i have two

questions about the forward guidance on the investments you published today. sayfirst one is you reinvestment is continuing for an extended period after the first increase in rate hikes. can you give more details about how long this extended period is. generally is understood reinvestment will continue for two or three years and the guidance you have now seems to suggest they somewhat shorter period. the second question -- pres. draghi: it suggests a shorter period? >> the extended period after the first rate hike. it is usually six months. given the general understanding -- pres. draghi: who says that? >> that is the general understanding of your wording.

if it is different -- the second question is that you link the continuation of rate investment to the necessity to maintain favorable liquidity conditions. does it mean reinvestment alone will be enough to ensure favorable liquidity conditions and the euro area, and therefore no further liquidity operations like long-term loans or an expansion of the fixed rate will be necessary? pres. draghi: the answer that -- -- to the first question let me put it the other way around. if we had wanted to specify a link the time, we would have done so. if you reflect on this specific formulation, you will see the benefits of keeping this way. i will not speculate on the

people -- what is called general understanding of what an extended period of time means. the other point is about -- no. ltro's have been mentioned by some of the participants in the discussion. we really had not discussed it substance but we are reflecting. this is another instrument of monetary policy. we will continue reflecting on that, like on the other measure you mentioned. we know this will address that. it will generally address monetary policy. -- majore a measure contributor to maintaining the monetary policy as accommodative as it has been and the financing conditions are accommodative as well. >> thank you.

you still say in your statement --expect key interest rates to keep interest rates at the same rate for next summer. was a discussion about the exact timing of the first rate increase or was there a sense that might've been pushed back given the recent economic data? and, my second question is you are and a new asset purchases four years after the federal reserve. it seems quite late in the economic cycle. if some of theed risks do establish themselves in the economy does worsen you will not have enough tools to deal with the next economic downturn? pres. draghi: the answer to the second question is no, for better. we are always concerned.

formulationat the of the monetary policy guidance today, we think we have instruments to address such a contingency. formulationof the -- let me step back. characterizede i ,s being of great uncertainty the monetary policy formulation that we have once to deliberately keep optionality as the dominant feature. in this sense the answer to your first or second question is yes. we have instruments. we have notuestion, discussed that. guidancereflect on our it is the date contingent and

mainlyate contingent, dependent on the situation of the economy. when you see interest rates time, it is the markets reading of the situation of the economy. that has to be kept in mind. thank you. core inflationt, has decreased recently again even though wages have increased. are you not concerned it might take much longer until higher wages feet into the inflation rate -- feed into the inflation rate? where their members in favor of

setting up precise horizon for reinvestments or was there unanimous consensus to keep the lanes open? pres. draghi: the decision was unanimous, which is quite important. it was unanimous. on wages, this is one part in describing why we considered the baseline scenarios still valid. i have not mentioned the wages, vucevic steadily increasing since 2016. -- which have been steadily increasing since 2016. they went up for the third quarter than the eurozone 2.5% from the second quarter which was 2.2%. negotiated wages for the eurozone at 2.1% in the third

quarter. broad-based, it is not limited to one country. i will say a word about germany in a moment. it is broad-based, across sectors. industry,is in construction, and various sectors. not all sectors but almost all. agriculture is not part of the sectors but however, in certain countries, this higher growth rate nominal wages is even more significant. in germany, 4.1% in third quarter of 2018. negotiated wages in some sectors like construction, between 4% and 6%.