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tv   Bloomberg Daybreak Europe  Bloomberg  September 19, 2024 1:00am-2:00am EDT

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>> good morning, these are the
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tories that set your agenda. the fed goes big. global stocks rally after jay powell leads colleagues to an outsize cut in u.s. interest rates. but he cautions of the speed of further easing. >> i think that anyone should look at this and say this is the real case. you have to think about it in terms of the base case. whatever happens will happen. tom: so does the fed cut open the door to another move lower for the bank of england? most economists say the boe staying put but inflation is still a concern. plus israel declares a new phase in the war with regional islamist groups as lebanon is hit with a second wave of exploding electronic devices.
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so yes, the fed went big and u.s. market struggle to get a grip on the narrative from jay powell, the statement and that decision is to try to square the markets expectations with the dot plot and the forecast. but in europe and asia, the message is clear. but his risk on on the back of the cut coming through from the federal reserve, what it signals about the health of that economy would jay powell stressing that the u.s. remains in a decent position in terms of economic growth. still expecting around 2% by the end of this year. european futures looking to add more than 1% as we lead up to the open here in europe this thursday. stateside the s&p index pointing higher by a full percentage point as well after losses from a choppy session yesterday. let's look cross asset, yields
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edge tire yesterday on the back of the press conference from jay powell. the pound in focus for us today, the switch to the focus around the boe, inspected to hold. let's see much division there is , if the basis point cut from the fed does move the needle in any way. goal remains at record levels, of .2% so far in today's session. also middle east tensions. let's cross over to asia for a check of the markets in hong kong. >> its risk on here all across asia today, the agent benchmark up 1.3% and is led by the nikkei to 25 punching up 2.7% in the back of the weakening yen.
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he did erased most of the gains after jay powell's comments which suggested the fed maybe was not as dovish as many people had been hoping for. the boj at the same time not as hawkish as people were hoping for. the boj decision tomorrow, economists expecting rates to be unchanged, but given the dollar yen is now up .6%, moving away from the dangers of 141, could that mean a rate hike is back on the table? for the boards a look at the china markets, pointing upward across the board. pboc now in the window to cut rates finally after the fed moves and we had that upbeat consumption data, the hang seng index up 2% after the monetary authority had met those rate cuts by half a percentage point. hong kong is benefiting the
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beleaguered property developers that have been slammed by the high borrowing costs. property index up 3% today, 10 still pointing down for an eighth straight day. tom: we lead up to the boj decision on friday. the fed has opted for an outsize interest rate cut, designed to preserve the strength of the u.s. economy is risks mount to the labor market. speaking after the meeting, chair jay powell said the cut reflects the central banks risk management approach as the aim for that soft landing. >> the federal open market committee decide to reduce the degree of policy restraint by lowering a policy interest rate by .5 percentage points. rod set of indicators suggests conditions or less tight than before the pin naming can between 19. the labor market is not a source of elevated inflationary pressures.
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i do not think that anyone should look at this and say this is the new pace. you have to think about it in terms of the base case, what happens will happen. if the labor market were to slow unexpectedly, then we have the ability to react to that. we have greater confidence now that inflation is moving down to 2%, but at the same time our plan is that we will be at 2% tom:. the skin some -- let's get some analysis, the economist got it wrong, the traders largely got it right. how does that set us up in terms of how we think about the market reaction, risk on in asia, european futures pointing higher after a choppy session. your take on this decision. >> a lot of the confusion is the way powell was framing it, essentially they probably shouldn't have gone -- should
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have gone between five basis points in july. it's almost like what they get overnight is delivering two 25 basis cuts, not 150 basis point one. for them, 25 basis points at a meeting going forward is the most expect to do over the coming year or so. meanwhile the bond market is expecting at least one 50 basis point cut, maybe even a couple in the coming year. that means that bonds and the fed are at odds. socks are loving it because they see they're getting that message that all that is needed is gradual easing, that's going to assure a soft landing for the economy, that is good news for equities. they like the idea of lower interest rates, but not rapidly lower because to them, that signals they get some help from the fed but the get a lot more help from the fact that the economy is going to remain
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strong. tom: we are also getting a reminder today that the impact of this cut is going to be felt more outside the u.s. them within the u.s. we see the rally in japanese stocks in hong kong doing well in terms of the tech index. we look ahead to the boj, does it ease the pressure on central banks beyond u.s. shores? an asset classes with the focus on equities. >> very much so. you could argue that as you were saying, assets outside of the u.s., for them it is even more important that this is a decision that comes with the message that the u.s. economy is still, as jay powell put it, doing just fine. the small open asian economies that still rely very much on exports to the u.s., even more so with china saying that's the message they want to hear. by the same token, the austrian
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central bank is happy that it doesn't suddenly face pressure to cut a lot of other central banks. they can see a path to easing now that the fed is gone, but without that threat that we're going to have a panic, after all, at times when there have been concerns about a global shock, that's when the u.s. dollar rises, even when interest rates for the u.s. are going down. that is off the table as well. so the best of both worlds as far as central banks and markets are concerned, especially across asia. is looking pretty good for europe as well, at least as far as the futures are showing for now. tom: it certainly is, as things stand. garfield, thank you. now to the bank of england, the boe is of course likely to slide against cutting you a -- u.k.
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interest rate for second straight meeting, maintaining a patient approach to reversing the most aggressive policy tightening in decades. joining us is lizzy burden. talk to us about expectations around whether or not the needle does move the boe, given that 50 basis came through from the fed, unexpected by economist. does it change the thinking of the mpc? >> far be it for me to suggest that central bankers don't have their own mind. of course the bank of england is affected by what the fed does. if you have stronger starting, it makes exports more expensive, which holds back growth, which encourages rate cuts. you also saw in yesterday's cpi data services inflation ticking up. it was less than the bank of england had forecast. it was in volatile areas like airfares, but none the --
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nonetheless we've had a cautious tone from andrew bailey at jackson hole. today the expectation from economist is that we will keep rates on hold. the split is likely to be even less finally balance and last time. tom: what about clues around the outlook for the boe that if they do indeed hold, or going to get any signals or indicators today? >> this is perhaps one of the reasons why they will hold. there is a forecast to explain what they are doing. however, they may -- be on today what markets are expecting a cuts in november and december and cuts through 2025. and on october 30 we had the new
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labor government's first budget read by the november meeting, the economists at the bank of england will have more idea about the shape of the economy especially because expectation is will it be in austerity budget with potential tax rises which could squeeze growth. tom: lizzy burden, thank you so much. that decision coming later today and lizzie will be on the ground to cover all of that for us. at 9:00 a.m. u.k. time, were talking about the ramifications of the fed cut, the norge's bank and orrie comes through with their decision at 9:00 a.m. u.k. time. in the emerging market space, an interesting one there, 12:00 p.m. u.k. time, it is turkey's rate decision. a cut from the fed would ease the pressure on a number of these him central banks. we know the focus for the federal reserve is less on inflation and more on the jobs market. that's why the importance is therefore the u.s. initial
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jobless claims numbers. building our picture and understanding of the health and labor market in the u.s.. get a roundup of the stories you need to know in today's edition of daybreak. terminal subscribers can go to dayb on the terminal. and tensions between israel and hezbollah, we have the latest from the region, next. this is bloomberg. ♪
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tom: welcome back to bloomberg "daybreak: europe." more telecom devices including walkie-talkies have exploded in beirut and other areas across lebanon.
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the countries health ministry it's a total death toll at least 26 people. israel's military has declared a new phase in the more and says troops are to be diverted to its northern border. let's bring in our horizons middle east & africa anchor. walk us through it happen yesterday in beirut, more exploding devices. what was the impact and what do we know where the causes at this point? >> another wave of explosions rocking through beirut and other cities around lebanon yesterday. the health ministry putting the total number of casualties at 450. in total, 26 people have been killed. the catalyst came from walkie-talkies that were triggered across all areas privy that were triggered in homes, in cafes, groceries, and even in people's cars as well. a few human rights groups are beginning to note on the indiscriminate nature of these attacks because what is
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happening is bystanders and family members of people who had access to these walkie-talkies are also some of the casualties that have been sent to the hospital. experts say this is just another case of the sophisticated preplanned operation relying on placement of a close of material into those pagers that were detonated on tuesday and the walkie-talkies that were detonated yesterday that these hezbollah group members had been using. as we have spoken about in yesterday's reporting, israel has not taken any responsibility for the instance. have not commented on it. what we did get yesterday were lines from the defense minister saying that a new phase of the war is opening up and that they started to redeploy military forces towards the northern border. again, this is on the back of netanyahu's comments on tuesday saying the new war objective is to get that security achieved on
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the northern border with lebanon. and it seems as of the focus now has squarely moved to that front . from the lebanese perspective, hezbollah are now on the defensive. the cheap commander is expected to give a speech later today, so we will be watching out for that. tom: that seems very significant, the troop deployment to the north of that border. what do we know about the u.s. reaction to all of this? >> all of this coincided with the trip that the u.s. secretary of state anthony blinken was making to the region. he was in cairo and he said that the u.s., and this is a quote, did not know about, nor was involved in these incidents. we are still gathering the information and looking at the facts. it seems as though the u.s. are not aware of this preplanned operation and that they had not given the green light for this intelligence operation to go
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ahead. what we do know is that they are still intent on achieving a diplomatic resolution and what antennae lincoln went on to say yesterday is that he does not want the events of the last couple of days to take the focus away from their desire to get that that cease-fire that -- cease-fire deal in gaza because of the risk of that full-blown conflict. we spoke about this yesterday, one of the casualties was the iranian ambassador to lebanon. even though the embassy put out a tweet saying he is recovering well, it's worth pointing out that iran also has made some of their own statements, their invoice to the united nations says they reserve the right under international law to take whatever measures deemed necessary to respond to such a heinous crime in violation. so you have to think about all the different pillars in the region that are looking at events of the last couple of days as a serious escalation. tom: u.s. authorities have
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accused iranian hackers of emailing stolen information from donald trump's presidential campaign to president joe biden's campaign team as well as to journalists. the operation appears to be an effort to dupe people working for bidens campaign to act on so-called spearfishing emails. investigators don't have evidence that anyone from bidens campaign replied to the emails. south africa's inflation dips below the central banks target for the first time in three years, head of today's rate decision. we are live in johannesburg. stay with us. this is bloomberg. ♪
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tom: welcome back to bloomberg "daybreak: europe." south africa's central bank is set to kick off and easing cycle when it meets layer today. expected to lower its key rate by 25 basis points to 8%. jennifer, how is the cpi print and date inflation tying into the central thinking of africa today? >> the consensus among mostly comets and analysts is that will see the sarb bring the rate down to 8%. the inflation picture we did get on wednesday, was surprising to the downside for many people. especially if you consider what we've heard from the south african reserve bank, this falls below their midpoint target
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range. this potentially is a reason for them to be up beat and consider rate cuts today because they've been working to do this for quite some time. back in 2022, inflation was about 7.8%. in some ways they have defeated or come quite far on inflation, but they are still quite cautious and that is clearly what we are hearing from a lot of analysts. they want to be cautious moving forward. they are paying close attention to inflationary risks that could potentially come from higher fuel costs, and of course there washing closely to what the fed did. but the consensus is that we will see a rate cut today, but not as aggressive as what we saw potentially from the fed. tom: we will bring that for you when it come through. we talk about the fed, there is a view for many out there that indeed this cut is more consequential for nations outside of the u.s..
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em is squarely within the mix there. what is your sense in terms of talking to people on the ground about her broadly african central banks are thinking about the consequences of this jumble cut from the fed, whether it does allow them more space to act. >> it is fascinating because over the past few months, as we've been speaking to a lot of analysts and economists, they are squarely watching what the fed is doing. the fact that the south african reserve bank joins another -- a number of other central banks globally to have their monetary policy committee is timely for them. they were already in their meeting prior to the announcement we got from the fed. so potentially, in terms of the other central banks were looking at that could potentially join south africa in easing, we could see mozambique, kenya, and ghana, because similar to what
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we see here in south africa, inflation has potentially peaked and is coming down. also their currencies and have been able to stabilize in some cases actually strengthened against the dollar. the picture is different new look at countries like nigeria and angola. of course they are paying close attention to what is happening geopolitically and how that affects the revenues, from fuel, and also paying close attention to what is happening with their currencies. the expectation by most analysts is that at least in nigeria and angola, potentially we see a pause and not yet a cut, unlike what we are expecting to see here in south africa and elsewhere. tom: thank you very much with a different perspective on the implications of this fed cut, with a focus on what happens next for other central banks in the region.
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the global vaccine alliance is purchasing a half million mpox vaccines for north africans hardest hit by the lethal outbreak. we are told they are for distribution this year. >> this is going to be a targeted vaccination, that is clear. the guidance is cascading into country strategies. that is what has been decided as the most appropriate response. having said that, this is an evolving situation. we have to look at the guidelines in the vaccination strategies as more information about the epidemiology as it emerges. tom: let's check in on how the fx space, gold and bitcoin are reacting to this jumble cut from the federal reserve.
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the focus right now on the japanese yen, the weakness has paired a little, still down 3%. the rate differential between japan and the u.s. has narrowed on the back of this fed decision. we had the boj decision on friday. the pound in focus, gold remains at these record levels, up .4%. bitcoin hitting eight lived as well on the back of the rate cuts. coming up, we will continue our analysis of that fed decision which ended henry, the hsbc global
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tom: good morning, this is bloomberg daybreak: europe very please of the stories that set your agenda. the fed goes big. global stocks rally after powell leads colleagues to an outsize cut in u.s. interest rates. but he cautions on the speed of further easing. does the fed cut open the door to another move lower from the bank of england, most economists see the boe staying put, but we had underlying u.k. inflation still a concern. plus, israel declares a new phase in the war with regional islamic groups as they are's hit with a second wave of exploding electronic devices. let's check in on the markets right now. u.s. equity markets, u.s. trade is struggling to get a grip as to the decision yesterday from the fed, not the case when it
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comes to asia and europe, the markets, now investors in this region with it firmly between their teeth, this is risk on on the back of the 50 basis point cut from the fed. european futures pointing higher by a full percentage point. looking to add 17 points. s&p many saying this is a dovish move from the fed in terms of the concept that chair powell gave. expectation of a soft landing has been reinforced with two percent growth be in the forecast. s&p futures pointing up by around .09 percent. nasdaq futures looking to rally 1.4%. treasuries not moving much. yields moved higher yesterday. the pound and focus for us today leading up to the boe decision. not expected to cut for a second time this cycle, but will we get any hints, any signaling. 132 on the pound. go remains record highs up .04% pop in the session. brent up .02 percent.
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there is the middle east tension factor to build into this. but continuing concerns about that demand picture on the other side of the break wage and. 73.7 nine on brent. the chair of the federal reserve has warned that the larger than forecast half-point cut in u.s. rates is not a new pace for the central bank. >> i do not think anyone should look at this and say this is the new pace. you have to think about it in terms of the base case. what happens will happen. in the base case, what you see is look at the sep. you see cuts moving along, the sense of this is we are recalibrating popular -- poverty down over time to a neutral level and we are moving at the pace that we think is appropriate. tom: joining us as janet henry, global chief economist at hsbc. thank you for joining us this
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morning. your take, the key takeaways for you from this 50 basis point cut from the fed. >> good morning, tom. it was more priced in. the headlines and economists weren't forecasting it yet but it was priced in. some news articles in the course of the last week, but my takeaway was that chair powell was the dovish end of expectations, the other takeaway's they are responding very much to what happens in the labor market and, yes, he sent the signal that people should not look at it and say this is the new pace. it did give a sense that they are a little bit more worried about the labor market than they are letting on, but as they say, it won't be dependent on the data and ultimately, that's what people are focusing on, how far will they eventually go.
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tom: i want to unpack your take on how the labor market in the u.s. is evolving. the mismatch in terms of the forecast, the dot plot from the fed expecting another 50 basis points by the end of the year versus the markets, which are closer to 70 basis points, where do you and the team land on that mismatch? >> i think there is the idea and this is something that was talked about a lot in the meeting yesterday. it is the idea of getting back to a sense of what is more neutral, that level of rates that's either forcing the economy to grow quickly or slow down a bit more swiftly, what is the new equilibrium rate for the economy. they don't know what it is, the markets are betting on the idea that they will have to go to a low level, and other a rate cuts . in the course of the next year.
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we think it will probably be a little bit less. the economy is still in a pretty firm place. the whole fed forecast's projections that are literally perfect. go back to 2% inflation. 2% growth in the rate cut, which will have inflation a little bit higher. in the more that they cut rates, the more that the economy might be a little bit on the firm. so we have points less. tom: 50 basis points less, i'm not quick enough to do the math on this.
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>> we have 25 in november and this will depend on the data. . if we get shocking payrolls in the next month, then it is very much contingent on the labor market data. but remember, inflation is locked up. if we get in inflation, that could tame what they do. but at the moment, i think it's reasonable to assume. tom: what is the health of the labor market then? the data seems to be mixed. in the u.s. is evolving? >> look at the labor market and think of it as a lagging indicator to what is happening the last few months and good
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news on inflation. and, suddenly a bit more of a slowdown with significant revisions. in this significance could be there could be further downward. but that's really based on striven by the supply of workers, which is been quite strong because of the immigration story against a backdrop where it is still growing. the claims are at low levels, nothing like what you see, even rates are still stronger than they have been. so, we would expect that to continue. but if the atlanta fed is right in the economy is still bringing us 3% in the third quarter --
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tom: to the u.k. them. the boe decision today, before we let you go, is 50 basis point cut for the fed -- who is flatlining, unemployment is ticking up, we could get in october budget with tax hikes coming through. is it going with another cut today? janet: it moved down in oil prices. it's not priced into the markets, it's not just the economists that are going for a change. the markets only have a small probability of a rate cut. we have to look at a new set of projections.
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and everyone is expecting a rate cut in november. admittedly, we did have it over the course of the last week. tom: always smart analysis with a deep dive of the fed. now, bitcoin is up this morning joining the risk on mode after the fed discussing the conference in singapore, take a listen. >> regulation itself cannot be this. you have smart regulations and not so smart regulations. rather than having regulations, you really just focus on the risk and that inhibits the growth further. >> such as face it, donald trump
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is a polarizing person and is for people who are against it. and that's something for people working alongside president harris, whereas mark cuban really want to prevent that from happening. we want crypto in the u.s. to have a bipartisan tribal conflict. >> what we want to see is more money velocity, more union and more interest rates definitely support that. and so we think this move down should be a positive growth. tom: the move lower should be a catalyst within crypto. we check in on the crypto markets. , some of our guest speaking to us at the token to 90 conference over in singapore. right now in terms of how crypto
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is up, they are benefiting it up, almost 3%. ether is the second largest token. market cap up 3.6% in the crypto token on the back of this, also talking politics has lent into the crypto space. >> the boe's rate decision in a few hours time, traders are waiting more more hints from governor andrew bailey on the great path. ♪
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tom: last month cut with the bank of england lizzy burden.
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all the excitement around the fed, not as much excitement around the boe. i'm sure you can jazz it up for us. what are we expecting? lizzie: it is more exciting now that the federal reserve cut by 50 basis points. dovish fed and a hawkish conversation with in boe to cut. however, you can also argue that the fed has done a bit of the work and that jay powell has a threat today. add on to that, yesterday's inflation data, a pickup and services inflation and that is what the boe is worried about. you had that caution by andrew bailey at jackson hole, don't forget, and this is my most economists still reckon that the boe rates are on hold today.
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with even less balanced votes split the last time. we have a new npc member today. it will be interesting to see. it will ramp up a bit. some economists expect that. but even then, a majority of economists recommend that the pace is going to say -- stay at 100 billion pounds a year but they are watching that closely from downing street. of course it has an impact. on how much wiggle room the new chancellor, rachel reeves out by october the 30th. tom: u.k. correspondent lizzy burden with preview. thank you very much. managing partner ahead of a mirror at chatham finance analysis. thank you for joining us. when we look at the growth picture, it stagnating, may be additional tax increases, is the bank of england setting itself
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up for a policy mistake if it doesn't cut today? >> obviously it will be finely balanced, but at that point the economic data will be at the points. as we look at it today, even excluding others influence from the fed with 50 basis points that came through last night in the market was not expecting the bank of england to cut rates today. it was scraping a little bit at 5.6%. it still looks like it. the inflation is not where the bank of england needed to be. so that will be the forecast and we are expecting them to stay on hold. tom: on the services component of inflation, what can you say is of concern to this npc, to this boe?
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>> there has been a few different influences on that number, and yesterday, if you dig into it from this impact to a plus impact, which impacted the headline number. so, if you look at it, it is quite volatile, so it's not like that could continue to have an influence on an ongoing basis, but the other thing we need to think about with the utility costs, for the uk's energy price cut will move up. and hundred 10% in october, and you start to lose what we had all year, so there's also a little concerned that inflation numbers will look a little bit higher, so when we get what we are looking for again, you commented on the gdp situation, and absolutely, the gdp numbers this summer have not been great for the u.k..
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so a lot of that stagnation in the economy combined with the situation that inflation is still under control. so, again, on hold for today, but the markets are still pricing in this year. i think that might be the question. tom: as you look ahead to 2025, with that view on the growth picture, how do you see that it evolving at the impact that these cuts will have? do we see a pickup, a more meaningful pickup in growth next year for this u.k. economy? >> the mechanism, in terms of falling interest rates, are really feeding the economy has lagged. we see that on the upside, where you were seeing rising interest rates through 22 or 23. in the u.k. and u.s. economies
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and still showing really strong growth numbers. now we are seeing the impact rises coming through. as we see them make predictions, which is even as we get two more cuts this year, will we really feel the beneficial effects in 2025, probably not. on top of that, the comment you made in the expectation of the fiscal policy is going to have to be tightened, and i think you've gotten a squeeze from both sides with regards. -- regards to interest rate still being relatively too high. tom: given everything that you set around the economy, the evolution of inflation, and how you see the boe's reaction function, and that delayed reaction, if they remained relatively --, that's the take from some, not necessarily the consensus. maybe that's a better way to frame it in terms of moving low
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on rates, how about next year? >> as we go into the second half of next year, if we really see the economy were sitting still, 1% growth is not really a lot for them to get excited about. but, if it starts to be worse for the labor market side with regard to unemployment, you could then see on the bank. it could potentially try to play catch up, but it's a superfine balance in its to see the underlying services sector and inflation. which is still causing concern. tom: different in tone and -- components feeding into the decision. we are looking ahead to the decision with outlined numbers in the data reflecting on how we are acting. this is bloomberg.
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>> i don't see from the fed that they need interest rates. they are going to be moving socially. >> if inflation doesn't continue to subside as the fed projects, at some points markets may price in a bigger move than the fed is able to deliver, and that potentially would disappoint markets. >> the impact on asian currencies is going to be -- and i think it's worth emphasizing that the interest rate differential in the dollar's favor remains quite large. even if it cuts another point it will still be quite large. in the dollar's favor.
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>> the most important thing is jobs market. you look at adp, the unemployment, and fp. if those numbers don't look good, then it doesn't really matter as much. tom: the fed did go with 50, that was called by bill dudley, former new york fed president, he made the call, he made a convincing case, that will be the take from some that they should go with 50 and would go at 50. that is what the fed did do. they went with the jump. jp morgan's team also getting the call right with their view. saying they would go 50, that's what came through. here's the dot plots then because this was part of the mix yesterday. you had the statement, you had the pressure from jay powell. you should now see an additional 50 basis point of cuts between now and the end of the year. another 100 basis points was expected and flagged by the 25 over eight meetings.
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they see, now, by the end of this year, rates down by 2025. fed officials at .4%. here's which interesting, in terms of the longer-term rate, the expectation is .9. is it the guide and in no way it locks these fed officials in. let's look at the market pricing, there is a disconnect in terms of the dot plots in the forecast of what the markets are pricing. markets are pricing and more. it's not the first time that happen. markets are pricing in about 70 basis points of cuts, by the way, by the end of this year. around 66 basis points the last time i checked, including 150 basis point cuts. this is the projection in terms of where you get the dot plot projection in terms of where you get to 4.4% in terms of the september move. the markets are disconnected from the dot plots. does that matter? to what extent will that close at all. does the fed need to address
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that in its communications going forward? this is the pricing coming through in terms of the market expectations on this, let's have a look at how the markets move. it was a choppy session, risk on right now across asia and in terms of european futures. u.s. futures in positive territory. it's a very choppy session yesterday on the back of this decision from the fed, initially a risk on on that 50 basis points, then it started to pair some of those games -- gains during the press conference jay powell laid out, including's -- including its insistence that does not mean this is the playbook for the fed going forward. 50 and 50. he said that is not how to think about this. right now it's risk on and asia, risk on in terms of european futures and u.s. futures. we are walking through all the consequences and how to position. later we will speak to the transport secretary in the this is bloomberg. ♪
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♪ anna: good morning from london. i am anna edwards along

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