Surveillance: BOE Decision & Apple Earnings Preview | Bloomberg Podcasts

Full transcript:
This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along with Jonathan Farrow and Lisa Abramowitz. Join us each day for insight from the best and economics, geopolitics, finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and anywhere you get your podcasts, and always on Bloomberg dot Com, the Bloomberg Terminal and the Bloomberg Business App. What a joy to see her in London. Sree Kachigovin and joins us right now, senior research economists at Aberdeen three. I'm absolutely fascinated by how the US stands alone, how Jerome Powell yesterday stood alone with massive stimulus leading into massive real GDP. Does the United Kingdom, where Governor Bailey stands now, do they need stimulus to keep it going? I think stimulus would probably not be a good idea at this point. Really, what we want to tackle is inflation. Now. The Bank of England have a very challenging backdrop. Growth outlook is weakening, but we still have very elevated inflation pressures. Now inflation is past the peak, it has started to decelerate. However, energy costs are still quite elevated. The headline inflation is still very high. And also we have even though those multi price based effects will start to unwind over time, we still have very sticky core services and wage pressures in place. So stimulus right now would not be a good idea for the UK. Now it's not restrictive fiscal background at the moment, but further stimulus would actually not be helpful with the Here's a fun fact from the Bloomberg News story that Lucy White wrote for US. Ben Bernanke actually attended the Bank of England's meeting as an observer. It's part of his review into the UK central banks forecasting communications. And of course this comes as Bailey has faced some criticism that they didn't move quickly enough to respond to inflation. Sree, can you compare and contrast the efficacy of communication at the BAIE versus the FED. I think, as we mentioned earlier, there was a conversation about group think. There is a split within the within the Bank of England, and I think the communication has been quite clear from the various members. We've had the arguments for staying on hold, the arguments for perhaps another an additional hike, and all of those are quite consistent actually with the data that we're seeing. But it seems that on the whole we are witnessing switch towards a focus on growth and the weaker activity data and some greater faith in terms of inflation actually passed the peak and decelerating from here. So we're also seeing there. So we have a signal from the split in the vote, and we also have that signal well, very very clear in terms of rates are going to be on hold for a meaningful period of time, even if, as we expect, the economy enters a recession, rates are going to remain quite elevated. And that's quite a burden for small companies in particular who are much more sensitive to the rate cycle. They are facing a profit squeeze. There is a bit of an issue there in terms of future business investment and so there are a number of challenges there, particularly for the smaller, smaller firms. So that's something that the Bank of England are going to have to really be wary of. Yeah, credit availability for small firm is always an issue, whether it's stateside or across the pond street. When it comes to the stimulus versus austerity debate, that time was referencing how does the Bank of England's decision to keep rates on hold for a second straight meeting and warn about a possible recession, warn about the need to perhaps raise rates in the future of inflation reaccelerates. How does that restrain or limit the government's options when it comes to supporting the economy. I think the government is also very aware, and we have heard from Sunak p at the...