Daybreak Weekend: US Jobs, BOE Meeting, RBA Decision

Bloomberg Audio Studios.

Podcasts.

Radio.

News.

This is Bloomberg Daybreak Weekend, our global look at the top stories in the coming week from our Daybreak anchors all around the world. Straight ahead on the program, we look to the October jobs report in the U.S. I'm Nathan Hager in Washington.

I'm Tia Adebayo in London, where we're looking ahead to the Bank of England's next interest rate decision in the wake of the Chancellor's budget announcement.

I'm Doug Krisner looking at the pressures facing the Reserve Bank of Australia ahead of its next policy decision.

That's all straight ahead on Bloomberg Daybreak Weekend. On Bloomberg 1130 New York, Bloomberg 99.1 Washington, D.C., Bloomberg 92.9 Boston, DAB Digital Radio London, Sirius XM 121, and around the world on BloombergRadio.com and the Bloomberg Business App.

Good day to you. I'm Nathan Hager. We begin today's program with a look at the labor market. The non-farm payrolls report for the month of October is due out this Friday at 8.30 a.m. Wall Street time. It is a number investors and economists will be watching. So let's speak to one of them. Anna Wong, Chief U.S. Economist for Bloomberg Economics is with us. Thanks for being here, Anna.

We know it's been a low hire, low fire environment for so long in this country. So Should we have low expectations for this Friday?

Yeah, that's because in recent months, the job, Prince, has been fluctuating between negative to hundreds of thousands. So I think what people are accustomed to now is just a big positive surprise or negative surprise. Our team is forecasting a 26,000 increase in payrolls. And compared to two years ago, that sounds like a low number. But now, given that this year population growth has slowed, we are estimating that the jobs increase that's consistent with population growth is roughly at 50,000. So 26,000 seen in that light is not extremely bad.

But nonetheless.

It is just a touch.

Lower than what you would want to keep the unemployment rate steady.

It's been such an interesting environment because, as we say, the labor market has been stuck at these relatively low growth numbers, while at the same time we continue to see inflation well above the Fed's 2% target. Is that part of the reason why hiring has been so sluggish, just that price pressures have been as elevated as they've been all this time?

That is a great observation, Nathan. And I wish more people would have made that observation you made, because there is actually a connection to firms hiring versus the cost that they're dealing with. So one way that firms have been handling these higher raw material costs and Input costs, higher health care premium costs is by not hiring as much as they would. We saw this in earning calls.

And the interesting irony is that we are seeing spectacular earning growth, right? In the last quarter and so far, this quarter in the earning season, the firms are still reporting very strong BITs. And so how is it that firms are not hiring? Well, it's because exactly that they're also all reporting very strong input cost growth and firms are handling that via operational efficiency, increasing operational efficiency, which is a code word for not hiring in our analysis.

So I think this low hiring, low firing environment is not necessarily. A stable environment, either going forward, inflation eases, then firms will even have more spectacular earnings and they will hire more because profits have increased. But that is conditional on the assumption that this inflation that we're seeing is purely supply driven. And however, if what happens today, in the future is that inflation eases because the fed hikes interest rate credit spreads widen generating demand destruction. That is not conducive to increasing hiring and that kind of inflation decrease would actually lead to more firing and worsened trajectory for labor market. In fact, when we look at forward-looking forecasting models,

such as the one that the Fed used as its workhorse model. The term premium increase that we have seen in the 10-year yields since March of this year is consistent with credit spread widening in the Q4 and going into next year. And in the case where the Fed is not accommodating this credit spread widening, they're actually holding rates constant, or even worse, hiking, The models would actually suggest that unemployment rate should be ticking up by 0.1 percentage point this quarter and rising by another 0.4 percentage point next year. So I think along our current trajectory, our view is that this low-firing, low-hiring mode will not be a stable one. We might see more firing going into the new year at the end of the year.

So how does all this factor into what the Fed could be thinking as it gets closer to its December decision? There's been so much focus, of course, on getting inflation back down to target. How does this sort of tepid labor market factor into what the Fed could be thinking going forward?

What would move the dial on them going ahead with the hikes is if unemployment rates stay steady at 4.2% as it is right now. However, if unemployment rate goes to 4.3, 4.4, which is what the models would predict, then I think that the risks of the current market odds of a hike in December is overblown because currently markets have 85% chance of a hike. But if unemployment rate does move up to 4.3% this Friday and then to 4.4%, in one release in early December, then I think the offer immediately for a hike would be more immediately lower. So then December hike were no longer looking like a shoo-in as it is now.

Okay, Anna, thank you for this. Good to have you on with us. That's Anna Wong, Chief U.S. Economist for Bloomberg Economics. Let's take a look now at some stocks-making news in the week ahead. I'm Nathan Hager, joined by Bloomberg earnings reporter Chloe Mellie, because we've got More earnings right out the gate with Apple on Monday. There have been so many jitters around the AI trade in recent weeks. Chloe, does Apple factor into that as far as big tech goes?

Yeah, absolutely. And Apple is going to be the really big one next week, really starting of the week. And there's going to be two main things in focus in addition to those AI jitters that you were talking about. So first of all, there's going to be the impact of rising costs for memory chips, the memory supply crunch has previously forced Apple to raise prices and to extend wait times on some products. And that's had a really negative impact on the second quarter. And so that supply crunch is still very much happening. And so the impact of that on the third quarter is going to be really key to watch. The other thing to keep in mind is that we've got those customer complaints about the iPhone Duo, which is the foldable phone that Apple recently unveiled.

And some users have reported malfunctions like cracks or like a white patch forming on the display. So any update on that will, of course, be of interest. But so far, though, it seems that demand for the iPhone Duo is very strong. It also seems that Apple is kind of on a roll introducing new products. Just this week announced a MacBook Pro that includes a touchscreen version So any indicators on how much demand there is and whether that's helping Apple withstand that broader downturn that we've seen in the laptop market, that's also going to be very important. And after we get Apple, we'll have had all of the Mac 7 except for Nvidia. So we'll be able to pass some of those big tech questions and what those have been

over this quarter.

Yeah, so we'll be waiting for those NVIDIA results. I think those don't come out for another couple of weeks here. But it's going to be really interesting to hear what Apple has to say as far as their outlook as we get closer to the holiday season as well. Sticking with big tech, we also hear from Palantir after Monday's close.

What are we expecting from this tech company?

Yeah, it could be actually quite a good quarter for Palantir. So revenue is expected to hit a new high today. driven in large part by demand from the U.S. government, but also demand from corporate partners. So the big question for Palantir is how it's going to be able to really stand out in a competitive, very competitive, increasingly crowded market as well. So some of the fears that investors have had over the last few months is that the business would suffer losses. from AI developers like Anthropic selling their own software, and also that governments outside of the US would increasingly be working with their own kind of domestic tech companies rather than rely on big US tech companies like Palantir. So those are some of the threats

facing the company and to counter some of these Palantir has been expanding its network of commercial partners like PwC or Fujitsu for example and and analysts have said that this would help with demand. So we'll see how that shakes out. It is worth keeping in mind that Palantir, uh, has, uh, called the commercial demand for its data analytics tools, uh, otherworldly, uh, last quarter. So we'll see if it lives up to that level of success for this quarter.

Yeah.

It seems like there's a lot of bullishness baked into this stock as well with like what 30 buy ratings, uh, on the Bloomberg terminal and it's beat just about every time, uh, over the last few quarters here. So, uh, definitely one to watch as well. Later on this week, we're going to hear from Airbnb. How's travel demand holding up at this time of elevated fuel prices?

Well, it's quite interesting because it seems that it is actually holding up quite well. So Airbnb earnings are actually expected to hit the highest level in three years. And we've got other names within that travel sector also reporting next week and expected to report stronger Results, we've got Booking and Expedia as well. And they also had the expectations actually also quite high for those. So it seems that travel demand is resilient, despite that weak consumer confidence, despite those flight tickets rising, of course. The Middle East remains a bit of a weaker region, obviously. But then in other regions, it seems that people are booking flights and they are checking into hotels. So it could be

a pretty solid report there. There's, of course, some challenges to keep in mind for that broader travel sector. You know, as with many other industries, the threat of AI disruption is, of course, top of mind. And there's the risk of AI agents, you know, handling the tasks that a booking or an Expedia would do, you know, the travel planning, the booking itself as well. And Airbnb has previously said that, you know, becoming... a sort of background data layer or an inventory source would be an existential risk for the company.

So any information on how Airbnb is sort of planning to mitigate that would be really important. And then in terms of travel demand itself, of course, the last few weeks have been marked by a lot of unrest in France and in Italy, other parts of Europe as well. So investors will want to know how much of an impact it's having on the current quarter as well.

Appreciate this, Chloe. As always, thanks for this. That's Chloe Mellie, earnings reporter for Bloomberg News. And coming up on Bloomberg Daybreak Weekend, we look ahead to the Bank of England's next interest rate decision. I'm Nathan Hager, and this is Bloomberg. This is Bloomberg Daybreak Weekend, our global look ahead at the top stories for investors in the coming week. I'm Nathan Hager in Washington. Later in the program, we'll look ahead to the next interest rate decision from the Reserve Bank of Australia. But first, policymakers at the Bank of England will meet in the coming weeks and share their next rate decision. But after a UK budget announcement that did little to ease inflation pressure on the central bank,

where will it leave decision makers? Let's get more now from Bloomberg Daybreak Europe's Tiwa Adebayo. Nathan.

Britain's efforts to protect millions of its households from rising energy costs this winter will have barely any effect on the overall level of inflation. That's according to the country's fiscal watchdog. With just a few days to go before the Bank of England's next interest rate decision, the cost of living measures announced by Chancellor John Healey in the budget are only expected to reduce inflation by 0.1 percentage point next year before adding to price growth by the same amount in 2028. The announcement wasn't enough to prompt traders to alter bets on a quarter point hike from the BOE on November 5th and at least three more hikes over the next 12 months. JP Morgan asset management global market strategist Hugh Gimber says the news leaves the

Monetary Policy Committee with a tough decision to make.

But the message yesterday was firmly, in my view, focused at the bond market. And that was one of fiscal responsibility and really parking those big decisions, which we know need to be made on welfare later down the line.

That was JP Morgan Asset Management Global Market Strategist Hugh Gimbert speaking to Bloomberg's Guy Johnson, Tom McKenzie and Anna Edwards. So where do UK policymakers stand in the wake of a budget that many are arguing was deliberately uneventful? Joining us now with more is Bloomberg's senior economics reporter, Phil Aldrich, and our chief UK economist, Dan Hanson.

So, Phil, I'll start with you.

Many have dubbed this the do-no-harm budget. Some are calling it a manana budget. It didn't really shift the dial in terms of policy or even the market reaction. But just looking through the announcements that we did get, which are the most economically significant?

Well, I suppose the big one which caught the eye was the bank tax tax. which ultimately was 15 months, raises just over a billion quid, one and a half billion quid. So although it was the big announcement, it's probably not one of the bigger, more significant things. There were a bunch of bizarre tax rises, changes in the administrative arrangements around taxes. So these weren't policy rises so much.

Like the bank tax is a definite policy thing. It was tinkering with the way that the tax system operates. And the other thing that they did was put more income tax on property and savings. So that one, you would say, was more of a policy issue. But there were a lot of small elements to this budget, which didn't add up to an awful lot. So the biggest things I would say were also the £ 4. 1 billion of cost of living provision that's being offered to houses. The commitment to 3% on defence policy, which has got no funding behind it, but it is a policy now. There was these energy reforms where there was really very, very little of actual reform, but there was a lot of vision for reform. And that is kind of significant. And then,

you know, departmental spending for some of the unprotected departments in particular is being cut more severely towards the end of the decade. And again, that raises questions about whether that will ever actually be delivered.

It's interesting you mentioned this idea that the administrative changes, a lot of the moves on tax have been through fiscal drag and other means, not necessarily tax policy. Does that mean or does that pave the way for a bigger tax hike maybe next year or in the future? Looking at the numbers, will that be necessary?

Next year, there's two events on there. There's the spring statement and then there's going to be the autumn budget. Now, it is entirely possible that we actually have another fiscal event in the spring, because, you know, the Iran war, you know, there's talk that the Trump camp is going to escalate and then we could end up with the energy costs rising and households feeling even more under pressure than the government was anticipating. So they may have to come back and try and do something more for households who will be really feeling the pinch at that point. So, you know, that's plausible. In terms of, you know, more tax rises the tax burdens you know it's a at a post-war high it feels like you know we it

all it's over the last few years the tax burden has been has been rising every year pretty much so um it does feel as though we're maxed out on that on that front and you know people as we know you know rock cost and co people are leaving the country the rich cannot bear the burden of taxes just solely. Any further tax rises would probably have to be the general tax rises, which are not allowed in the Labour manifesto, which they've said no income tax, VAT, next rises. So I don't think, as we saw here, these were fiddling tax rises or tax administrative changes that Healy announced.

Dan, looking ahead to the Bank of England decision, we've heard now obviously from the ECB and from the Fed. Where does the Bank of England stand after this budget? Do these measures mean anything to policymakers at all?

No, I think it's not going to change the bank's thinking at all. If you remember back to Rachel Reeves' budget in 2025, she announced a set of policy measures that had a material bearing on the near-term outlook for inflation. But what we got yesterday, that's not going to affect the bank's thinking. And fundamentally, they've got a big problem because we've got inflation going above 4% in the new year.

It's double the Bank of England's target. They've made a lot of this point that inflation at 3.5% to 4% is a trigger for households to become more attentive to what's going on with price rises. So, all the pieces, for me at least, and I think for market participants as well, all the think send a relatively hawkish message to be honest with you because the inflation outlook has deteriorated dramatically and as phil was saying you know if it's unclear how much of the of an escalation is priced in to markets presumably quite a lot because trump's rhetoric but nonetheless if energy prices go higher again through the winter you know i think if you're if you're sitting in the bank of england you want to be

in a position where you said look we've put some insurance in place And now maybe come spring next year, we can unwind this. But it's a much better place to be to say we've sort of got started and we can move. And that's very different to how they responded in 2022, where they sort of hope for the best.

They've been the slowest of the ECB and the Fed to move. And there are there have been some arguments in favor of that. But I think now's the time they need to sort of, if you like, put the money where the mouth is.

Yeah, perhaps this idea that, you know, the weak labor market and tightening financial conditions has bought them some time. But it's interesting that you mentioned 2022, because, you know, we saw the OBR saying that there will be fewer second round price effects than in the aftermath of the energy shock in 2022. So, is there room for optimism, particularly optimism relative to the situation in Europe?

There is. And, you know, it comes down to two points. The first is the state of the labour market, which is weaker than it was in 2022. And the other is the scale of the rise in prices, which at the moment hasn't got to 2022 levels, though, you know, the off-gen price cap is going to rise again in January.

And where market pricing is at the moment for gas and electricity, it could rise again in April. So we're, you know, we're not out of the woods. And for the bank, you know, I think it's about, so to answer your question, yes, there are reasons to think second round effects won't be as big as they were in 2022, yes.

But what's the path of least regret for the bank? Is it to be caught out by the same problem again? Or is it to put some insurance in place and say, look, we don't think this is going to be as bad? as it was in 2022, but we can't be 100% sure. So the best path is the risk management approach, as they call it in the monetary policy circles, is to hike rates a little bit, and then you maybe get lucky and you can reverse it.

And, Phil, this question of insurance is quite interesting when it comes to the fiscal situation as well. We've heard from Andy Haldane saying that lowering the fiscal headroom is kind of getting rid of insurance. particularly as the headroom that we have is maybe built in to deal with shocks, the likes that we've seen in the Middle East. In terms of your assessment of that, do we need more headroom?

Headroom, as it is at the moment, 14.5 billion, is low historically. It's back to sort of nearly perilously low levels. I think I was at a Resolution Foundation event this morning, and they were suggesting that. The average headroom you would have for past fiscal events would be around £ 25 billion. So you'd need another £ 10 billion there to feel as though you have got decent insurance.

So the government must be concerned. I mean, the other thing, as Dan was saying, you've got these energy bills going up short, potentially in January and again in April. And the increase in energy prices alone will then add to debt costs through inflation rates. will increase borrowing costs through inflation and dead interest. So that's going to have a negative effect on the existing 14.5 billion hedging. You'd expect that to have shrunk. And the OBR itself ran a severe scenario, which is pretty much similar to the current situation, actually, because they locked in their forecast quite early and things have got worse since then. And if you just apply their severe scenario to the forecast that they produced, the

The central forecast, their headroom more or less vanishes. They lose something like three and a half billion directly in borrowing costs. And then there's all these spending pressures on departments, which you have to meet. So they need these top ups and that takes another 12 billion out. So you end up with negative headroom under their own scenario, which looks very much like what today's outlook is.

Of course, on the other hand, if no insurance, maybe perhaps a pathway to growth. I wonder what both of your thoughts are on that, the OBR cutting their own forecast. Has Andy Burnham, has John Heaney scuffled themselves in terms of being not ambitious enough to really go for that growth?

Yeah, I mean, I think one of the reasons to do no harm, the sort of mantra that surrounded this budget, the low-key budget, was that at least if you look this year, the economy's done brilliantly. We look like we're on for a barnstorming third quarter as well. And I think one of the things they were worried about is to the extent that reflects animal spirits and the private sector beginning to sort of gain momentum. They didn't want to quash that by, you know, announcing a big fiscal, potentially a big fiscal tightening or even in some in some worlds, a big fiscal loosening would have done something similar because you've had a massive rise in interest rates in response to it.

So.

Either way, you can see why there was that thinking behind what they were doing. As we said at the start, in terms of the policy package itself, it's not going to do much. But I think their argument would be, well, what would be the counterfactual around that? We couldn't use fiscal policy to buy our way to growth because the markets would have punished us. And we didn't want to announce loads of tax rises because that would have dampened animal spirits. So, this is the path that we've taken. So, that's the sort of if you like the glass half full version of the story. I mean, just generally, I think the economy is going to do much better than the OBR forecast suggests. So over this year, for this year, certainly,

and potentially next year as well.

My thanks to our senior economics reporter, Phil Aldrich, and our chief UK economist, Dan Hanson. We'll have full coverage of that Bank of England decision on Bloomberg Platforms. I'm Tiwa Adebayo in London. You can catch us every weekday morning here for Bloomberg Daybreak Europe, beginning at 6am in London and 1am on Wall Street.

Nathan.

Thanks, Tiwa. And coming up on Bloomberg Daybreak Weekend, we look to the next monetary policy decision from the Reserve Bank of Australia. I'm Nathan Hager, and this is Bloomberg. This is Bloomberg Daybreak Week and our global look ahead at the top stories for investors in the coming week. I'm Nathan Hager in Washington. The Reserve Bank of Australia is facing growing pressure to raise its policy rate again with its meeting coming up this week. For more, let's get to Doug Krisner, host of the Bloomberg Daybreak Asia podcast.

Thanks, Nathan. The Reserve Bank of Australia has already guided markets in expecting a rate hike in the week ahead for what would be the fifth rate increase this year. To help us provide a bit of context, I'm joined by Bloomberg economist James McIntyre, who covers Australia and New Zealand. James joins us from our studio in Sydney. Thank you for being here. Before we get into what may happen as a result of this meeting, set the stage for me in terms of what we know about the rate of retail inflation in Australia right now, given the data that we just had in the last week.

So we've had headline inflation coming up to about, Australia's moved to a monthly inflation now, right? And so we've moved up to 4.3%. So inflation down under here is a little bit stronger than what we're seeing around the rest of the world. And it's a bit of a delayed inflation cycle. But it's stronger, 4.3 and 3.9 on a quarterly, which the RBA still forecasts on and cares about.

And it looks like that might be a little bit more persistent to here than we're seeing in the rest of the world.

And I'm just imagining that a lot of this is still an energy story, right? Is it not?

It is.

The energy is a big component, but what we're seeing is two things, an increasing broadening of inflation beyond energy, so a lot of other services things, and some of that's administered stuff, like property rates and charges, for example. My favorite is streaming services, and I'm looking at which ones I'm going to cancel and which of my kids I'm going to disappoint. But those subscriptions like Disney and Netflix and the like, we're getting a rapid increase in inflation for those. There's nothing the RBA can do about that.

I'm probably going to have to. So there's going to be two lots of tears in our house, I think, interest rate hikes from the services inflation for dad. And I think my daughter might be missing the Disney sometime soon.

So we've talked a little bit about energy and how it's impacting services. But How is the real estate market right now, and is that also being impacted by these inflationary pressures?

The real estate, we've got a continuing and deepening downturn in the housing market. So we've had house prices off almost 8% from peak to trough, and it looks like the data we're going to get for October will show that compared to all of the downturns at the aggregate level since 1980, that this is going to be one of the fastest downturns. ones so far. It came after a big run-up, but we've got these interest rate hikes, so four already this year, a fifth one coming at the November meeting. It's likely that this is going to continue for some time still, but that's not enough to be dissuading the RBA, and it's not only the RBA that needs dissuading. What the issue here for inflation is, is it's more about businesses and inflation expectations. This housing

downturn that we've got in the economy, it's hurting consumer spending. There's a negative wealth effect. It's starting to percolate through all of the retail businesses that are linked to consumer spending and housing, right? But what we've got on the other side is the AI investment boom and a whole heap of businesses across the rest of the economy are Because of the AI investment boom, the messages that they're sending through business surveys and through the RBA's liaison is that they feel that they are going to try on and pass on some of these energy price costs, and that's the thing that the RBA is having to respond to.

So it's energy prices feeding through into the economy, but because there's this confidence in demand perhaps being a little bit more resilient thanks to a major investment impulse in the economy... That's the thing that the RBA is going to have to stomp harder on things like the housing market.

Okay.

So from there, maybe we can talk a little bit about the labor market right now. You mentioned the build-out of AI infrastructure. Is the labor market healthy as a result of some of that activity?

Parts of the labor market are for sure. So we've got this pressure coming, and you'd be unsurprised to learn that the data centers are driving up demand for electricians. and for air conditioning and ventilation specialists. But across the rest of the economy, the jobs picture is slowing. The unemployment rate's already risen. The September figures were around about where the RBA's August forecasts expected the unemployment rate would be in about 12 to 18 months' time. So we've got slack building in part in the labour market in aggregate, even though there's this strong demand. But We've got this situation where the RBA is looking at the whites of the eyes on inflation expectations here.

James, I'd like to bring into the conversation this issue of fiscal spending, because from what I've read, Australia's Treasurer Jim Chalmers has faced a bit of criticism over the level of government spending as possibly being another driver of inflation. Is that criticism legitimate?

Overall, the demand story within the economy is one that the RBA has assessed as too strong. So anything, any piece of demand... that is there in the economy. If we want to make room to do this AI rollout, we're going to have to be squeezing and putting pressure on other parts of the economy. I think a lot of this pressure on the government spending is a little bit of kind of rear window, which economists were tragic for doing this rear view look at the world. The latest six months of data shows that public demand has been pretty much flatlined. We're really talking about a story of very strong government spending growth in the post-pandemic era, but especially in 2024 and 2025. So Treasurer Chalmers is trying.

He's not winning any friends within the government party, within the caucus, for trying to undertake the spending restraint. And the parliament isn't really doing anyone any favours by blocking some of the attempts at spending measures.

But....

To provide a little bit of a counterpoint is that some of the spending pressures are actually structural. An ageing population in particular means that there is a bit of a runaway train on some parts of government spending, but other parts have to, that means other parts of government spending have to pull back a bit in order to make room for that. So there's a lot of these competing forces at play. At the end of the day, the RBA's view is that the supply potential of the economy is not growing at a fast enough pace to meet the demand growth. And anything that's adding to that demand growth or not providing a big enough negative is something that they're going to be calling out there. And the government has copped some stick for that.

So let's get to the RBA meeting this week. I think the conventional wisdom, as I said at the top, is that we're going to get a rate increase, 25 basis points, I'm assuming. It sounds like you agree with that. And what I'm wondering is whether we have to now look to the December meeting as a live meeting and the possibility that we could see further tightening at that time.

I think that's the risk. After the September rate hike, my base case was that we'll be on pause, but there's a very, very strong risk in November that we could see another move from the RBA, especially if the energy price story continued. energy price pressures continued, pass-through pressures continued, and if the inflation outcome was too high. And those three things have come through, they've crystallised, and so that means that this November meeting is pretty clear that they're going to move, and they've very strongly signalled that. But if we're going to measure, if we're going to kind of have the RBA really batting back against inflation expectations, they're going to have to continue to deliver rhetoric that

suggests there's a credible threat of a December and a February move. I think they'll probably pause in December after five rate hikes this year, two back-to-back, see how things go. And when they return in February, there's a long time between now and then. We could have energy prices doing something very different. And that could really sort of change and swing things. And so I think it's a wait and see, but it's going to be a very strong threat from the RBA that if they don't like what they're seeing, that another move is coming, despite what we might be having in the labor market or a soft consumer.

James, we'll leave it there. Thank you so very much. Bloomberg economist James McIntyre joining from our studio in Sydney. Staying with monetary policy for the Antipodean countries, New Zealand's central bank unexpectedly kept its interest rate unchanged. The RBNZ said global uncertainty is weighing on domestic demand, and this pause signals policymakers' intention to remain cautious. over how aggressively they should battle inflation. Following the decision, we had the chance to catch up with Anna Breiman, governor of the RBNZ.

She spoke with Bloomberg TV host Haslinda Amon.

The macro environment can change dramatically. We've already had President Trump suggesting that perhaps he will resume aggressive attacks on Iran after the midterms. If the Kiwi were to keep sliding and inflation rises above 4%, might you resume your aggressive tightening, even if it means a recession?

Well, the main thing to understand is that we will do what it takes to deliver on our mandate, and that is returning inflation to the midpoint of our target range, 1% to 3%, the midpoint being 2% over the medium term, without causing unnecessary volatility and economic output. And if we look currently, we do expect inflation to increase over the coming months because of higher fuel prices. But we also see that the conditions for inflation falling back towards target next year are really good, especially since we have these well-anchored inflation expectations and subdued wage growth. Importantly, we have done two OCR increases at the previous meetings. And at the previous meeting, at this meeting, we say that we

still expect to do further OCR increases at coming meetings. So we are continuing with the strategy that we had for a while.

Governor, you talked about the possibility of the macro environment shifting abruptly. Could you elaborate on that? And could you also elaborate on perhaps the role of AI, which could pose a risk?

So what we are discussing is risks to the global outlook. And the way that we characterize it is that we say that we've seen resilience in global growth. partly due to AI investments in many of New Zealand's trading partners. But we also see fragility. So what we are looking at is how will these different factors evolve over the coming months and how will that affect the outlook for the New Zealand economy and for inflation in New Zealand.

So we are carefully watching global developments.

You're also watching how past tightening is impacting the economy. How is it looking? How impactful have they been?

Well, what we're seeing is that inflation expectations are well anchored and we're seeing that wage growth is still subdued. We're seeing that house prices, which tends to be important for household consumption in New Zealand because wealth is concentrating in the housing sector, And house prices have been moving sidelines.

They haven't been increasing. And all these things means that household consumption and demand from the domestic sector is still weak. So it means that it's been hard for firms to pass on cost increases onto households. And that's what we see when we dig into the inflation data very carefully.

That was Anna Bremen, governor of the RBNZ, speaking with Bloomberg TV host Haslinda Amund. I'm Doug Krisner. You can catch us weekdays for the Daybreak Asia podcast. It's available wherever you get your podcast.

Nathan?

Thanks, Doug. And that does it for this edition of Bloomberg Daybreak Weekend. Join us again Monday morning at 5 a.m. Wall Street time for the latest on markets overseas and the news you need to start your day. I'm Nathan Hager. Stay with us. Top stories and global business headlines are coming up right now.

Daybreak Weekend: US Jobs, BOE Meeting, RBA Decision

Kapitelklicken springt direkt hin

Shownotes

Transkriptvom Podcast bereitgestellt · Zeitmarken springen hin