Good morning. It's Wednesday, the twentieth of September here in London. This is the Bloomberg Daybrecate podcast. I'm Caroline Hepka and.
I'm Stephen Carroll. Coming up today. The rate of UK inflation unexpectedly cools, raising the prospect that interest rates could be close to their peak.
The Mayor of London tells us that Rishi Sunak is weaponizing climate change, as the Prime Minister considers delaying a ban on the sale of combustion engines.
And as electric vehicle sales saw in the EU, Ursula Vanderline warns that China's massive subsidies need to be investigated.
Let's start with a round up of our top stories. Britain's inflation has unexpectedly fallen to the lowest level in eighteen months, easing pressure for further interest rate hikes from the Bank of England. The consumer price INDEGS rose by six point seven percent from a year ago in August, but that was less than the six point eight percent gain the month before, and it was well below the
seven percent that economists had expected. Bloomberg's UK corus Lizzie Burden says it's good news for central bank policy makers in the UK.
We've heard the chief economists of the Bank of England, Huepill, talking about us reaching the peak of table mountain, maybe the end of the rate rises, and it makes it easier that that could be the case tomorrow.
Bloomberg'slazy Burden says that the latest data may still not be enough though to stop another quarter point interest rate increase tomorrow, given that inflation is still more than three times the bank's target of two percent.
The Mayor of London has offered a stinging rebuke of Conservative Party plans to roll back some green policies, calling it lazy politics from a weak prime minister. Richie Sunac says he wants to implement climate pledges in a quote more proportionate way. It's understood Sinax considering delaying a ban on the sale of new patrol and diesel cars until twenty thirty five. Speaking to Bloomberg, London's Mayor, City Can derided the move and this.
Is basically, you know, lazy politics from a weak prime minister throwing red meat to his backbenches because he so.
We can in effectual.
That's not only Can who's been pouring scorn on the idea. The former Conservative business secretary and COP twenty six president Alek Sharmer says the change won't help economically or electorally.
The head of the European Commission says that the EU needs to investigate massive subsidies that China gives its electric vehicle industry. The comments come as the EU's latest car sales data shows electric vehicles exceeded twenty percent of overall sales for the first time in August. As If Onderlion told Bloomberg that the Bloc won't accept unfair competition.
We want the level playing field for our companies, and what we see is massive subsidies in the EV sector in China, which is of course unleveling our playing field, and we do not accept this in the internal market for our companies, so we do also not accept it for Chinese companies.
Rondallian's comments come after the European Commission announced the anti subsidy of destigation last week, which could lead to tariffs on made in China evy imports. Beijing has called the move a naked act of protectionism and could restrict access to Europein exporters.
In response, the Federal Reserve is expected to pause rateikes today for the second time this year, while leaving the door open for another increase as early as November. With the inflation still well above the fed's two percent target and the US economy resilient, officials made pencil in one more hike in their quarterly projections. Bridgewater Associates co Chief investment Officer Karen Carneal Tambor says the FED may be slower to cut rates than many expect.
The bar is high to either raise or lower rates from where we are today. When you look at what it takes to get fast rate declines, usually you need the economy collapsing pretty quickly. There's a sense of urgency, right, economies collapsing sense of urgency, lower rates as fast as you can. That's very far from where we are today. We don't have a collapsing economy create that, and inflation is still uncomfortably high. It's not as as it was.
It has been coming down, but the impetus for I got a lower rate quickly is certainly not there.
You can hear that full conversation with Karen Carneel tambora accorded at the end of August on the latest episode of Bloomberg Wealth of David Rubinstein will bring you their FED rate decision live here on Bloomberg at seven pm London time, followed by Jern Powell's press conference thirty minutes later.
Now, the Confederation of British Industry has postponed its annual meeting at the last minute over concerns about cash flow. Poomberg's You and Potts reports.
The CBI is long beeing, Britain's biggest business lobby group. Now Sky News reports it's thought to be as little as four weeks away from running out of money. Up until early this morning, the CBI's website listed it's AGM due to kickoff today at ten am, but the business group told members yesterday its big annual meeting is being
postponed due to cash flow issues. Its money problems come after dozens of the UK's biggas company suspending engagement with the CBI in the wake of a series of allegations of serious sexual misconduct to the group in London. I'm you in Pots of Bloomberg.
Radio President Joe Biden is calling on world leaders to stand with the Ukraine in its war against Russia. He made the appeal at the UN General Assembly in New York.
If you allow Ukraine to be carved up, is the independence of any nation secure? Hid respectfully suggest the answers, No, we have to stand up to this Neked aggression today and the tour other would be aggressiors tomorrow.
Biden's remarks attracted applause from UN delegates, including his Ukrainian counterpart, Valdomei Zelenski, who was in the audience. Concerns have been growing over the cost of backing Ukraine's fight, with Kiev's forces struggling to make major battlefield gains. Boomberg understands that one G seven official sees the war lasting as long as seven years, and says that allies need to plan financially to continue supporting.
Consumers accidentally caught a glimpse of Microsoft's future video game plans after the tech giant mistakenly provided confidential information to a federal court website. The details were part of the FTC's antitrust suit against its takeover of Activision Blizzard, including unannounced games under refreshed Xbox console. The information has since been removed.
Those are our top stories for you this morning. On the markets. European stocks are currently up by three tenths of one percent, forty one hundred shares also gaining six tenths of one percent. Two year Treasury yields trading at five sports zero eight. The big move though markets a thirteen and a half basis point decline for two year UK guilt yields now trading at four point eight five percent.
The story linked to those inflation numbers we were talking about from Bloomberg opinion column of some More and Summerset Web this morning writing about the slump in the buy to let market. So we know that rents have been going up at an almost record pace, in fact twelve percent year on year, thirty percent hiresince the start of the pandemic, but the number of people who are willing to stay in the by to let markets splickly take out to new mortgages has slumped. Obviously, rising rates is
a big problem. Add to that, marrin Somerset Web says rising regulatory costs, incoming net zero rules, few extra wealth taxes, and the risk that rent control could pose to the income on these properties as well. And essentially many because a lot of we're talking about a lot of small players, and we talk about the vite let market are saying
it's not worth it and pulling out. But that creates a whole different problem, is that the supply in the market shrinks, rents keep going up, and you're present potentially presented with a rental crisis.
Yeah, look, rent on issue, aren't they. I mean there's a problem with landlords, with upgrading old buildings, with the cost of renting, you know, with how you professionalize it, with climate change coming. But I just wonder whether we're going to really get anything out of this government of
Chuca's government. You know, this is a fraught issue. And lady we're talking about ris you talking about sort of rolling back some green pledges seeing that as a win electorally potentially for the Conservatives.
Yeah, we'll be.
Watching to see what the parties say about this when we get closer to the election. Let's get more details though on today's big data print. Consumer price inflation in the UK unexpectedly falling to the lowest level in eighteen months, easing pressure for further rate ikes from the Bank of England. We've already seen the market scaling back their bets on what the Bank will do next ahead of its meeting tomorrow. Let's get more from our senior UK economist, Dan Hansen. Dan,
great to have you with us. Is took us through I suppose your reaction to what we saw in the data this morning, a slowdown in in core and in the headline CPI rate.
Yeah, I mean it was in good morning. Sorry, it was a huge surprise, to be honest with you, but of course a welcome surprise because we've spent most of this year discussing upside CPI surprises, so it was nice to get a get a downside surprise, I think. So
you're absolutely right. I mean, the thing that really caught my eye was the core number falling to six point two percent, and beneath that if you look at if you look at the breakdown, it looks pretty widespread, so that all important services inflation number fell from seven point four percent to six point eight percent. So it's still very elevated, but nonetheless it's finally moving in the right direction,
particularly when we're thinking about the Bank of England. So I think there was there was a lot of good news in the in the release, and of course with the with the bank meeting tomorrow, it does throw up a bit of a cloud of uncertainty about what they might might decide to do.
Yeah. Absolutely. Do you think that it is going to influence their decision tomorrow. I'm just looking at the function on the Blueberg terminal that shows what markets expect. I mean, you've seen a big pullback now in terms of the percentage probability of a rate height tomorrow out of the Bank of England.
Yeah, I mean, and I think that's obviously the obviously the correct reaction to the day. I mean, I think there are a few things. I mean, the bank will definitely want to be sure this is durable. In terms of the dropping core inflation we've seen, particularly in the UK, less so in the Eurozone and the US, but core inflation has been quite volatile. It has bounced around. We've had upside mainly upside surprises, but now we've had a downside surprise as well, so the path down hasn't been smooth,
so they want to be sure it's durable. I mean, in terms of tomorrow, I think there's still enough concern, or there will still be enough concern around the pay growth data for them to hike again. But I definitely think it's a much more balanced decision with this, because if you think about it, the pay data or the pay growth data is the only thing that's really surprised to the upside. Now you've got services inflation surprising to the downside, you've got the economy weakening, and you've got
the unemployment rate rising fast than they expect. So there's a lot of dubbish news on the data front other than the pay growth data. But I think on balance, the bank is going to lean towards probably just doing one more, just essentially on insurance. But I think that beyond that, there's there's a real question about is that going to be the last one?
And is that it?
And will they will they choose to send a stronger signal that they're going to pause in following tomorrow's hike.
If it is a hike and a pause, or perhaps signaling a pause now and one more hike to come, How how soon could we start to think about interest rate cut to the BIOI yeah, I mean, that's the that.
Would be what the main question. And I think actually, when you think about tomorrow, that would be one of the things the bank wants to guard against having got to the peak. The last thing it wants is the debate quickly shift to the timing of the first cut. You know, we've heard from Hugh Peel, the Chief Economist, about this idea of table mountain rates staying higher for longer. For that to be an effective strategy, markets need to believe that tightening is still potentially on the table and
there is a tightening bias. Jay Power has been very good at that doing that, the Federal Reserve chair. So I think for us at least we think in the middle of next year will be the timing of the first cut. So our first cuts in the second quarter of twenty twenty four. I think the risks are probably to it being a little bit later than that. I mean, we've had some good news on inflation today, but the
grind lower is going to take time. Getting down to that two percent is going to take a very long time. We don't think it's going to happen till early twenty twenty five. So I think we've got the first cut coming in in the middle of next year. But I think it wouldn't surprise me at all if it was delayed all attle bit later.
Okay, that's interesting, do you think though, I mean that the UK's position compared to the rest of the world does remain pretty fraught, doesn't it. I mean, compare us to the US and Europe, the inflation picture is still very difficult.
Dan briefly, Yeah, and that's exactly the point. And I think that's why they're going to be careful about not claiming victory from one inflation number. So I think, you know, tomorrow it is likely we're going to get a hike, and they're also not going to be too confident about confident about signaling victory. And it's also why next year,
if there are cuts, they'll be very limited. They're going to keep more to keep rates restrictive until infact really does get close to that two percent number.
Okay, Dan, thank you so much for being with us. Bloomberg Senior UK economist Dan Hanson, let's.
Bring you more now of our interviewed London's mayor City Can He says the Prime Minister is week for pulling back on green policies. He's been speaking to Bloomberg's Francine Lackway.
Well, what's happening is some people are trying to weaponize climate change, weaponize air pollution. And here's the perversity of what Prime Minister Sunac is doing.
We've seen in the UK and September.
In London in September, for the first time ever, four consecutive days of temperatures north of thurny degrees celsius. We saw last year in London temperatures north of forty degrees celsius.
Wildfires in London. We've seen across.
Europe and the global North in America, wildfires, droughts, heat waves. The response of government should be actually to turn this awful crisis into an opportunity, creating green jobs, a green new deal, thinking about how we can both save the planet, address climate change, but also give people security and have that just transition. And this is basically, you know, lazy politics from a weak prime minister throwing red meat to his backbenches because he's so weak and ineffectual.
Do you think you could have been better supported by Kerstarmarch with you guys.
Well, I recognize that we've got to make sure we take people with us. I recognize that addressed people's concerns, but concerns. But from kir Starmer and the Labor Party, what I would hope to see and we are seeing, is plans to.
Address the climate emergency. You've got an announcement from the Shadow of Finance.
Secretary Rachel Rehees saying, you know what, in the first term of a labor government will be invested into the tune of twenty eight billion pounds a year, which is a wall terms, akin to more than President Biden's Inflation Reduction Act.
But Mayor, is it fair to say that you could have gotten more support by Drestarma on u les and also in the by elections and you haven't because it's now a political hot potato.
But what happened was the by election in Oxbridge and Rice that took place a few weeks before the units was expanded. People had judginge concerns which we were addressing at the same time people were playing on that as well as so. Kier and I are close friends. We've flowing to over for more than twenty five years. The only thing we disagree about is I support a great soccer team, great football team Liverpool.
He sports a rubbish roun Arsenal okay.
But apart from football, what kind of advice would you give him to win the general election?
No?
I don't give care advice.
You know what I do is I'm a friend to care but also an example of what a labor politician winning the difference we can make being pro business, supporting businesses to flourish and thrived, being pro enterprise, being pro fighting a climmergency, being pro clean building, recognoumns, affordable homes, making sure we invest in public transfer and young people. And what do want people to see across the country
is that that's the difference labor women can make. Compare to contrast to a Conservative government where there's been economic mismanagement. List trust is all from many budget last year, but also a week at ineffectual Conservative leader.
What can labor now do to be closer to businesses? There has been a campaign to actually get them on board. I think the latest polls show that they be pretty happy with the labor government.
What would you do more?
Well, there's two There's two things that people want to see from good leaders. One is addressing social injustices, but also economic competence, supporting businesses, being proud to spaught businesses, being pro businesses.
Being pro business. One of the things that we've got to have the humility.
Is politicians to do accept is you know, we don't create the jobs the wealth of prospiracy for often we think we do, but we don't. We can create the environment where businesses flourish and thrive, and work with businesses to be pro well paid jobs, to work with businesses to make sure they invest in young people, to work with businesses to train up people to have the skills for the.
Jobs being created.
My nervousness about the Layer Party is our reputation in the recent past has been with anti growth or anti prosperity. What KOs Arma Rachel reeves their teams have done is to reassure businesses by listening to them that we are pro business.
We're back at business.
As a result, Mayor, sure, should London have gotten the rm IPO and was it a kick in the teeth not to have done so?
I'm sorry, hey you the r IPO.
Well listen, But the great thing about you know, London is our in the line strengths are still there. We you know, even post Brexit, we are still a city that has got all the things that businesses need to invest in London, to expand in London and to run in London.
Mayor, what are you most excited about in the climate space?
So?
Is it green?
Vard issuance. Can London Financial as a centre actually become a hub for a green finance and green issuance.
We started our conversation by you talking about the Ultra Amission Zone, the world's biggest clean air zone.
There are so many exciting things happening in London.
We have the largest amount of electric buses in the western world, the largest amount of rapid charging points in the in Western Europe, bigger party you know, brecon numbers of trees being planted, rewild in half at taxi electric. What I'm saying to investors around the globis London is the green capital of the world. This crisis of the
clim emergency can be an opportunity. We have a green bond in London, more than five hundred million pounds come to London invest and also at the same time make sure that the London Stock Exchange is known as the green stock Exchange.
But may can London do that by itself? If you have a government that doesn't really believe in its own plasures in the transition I.
Say this, I said this with the utmost humility and no complace. See this government is only here for a short time in the near future, there's a general election as soon as it's called. I'm hoping the British public gives Labor a chance to be in government. And one of the things that Kirstar has done this week, another good thing is done, is is to set out a direction of travel that with a Labor government will the
closer in alignment with the European Union. And so what I say to people nervous about this ineffectual, ineffective Conservative government is their life span is very short.
They'll be out of power very soon.
This is Bloomberg Daybreak Europe, your morning brief on the stories making news from London to Wall Streets and beyond.
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