Bloomberg Daybreak Weekend: Queen, CPI, China, GOP (Podcast)

in China change the picture for markets? I'm Amy Morris in Washington, will look into the changing fortunes of the Republican Party as the midterm campaigns heat up. That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg Eliven Free on New York, Bloomberg one, Washington d C, Bloomberg one oh six one, Boston, Bloomberg nine sixties, San Francisco, d A B Digital Radio London, Sirius XM one and around the world on Bloomberg Radio dot Com and via the

Bloomberg Business App. Good day to you. I'm Nathan Hagar. We begin today's program with a look at inflation and whether we could be in line for some relief for that I'm joined by Bloomberg's Global Economics and Policy correspondent Michael McKee. So, Mike, we're all waiting for the release of the August Consumer Price Index on Tuesday. What are

you expecting. Well, there's a good possibility we could see on a month over month basis a slight decline in a CPI because energy prices continued to fall during the month of August. That made a big difference in July when month over month inflation came in basically flat. So forecast a consensus forecast at this point for about a

tenth of a percentage point decline. Now that would only push year over year inflation down to about eight point one percent, So still very high and something that will be concerning Americans. But progress. Yeah, progress, And I guess the question is, as it has been for some time, whether we've hit the peak of inflation. Can we say that, given that so much of it is driven, as you rightly point out, by energy and food prices. Yeah, that's the problem. Um, in an ordinary world you'd say we'd

hit the peak. A number of categories are probably going to start going down. Now we've seen, UH, car assemblies start to pick up, so h new car prices should start to fall. Use car prices are already falling, and with the decline in how home sales market, we're seeing appliances start to uh, you know, stop their increases at least put it that way in in some cases fall.

Even though housing will still contribute to inflation, the things we buy two put in our homes may not, so that could have a big impact, particularly on core inflation. The problem is you have something like Vladimir Putin's addressed last week in which he said that the gas is going to stay off for a while and Europe's gonna have a cold winder oil being fungible around the world,

a global price. We could easily see headline inflation go back up if an energy prices go back up, And of course that's something that the Federal Reserve doesn't have much control over with the tools it has, and it's gonna stay focused on, as you mentioned earlier, the core.

What are we looking at from the core? Well, we are looking at this point, uh for a three ten percent gain, that's the consensus so far, and that would bring the core rate on a year over your basis because of base effects up from where it was was five point nine percent of July would go up to six in this case, Given where we are with inflation and the unique nature of pandemic induced inflationary episode, I think the FED would be satisfied to see some of

the major categories going down even if the overall headline inflation doesn't go down. If we get a real surprise rise in core inflation, that would certainly seal seventy bases point increase at the FED meeting on the twenty one, But that's probably baked in anyway. It would take quite

a fall for the FED to change their minds about that. Now. Yeah, it sounds like the Fed itself is almost baked that in, given some of the hawkish commentary we've heard in the run up, not just to this inflation print, but to the decision coming up later this month. Yeah, the Feds seems to have gotten more hawkish as time went by, and that maybe in part of by product of that strong jobs report we got for the month of August. And if inflation doesn't fall a lot, then it just

it makes their decision a whole lot easier. Uh. I think Jim Bullard put it best. Uh, He's been a hawk all along of pushing for seventy five basis points, and he said, if you're going to get to a certain level, which they all agree they need to do slightly restrictive, why wait, do it now, and then if you need to you can reverse it. But by dragging it out, you only let inflation get more firmly entrenched. And so I think that's kind of what they've all embraced.

There's a tactical, uh question about how high you need to go, whether they need to go over four percent or not, what is restrictive, but the strategy is all kind of the same. We get up to that restrictive

level and leave it there for a while. Yeah, I was gonna say, I'm sure there's a lot of discussion, a lot of debate about whether we're already in restrictive territory, even though, as you say, the markets are expecting that rates are going to continue going higher, and even if it starts too slow, we are going to see further increases for the rest of this year. Yeah, this is where we get a little nerdy and point out that the FED looks at the long term neutral rate as

about two and a half percent. That would be with unemployment somewhere in the low four percent rate and inflation somewhere around two percent. But since inflation is elevated and unemployment is lower than what the Fed thinks is a neutral level, it is likely that the Fed thinks the neutral rate is temporarily much higher. In other words, it'll it'll take more of rate increase to bring down the inflation rate to what it thinks is neutral, and then

they could bring down UH interest rates. So you could expect that the Fed is going to get to somewhere in the vicinity of foreign if we have a surprise, go over it UH and hold it there for quite some time. Unless we get signs of recession. It is likely that we're going to leave interest rates in this neighborhood or above for at least a year. All right, Mike,

thanks for being with us. That's Bloomberg Global Economics and Policy correspondent Michael McKean, and coming up on Bloomberg Daybreak weekend, we turned to the UK with Britain in ten days of mourning following the death of the Queen. I'm Nathan Hagar and this is Bloomberger. This is Bloomberg Daybreak weekend. Our global look ahead at the top stories for investors

in the coming week. I'm Nathan Hagar. Up. Later in our program we'll look at the Chinese economy, but first we head across the pond to the UK, where the British people lost their queen this week. Now the country enters a period of mourning. For more on the details and the path ahead, we turned to BLUEMBERG Daybreak Europe anchors Caroline Hepger and Stephen Caroll. Nathan. The Queen died peacefully at balm Mole on Thursday, the eighth of September, and on Friday the nation went into a period of

ten days of morning. What are we expecting over these coming days, Well, the lying in state of the Queen, King Charles the Third's first speech to the nation as King, and of course then the state funeral of Queen Elizabeth. Now I expect the mood in London will no doubt be extremely somber in the coming days. Stephen, Yes, already we could see in the mere moments after the news

was announced, already the formal process was in place. The new Prime Minister, Liz Trust said that Queen Elizabeth the Second was the rock on which modern Britain was built her predecessor. Boris Johnson also commenting saying that in the hearts of every one of us there was there is an ache at the passing of our queen, a deep and personal sense of loss, far more intense perhaps than

we expected. Interesting that he reflects on that point of her being such a constant in people's lives in this country, and how even though she was ninety six years old, it still has come as a shock and and deeply affected so many people here. Yeah. Absolutely, I think the nation was already on alert on Thursday when on Bloomberg Radio we were focused, of course on the economics and politics.

We were watching the brand new Prime Minister delivering a significant speech on energy bills, and in Parliament at some point after that speech, key politicians were added a slip of paper. Then we got the Bucking and Palace release of a statement about the Queen's health. That really did put the country on notice about the gravity of the situation. It wasn't though, until six thirty or around that point on Thursday evening, that we learned of the death of

the Queen. As that news has been thinking in here, we've been speaking to Charles Anson, whose communications consultant and a former press secretary to the Queen. He was speaking to us on Bloomberg Radio and here some of his reflections on the Queen's legacy and what might be to come under King Charles the Third. The reason that the British monarchy has survived and prospered over a thousand years,

with difficult times and good times as well. The reason it has survived it has been able to adapt, and none more so than in these last seventy years have changed since the Second World War. And what the Queen has brought is a sort of steady modernizing approach of the monarchy, whilst remaining herself the same character she was when she stood and knelt in Westminster Abbey her coronation.

And I think that combination of appearing to be the same whilst being open to new ideas and new ways of doing things has served the monarchy very well and reflects that there's society in the country that we now live in. And I think the process and embracing change in a very quiet sort of way has been very effective. And of course this has been admired by other great

political figures around the world. News Mandela Barack Obama virtually every American president has valued the Queen's and take on things. Her experience is enormous, and she's used it and projected Britain in a way that has been a touching to many people. Given that legacy and influence of the Queen, what sort of king do you think that Charles will be? Well?

I think each monarch brings his own his or her own style and some beliefs to the role, But essentially the core value of the monarchy is to remain politically neutral above the political fray, and to work for society

and the nation as a whole. And I think the aim very much of the Prince of Wales now King Charles the Third, and of his mother, Queen Elizabeth, was to try to make a better world, one that was more tolerant, one that was more stable and steady, and one that was able to deal with adversity as well

as with triumph. And I think that combination of quiet steadiness making the world a certainly better place is a tremendous ingredient in the world where politics is often a very rough business, and the constitutional monarchy there's an overlay to the political and economics society and God embodies a set of values about decency, about tolerance, about fairness, about inclusion, about good relations with people in the matter what their religion are, what their color are, so and so forth.

And I think you know, under in reign of the new King, it will be interesting to see how King Charles the Third takes forward and this sense of inclusion in society which he has spent over the fifty years and promoting and encouraging amongst young people of different colors and religions in the sort of modern society that we

have now. And I think that's a forceful influence. It's not a party political influence, but for the body politics ahult to have a constitutional monarchy doesn't interfere with the day to day political process, but there's art and minds of that monarchy are for the changes needed in the mode societies and make it work well and to make it work more fairly. I think there are a great

force for good in that respect. And I think whether you're a monarchist or not, our constitutional monarchy is a mechanism that offers a bit more stability and prospect for sensible change, for good manners and for high standards in society and particularly in political and public life. And they said that example in the Queen is a superb an exemplar of that. That's trans Anson, former Press Ecretary to

the Queen. How fascinating to hear those insights from someone who knows the royal family so well about the challenges not insignificant face King Charles the Third, he is seventy three years old and we know him well. Of course, he is the oldest person to accede to the throne in British history. We know and understand how much rests

now upon his shoulders. But I think Stephen, over these coming days, I and many Britain's will be grieving, no doubt, quite personally for the loss of the longest reigning monarch in British history. We're going to be continuing our reporting here on Bloomberg Radio as we look to the state funeral of Queen Elizabeth the Second and we commemorate her

life and times. I'm Stephen Carroll in London. You can catch us every weekday morning here for Bloomberg Daybreak Europe, starting at six am in London and one am on Wall Street. Nathan, thank you, Caroline and Stephen, and coming up I'm Bloomberg Daybreak Weekend. How much is China's economy really slowing? I'm Nathan Hager, and this is Bloomberg broadcasting live from the Bloomberg Interactive Broker Studio in New York.

Bloomberg eleven three oh to Washington, d C, Bloomberg to Boston, Bloomberg one O six one to San Francisco, Bloomberg nine six to the country Sirius XM Channel one nineteen to London d A B Digital Radio, and around the globe the Bloomberg Business Act and Bloomberg Radio dot Com. This is Bloomberg day Break Weekend. I'm Nathan Hager with your global look ahead at the top stories for investors in

the coming week. China's economy has been experiencing some pacups, we'll call them, and we may learn more in the comic week about just how big the challenges or problems really are in Beijing for more. Let's head to Hong Kong and Bloomberg Daybreak Asia host Brian Curtis. Nathan will get a slew of Chinese data in the coming week that will shed further light on the health of the economy.

Markets in China have been choppy for months now in light of further COVID lockdowns, the property crisis, a tough regulatory overhanging, and rising geopolitical tensions. Joining us to see what it all means here for markets going forward in China is Sophia Orte Costa, Bloomberg's chief China market correspondent. Sophia,

thanks very much for taking some time with this. So the c s I three, it's interesting it had strong outperformance against global peers from the period of April until about the end of June, and then all of a sudden, the door was slammed and we've been grinding lower from that time. What happened, Yeah, there was a sense that the worst was kind of over around April in terms

of lockdowns, COVID zero and also the property market. That's kind of when officials and authorities in a Chinese hits he started rolling back some of the strictest measures around prop to around housing. That's also when we saw the officials really react quite strongly to the risk of the mortgage boycott's kind of going out of control. So there was a little bit of faith in financial markets that

um that things would get better. The problem is these rebounds really don't last inflows don't stick, and nothing really changes despite vows of more action from Beijing. The problem really is when we saw that economic data actually turn worse after the summer, people really started thinking that actually, you know, now is not the right time to buy, and confidence really really really declined from there. And it's both internal and external demand that is lagging, yes, exactly,

I mean within China domestically. The problem is the fiscal stimulus plans and the the surprise interest rate cuts. Um, they're really not that's all on the demand side of things, um. Sorry, on the supply side of things, it's not doing anything to stir up demand. UM. When you have retail sales really low. I mean we're getting uh and the number for August is expected to be around three point growth UM.

But that's not that's not great when you consider the impact of COVID zero and the never ending extended lockdowns in big cities like cheng Do. That is the key thing, and that kind of stops everything else from being effective. It doesn't matter what Bijing does, the more vows of more action and actual action keep falling flat. In terms of the stimulus, I mean, we can't say that policymakers haven't acted. They have rolled out measures, but it's just

no shock and awe. It's been drip, drip drip. Now, if we were to get a U shape recovery, plenty of economists tell us on our show Bloomberg Dave brak Asia that that's what we can expect, the U shaped recovery. If we were to get that, what might the catalysts be? I spoke to someone this this week. Actually, it will be a long grind. There is expectation of a U

shaped recovery. We we do have the Key Party Congress on October sixteenth, and my sense that there's so much baked into, so much expectation of of some kind of pivot after that. The question for me is what would the pivot look like. It doesn't look like she jumping is really easy off on the COVID zero Pulsey and that is Brian, really the biggest overhang in markets. The catalyst would be a suggestion that that will be pulled back. We know that that will be gradual and we know

what it's like. I mean here in Hong Kong it's been a very slow reopening, but any kind of sense or sign that China is moving in the right direction in terms of opening up the economy and opening up its borders would be a significant catalyst for markets. We had the regulatory overhang, which seems like it would never go away, and I'm not sure that it has, but it does seem like it doesn't really get as much attention right now. It seems like they've backed off a

little bit on that side of things. Could that possible happen with dynamic zero, Brian, It's all about watching the signs and seeing where China is going. If we do get, for example, m a relaxation of cross border testing, or if we get any sense that there are more flights from overseas into China, or if even within China there's an easing of movement between provinces, that would be a very good sign, at least from where we're standing, that

that China is moving forward with this. Thanks so much for joining us to take a close look at this, Sophia or Too Acosta, Bloomberg's chief China market correspondent. I'm Brian Curtis, along with Doug Krisner. You can catch us every weekday here for Bloomberg Daybreak. Asia, beginning at six am in Hong Kong and six pm on Wall Street. Nathan, Thank you, Brian. And coming up on Bloomberg Daybreak weekend, the GOP gets ready to try to end internal bickering

with a new platform. I'm Nathan Hagar, 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 Hagar. The Republican Party is getting ready to try to end its internal bickering with a new GOP platform. For more on exactly what they're doing ahead of the mid terms, let's go to Amy Morris in the Bloomberg newsroom in Washington. Amy, that's right, Nathan. Republican leaders are

aiming to unveil a unified party platform. House Minority Leader Kevin McCarthy planning to do this in September on the nineteenth. Joining me now to talk about this, Bloomberg political reporter Gregory Cordy. Greg thanks so much for joining us. We really appreciate taking the time. Sure, now, the Republicans really trying to get off the back foot here, tell us

what their strategy is. Well, one of the things they're trying to do is to uh present a campaign that's more than just being against President Joe Biden and his agenda,

but trying to give voters something to vote for. And so what they're gonna be doing UH in later this month is going to the city outside of Pittsburgh, Pennsylvania, which is significant in and of itself, to unveil this commitment with America, which is a uh something that kind of harkens back to New Gingrich's Contract with America back when Republicans took the House for the first time in decades and sort of layout what their agenda would be

if they took back the House. So it includes things like of the economy, uh, emphasizing energy production, on safety, talking about building that border wall that President Trump didn't quite finish, also just holding the Biden administration to account with more aggressive congressional oversight. Was back in June of last year the Republicans first started working on this, and of course that was a much different political environment when

uh Joe Biden was a lot more popular. But as the President's popularity has waned a little bit as inflation has gone up, the economy is is certainly a lot different than it was a year or two ago. Talking to Republican strategists and posters, they've they've seen this momentum on paper, it's the great time to run as a Republican,

and yet they're struggling. You see a lot of more Democratic enthusiasm in part because of the abortion issue, but also the president's approval is coming back, and so yes, this is an acknowledgement by Republicans that they need something more than maybe just against everything that Joe Biden is doing. They need to tell people what they're going to do. By the way, that sets up to the table when

Republicans hope to take back the way out. And the thing about this happening though in a mid term election year, is that mid terms are primarily about anchor. People do come out because they're against something, and that's why it usually favors the party that's out of power. Well, now here's a very emotional issue that now has energized the

other side and sort of balanced that. And so the only thing that mid terms are is that you talk to political scientists, uh, they are thermostatic, and what they mean by that is that voters tend to sort of adjust the temperature up or down based on where they think the center should be. And if voters since that the country is moving too far in one direction or the other, uh, they'll try to dial the thermostatic back to the center. Usually in the president's first two terms,

the president takes the country in his direction. But there's a lot of sort of countervailing factors here, and the abortion issue is one where voters might decide that no, uh, we we you know, we're maybe moving too far to the right on the issue and try to dial the country back a little bit more towards the middle. Meanwhile, we've been seeing reports some of your reporting the Democrats now have been getting more than double the money in the bank than Republicans as far as his cofers. Yeah,

there's two issues here. One is the fundraising and environment that we're in for the past of a few cycles is really driven by these small dollar donors. Really on post side. Trump is very effective in raising money from small dollar donors, but also there's a number of people on the left and then the Democratic Party that can

do that as well. But the other issue is also the Burnley and Republicans have been spending money this cycle earlier than they've had to in part because they're defending some seats that they didn't think that they would have to defend as aggressively. We've had a number of high profile Republican retirements, people like Senator Pat Toomey in Pennsylvania,

Rob Portman in Ohio, Richard Burr and North Carolina. All of those have opened up these currently Republican seats and into pretty competitive elections, maybe more competitive than than the Republicans had bargain bargain force. So they have to hold those seats, us to have to pick up some seats in places like Arizona or Georgia if they're going to take control of the Senate. And so the Senate map is a lot more unpredictable than it was, maybe even

just a year ago. So then what would be more significant for either Republicans or Democrats for any candidate out there. Is it money in the coffers or vote or turnout or are those so closely linked. It's hard to say, you know, I think in the end of at the end of the day, elections are decided by vote and

not money. And there's certainly a number of examples where a candidates who spend less money but has an effective message can win, but you know, the money can be a great equalizer, and so it's not that it's unimportant.

But I also am starting to get the sense out there that, you know, we're just so deluged with these political messages, but also people are are are attention is so much more fragmented than it was a decade or two ago, with people watching consuming their entertainment differently, and the political campaigns have been sort of struggling to keep

up to where people are To get their attention. It's not always on the local eleven o'clock news running a thirty second add it's gonna get people's attention, people have to be a lot more creative and use social media, and if they can do that in a cost effective way, that can be very effective as well. And we are talking about the mid terms and the changing fortunes of the GOP. Bloomberg political reporter Gregory Cordy is with us now, Uh, Gregory, is the dream of a red wave starting to fade?

We had almost gotten to the point of thinking it was a foregone conclusion. It's largely an expectations game, especially in the House. Is we just discussed with the Senate that's a little bit unpredictable because Candida quality matters a lot. There's only so many chess pieces on the board, and in a in a weird year, anything can happen. In the House is a lot more predictable that the House

races are much more tied to the president popularity. And as I said, that long term trend all the way back to the Civil War is that in all but about three or four elections since then, the party out of power games seats and very often takes back the House if they don't already control it. And so, uh, it's sort of baked in. In this cycle, Democrats control the House by only about five seats. Uh, any kind of a slight wind is going to push Republicans in

the power there. But again, then it becomes how big of a wave is it. In nine and two thousand and ten, when during the President Obama's first mid term, Republicans pick up sixty three seats, that's sort of the high water mark. Nobody expects the Republicans to be able to repeat that performance. But a year ago we were talking about maybe thirty thirty five, forty seats. Now the prognosticators are talking maybe a little more like five seats, and some of the models have it as you as

maybe ten or fifteen. And the size of Kevin McCarthy's majority is going to be important if he's going to put together a governing coalition that can elect him speaking speaker and actually get something done. So yeah, that it's not just whether the Republicans take back the House, it's how big of a majority they can build, uh, towards momentum towards There's been a lot of attention paid to the I don't want to call it a chasm, but a bit of a rift, let's say, between progressive Democrats

and your more traditional middle of the road Democrats. If we could turn the spotlight a minute onto the GOP, there is a similar rift there some open feuding between say Florida Senator Rick Scott Minority Leader Mitch McConnell um. Give us some insight and a little shine, a little light on what's going on behind the scenes. Yeah. Rick Scott is the Republican Senator from Florida, and he's important because he is the chairman of the National Republican Senatorial Committee,

that's the fundraising and campaign arm of Senate Republicans. And it's his job to get Republicans elected in Senates so that Republicans can take back control of the Senate. Mitch McConnell, the Senator from Kentucky, is the minority leader, the Republican leader in the Senate, and so it's also his job to do that. But there they didn't sort of a

cross purposes at times of the past few months. And I'll started earlier this year when ricks Got built his own platform without really talking to anybody else in the Republican caucus in the Senate, that they would talk about things like sun setting every federal law but putting on a deadline so every federal law would expire after five years. And Democrats were quick to point out that would include programs like Medicare and Social Security that a lot of

Americans depend on. But also making sure that everybody pays at least some tax, which would obviously be a uh an in tax increase on some of the poorest Americans. Not a popular idea in in either party as it turns out. So that was the policy riff that started this, and now there's sort of a disagreement on Republican strategy and trying to take back the Senate. Uh, in terms of what races to focus on, what the fundraising strategy

should be, that the spending strategy should be. And so now Mitch mc conall is uh, sort of really focusing on his own effort. He's got his own separate campaign effort called the Senate Leadership Fund, trying to raise money in a super packet. It's to support Republican candidates for the Senate. He's complained about candidate quality being an issue.

There are a lot of candidates on the ballot for Republican that have no prior political experience, but they got there because they had the endorsement of former President Trump UM and so that there's But basically what this all comes down to is things aren't going quite as planned for Republicans. Uh. And though maybe there's already some finger pointing going on in case things don't work out and Democrats continue to hold the Senate or maybe even pick

up seats. All right, thank you, Gregory so much. Gregory Cordy covers politics for Bloomberg News, and that is what is going on in the nation's capital. For more of our political news coverage, you can tune into Balance of Power with David Weston weekdays at noon Wall Street Time, and sound On with Joe Matthew week days at five pm Wall Street Time. Right here on Bloomberg Radio, I'm Amy Morris and this is Bloomberg. Nathan. All right, thank

you Amy. That was Amy Morris reporting from our Bloomberg newsroom in the nation's capital. And that does it for this edition of Bloomberg day Break Weekend. Join us again Monday morning, five am Wall Street Time for the latest on markets overseas and all the news you need to start your day. I'm Nathan Hagrin and this is Bloomberg