This is Bloomberg day Break Weekend, our global look at the top stories in the coming week from our day Break anchors all around the world, and straight ahead on the program, a look at Tuesday's US presidential election and what could be at stake for the US economy. Also a preview of this week's Federal Preserve Policy meeting. I'm Tom Busby in New York. I'm Stephen Kyle in London.
Work calculating the size of the Bank of England's but just headache.
I'm Charlie Pellett, looking ahead to earnings from some of Japan's biggest automakers and the state of the gold trade.
That's all straight ahead on Bloomberg Daybreak Weekend, The business news you need to wrap up your week. Available on Apple, Spotify, the Bloomberg Business Appen everywhere you get your podcasts.
Good day to you. I'm Tom Busby. We begin today's program with this Tuesday's US presidential election and what each candidate, if he or she wins, is hoping to do for the economy. For more, we turned to Mark Niquette, Bloomberg Real Economy Team reporter. Mark. Thank you for joining us. Well, we're getting down to the wire. Right now, this election looks like a toss up, just a few key swing states likely to decide the outcome. I'm going to ask
you where the economy is right now. One candidate calls it a disaster. I don't think that's true, but why don't you tell me where we are now?
We kind of have a disconnect between an economy that economic indicators show is doing well and is strong, and public perception is measured by poles that the economy is headed in the wrong direction.
We had a spate of economic reports this week that would be otherwise you'd think encouraging for Kamala Harris, showing that the economy is doing quite well. We had a GDP report yesterday that showed an annualized rate of two point eight percent in the third quarter, consumer spending was up. On Tuesday, we had a Consumer Confidence report showing that consumer confidence increased in October by the most since March
twenty twenty one. And we had a PCE report, you know, so called core personal consumption Expenditures, that showed that overall inflation was down to two point one percent, the lowest since early twenty twenty one. But despite these good economic numbers, polling continues to show that voters think the economy is headed in the wrong direction. They're still stuck on you know, high prices and you know a sense that inflation rate that we've seen come down hasn't translated into their everyday
purchases of gas and groceries. So that's sort of the backdrop for the presidential election where you know, we have a race where voters say the economy is their biggest issue, and polls, including our poll Morning Console, show that voters trust Trump Donald Trump more than Kamala Harris.
On the economy.
Well, because of that, let's talk then about what each candidate is promising to do. You're right, former President Trump, many believe he handled the economy better right now, though it seems to be banking on punishing import tariffs as his chief economic plan. Tariff certainly have their benefits, but is this really going to move the needle on inflation and household budgets.
Well, if you talk to most mainstream economists, they'll tell you yes, that there's even forecasts out there that will calculate what impact the proposed tariffs that President Trump, former President Trump has promised on the campaign trail, What impact they would have on the increase in inflation and decrease
in gross domestic product. The expectation from most economists is that when you put a tariff on at the size that President Trump is talking about, ten to twenty percent on all imports, on imports from China, that's just going to drive up prices because you know foreign countries, foreign countries don't pay the tariffs. Importers pay the tariffs, and they're passed along to consumers. So the rising prices will,
some economists predict, will lead to even stay inflation. Now that the president's former president and his supporters would argue that the inflation didn't spike during his first term when he put in tariffs on China and aluminum and steel imports, and that you know, their projections are that the tariffs will actually help with reshoring of manufacturing and creating of manufacturing jobs in the US and actually increase economic growth.
So we'll kind of have to wait and see if former President Trump wins and he does put these tariffs on, you know what impact they would have, because while his supporters say that, you know, there wasn't a spike in inflation during his first term because of the tar see put on. What he's talking about enacting if he elected to another term is substantially higher and broader. Essentially, his proposed tariffs would hit all three trillion of US imports annually.
That would have a staggering, staggering, presumably a big impact on economy.
Vice President Harris has promised to tackle the high cost of living by boosting new home construction, going after corporations accused of price gouging, and expanding a tax credit for those with young families. And to pay for all that, of course, taxes on the wealthy. What would that mean for inflation and for the economy.
Well, that's going to be the big fight next year over taxes. We have the tax cuts that former President Trump enacted when he was in office in twenty seventeen that are expiring at the end of twenty twenty five. So the next president, whether it's Kamala Harris or Donald Trump, and the newly elected Congress will have to deal with taking action on those expiring tax cuts, either extending them as President Trump has talked about doing, or changing them
as you mentioned, Kamala Harris has talked about. Vice President Harris has talked about She's suggesting that the tax cuts should be limited to those making four hundred thousand dollars in the less a year, So preserve the tax cuts for middle class, but allow increases for wealthier individuals, and increase the corporate rate to twenty eight percent as a way to, as she would say, you know, have the wealthy and corporations pay their fair share, but also to
rai's revenue to pay for, as you mentioned, expanded childcare tax credit, tax credit for first time home buyers, and some other subsidies that she's proposed for small businesses. But that's all going to be up to Congress, and one of the things we'll be watching to see, you know, what kind of party control of Congress we see after
the elections on Tuesday. You know, we have a potential for a president elected with full control party control of Congress or divided government, and that will go a long way determining what happens with the tax bill.
Yeah, you bet well, a lot to look forward to election day Tuesday, November fifth. Our thanks to Mark Niquette, Bloomberg Real Economy Team reporter. But we turned now to the Federal Reserve as policymakers meet again this week on interest rates. For more and what to expect. We turned to Stuart paul Us, economists with Bloomberg Economics now Stewart. FED Chair Jerome Pala has always maintained that FOMC decisions
are data driven. And wow, did we get some kind of data point this past Friday, just twelve thousand jobs added in October. Was this just shock to you? And what does it mean for the Fed?
We had anticipated actually a slightly worse jobs report. We'd expected total employment to actually decline by about ten thousand jobs. Private employment did decline during the month. A big part of that is the effect of both hurricanes Milton and Hollene, and also the strike at Boeing. We did see about forty five thousand jobs lost in manufacturing, and we think that that's mostly a consequence of the strike at Boeing
and knock on effects at parts suppliers. The household survey where we see the unemployment rate actually worse in just a little bit. Now, the headline on employment rate held steady at four point one percent, but that's mostly just a matter of rounding. It's literally just a matter of a few hundreds of a percentage point that is getting rounded away. And that's keeping the unemployment rate at four point one percent, But the actual numbers do look a
little bit worse when you look under the surface. Undoubtedly, the labor market is cooling. We also saw earlier last week the total number of job openings declining during the month and the quits rate falling as workers realize and as they come to grips to the fact that it is more difficult to find new employment at higher wages. The Fed is absolutely going to be taking this cooling labor market into consideration what it meets next week to make its next rate cut decision.
Now, on the other hand, we have seen some very encouraging economic data as well about GDP, consumer spending, consumer sentiment, and inflation.
Right, that's right, So core PCE inflation, the Fed's preferred gauge, came in a bit hot in September, and yes, you're right. Through the third quarter we did see pretty strong growth two point eight percent annualized growth on the back of
about three point seven percent annualized consumer spending growth. Now, when we drill down into the data, looks to us like it's mostly employment and employee compensation income, so wage income that's supporting that spending and just an exceptionally low saving rate that it just consumers undersaving to support their
spending habit. As the labor market cools, we think that that undersaving is going to go away, consumers are going to get a little bit more cautious, and so a lot of those tailwinds that have been supporting spending we think are going to fase as the labor market cool. So yes, for now, things do look rather strong. They
look strong through the GDP numbers. But I think that if you're thinking like the FED, and you're thinking about what it's going to look like down the line, it's time to get a little bit more cautious to think that some of those talwinds might be fading.
And the FED still has another meeting in mid December, right, So what's your gut feeling right now after in the wake of this Job's report, dismal report of.
What the Fed is going to do, we think that the Fed is going to cut by twenty five basis points, So still another rate cut, still the removal of restrictive policy, not quite getting back to neutral, certainly not accommodative, but a twenty five basis point reduction for November Looking ahead to December, we still think another twenty five basis points
is in play. But for a data dependent FED, who's probably going to then slow down its cadence of rate cuts in twenty twenty five, December is going to be more of a knife edge decision. We'll need to see just how much the labor market deterior rates between now and then.
Mortgage rates, though, have moved the other way. Why is that? And I mean it's really got to affect housing and people's affordability, But why have we seen six weeks in a row mortgage rates edge a little bit higher.
Mortgage rates tend to be benchmarked based on longer term treasury rates, So the Fed is cutting very very short term interest rates, and in fact, by running off its bond portfolio, it's putting upward pressure on long term rates, all at a time when we have on election coming up where the two candidates are spending heavy versus spending heavier.
There is no austerity candidate, So I think that the bond market is looking at our fiscal situation as a country, and they're also feeling the effects of the runoff of the Fed's balance sheet, and we're getting some upward pressure on long term yields, and that's pushing up mortgage rates. Again.
We think that higher long term rates, it's higher mortgage rates tends to put people in a little bit more bind So even as the Fed is cutting short term interest rates, folks are probably going to need to rain and spending just a bit more, especially as the labor market cools.
Yeah.
Oh, and it's cool well that two day FOMC meeting kicks off Wednesday, delay to day because of the elections decision expected two pm Wall Street time on Thursday, and our thanks to Stuart paul Us economists with Bloomberg Economics coming up on Bloomberg day Break weekend to look inside the inaugural budget of the UK's newly installed government what that means for the Bank of England. I'm Tom Busby
and this is Bloomberg. This is Bloomberg day Break Weekend, our global look ahead at the top stories for investors in the coming week. I'm Tom Busby in New York. Up later in our program will look ahead to earnings from some of the world's biggest automakers. But first, the UK's new labor government has delivered its first ever budget, boasting one of the biggest tax increases in a generation
and changes to the nation's much touted fiscal rules. What will the country's new economic direction mean for the Bank of England. For more, let's go to London and bring in Bloomberg daybreak, Eurobanker Stephen Carroll.
Tom The UK's Chancellor of the Exchequer, Rachel Reeves, unveiled a forty billion pound package of tax rises and ramped up borrowing in a dramatic move to meet the Labor Party's pledge to rebuild the UK.
Well.
One person who'll be keeping a close eye on the developments announced by the chancellors the Government of the Bank of England Andrew Bailey. He and his fellow policymakers are due to make their next interest rate decision in the coming days, just shortly after the budget announcement. Although officials have already opted to lower borrowing costs this year, economist, they're warning that the pain of high rates could be
prolonged following Reeves's announcement. It's all the government plans to lift borrowing by one hundred and forty two billion pounds over five years to help fund a massive program of investment and boost public services. Couples with appliged to deliver another large jump in the minimum wage, our potential threats to the BOSIM to keep inflighting low. We discussed how reads as plan my effect personal spending habits with our money distilled columnist John Steppek. Here's what he had to say.
I don't get it wrong. I mean I think that it's been the direction of travel has been very clear on property for a long time. And I think if you're someone who still views residential property as a viable investment for an amateur in person or even as an investment asset, you maybe need to have a look at what's happened over the last ten years because the tax benefits have been slashed. You know, this latest move jacking up the stamp duty again is just it's sort of
signaling we don't want people you own second homes. And that's before you get to local council taxes in various desirable areas. I mean, the other rabbit obviously is not it's basically saying it didn't happen. We'll defrost the tax thresholds in twenty twenty, twenty twenty night. But of course she's got you know, five years did change on the mean to put that, Yes, it.
Has Boombergs John step out there. So will government policy leave the Central Bank wary over the pace of further rate cuts? It's something I've been discussing with Boomberg's chief UK economist Dan Hansen. Give us some context. What has the budget for changed for Andrew Bailey and for BOI policymakers if.
You go back to the middle of September, I think it was or not long after the September meeting, Andrew Bailey gave an interview saying that policymakers could be a little bit more aggressive in terms of their speed of
rate cuts. I think the budget makes that quite unlikely now in terms of how quickly they ease I think there's sort of the baseline case, and a reasonable base case is that they they may they make a move down in November, but they stick to the mantra that things will be gradual, so they're not going to indicate I don't think that they will speed up the pace
of rate cuts for that happen. The data is going to have to really surprise, and it surprised a bit to the downside, but it's not really surprising to the downside, and as you just mentioned there there's this enormous fiscal stimulus that needs to be factored into their thinking now and the national minimum wage hike as well, and that just is just one more reason to think that they're going to move slowly.
Let's dig into the borrowing picture and what we learned after the budget from the independent government watchdog, the Office for a Budget Responsibility that kind of crunches the numbers around the announcements being made by the Chancellor and puts them in a look of a long term context. What did they say exactly about what that spending would mean for the inflation outlook and thus the out look?
Yeah, yeah, so they said that there would be the way the policy package has been set up, there will be this relatively large near term boost to the economy. So growth next year could be point four point five percentage points higher as a result of the policy package, which is a significant news. Surely, Yes, it's very significant when you're you know, when you're forecasting growth of sort of one ish percent, if you you're going to add sort of point five percentage points to it, that's quite
that's quite significant. So and the thing to remember about the Bank of England, which is slightly different to the Office of a bunch of Responsibility, is that the Bank of England thinks the economy's speed limit, so the speed at which it can grow without stoking inflation is low or lower than the Office of a bunch of Responsibility, I should say, So the Bank of England thinks the economy can grow one to one and a half percent somewhere in that range a year without inflation taking off.
So if you add in, as I say, this stimulus next year that you know is good and with an economy operating pretty much sort of at full employment for capacity, there is going to be an inflationary impulse from it, maybe point two somewhere between point two point four on CPI inflation over the next eighteen months or so. So that's you know, it's a significant significant boost.
So for the outlook for rate then what does that mean?
So I think, as I say, I think they're going to cut interest rates at the at the upcoming meeting, I think that's that's sort of pretty much a given. But I think there was there was always a question about whether this meeting they would open the door to going a little bit faster. If things allowed them to, so essentially creating some conditionality in in what they how
they'll sort of respond going forward. I think the chances of that now have dropped dramatically, and there was a lot of debate in the market, and a lot of clients I speak to are sort of there's there's a lot of debate about was a lot of debate about December whether they cut again in December, particularly with you know what's going on to the ECB, potentially the FED going twice before the end of the year. I think the budget has made that significantly less likely that they
go again in December. I don't think you can preclude a speeding up next year if that, but it will really be about the data. I think if you're if you're sat in on Monetary Policy Committee over the next week or so and you're going to make your decision, which is announced on the seventh of November, you will feel that the implation pitch has become a little bit more cloudy as a result of the budget. So I think for this upcoming meeting, the cautious time will continue.
I mean you wonder as well whether people in thread Needle Street we are holding their head in their hand think either have to rethink all of the work they've done before in terms of projections for the economy with everything that happened in the budget because it was a big package. We expected it to be because it had been the first under this current government in the UK.
But I mean, is it kind of further down the line if we think past the upcoming meeting, is there a lot in there for the Bank of England to have to try and calculate the effects of down the line? You meant in the national minimum wage increase coming, that's of course a wage inflation issue. We've got the increased payroll taxes on employers for national insurance contributions as well.
Down the line, are those things that are going to have that could shift the path for where the Bank of England go.
Yeah?
Absolutely, I mean I wouldn't you know, I said that I wouldn't like to be in thread Needle Street, as you just said, watching that budget and sort of making the decision about interest rates. I also wouldn't like to be in thread Needle Street putting the forecast together, which is what they're going to have to do at in quickly, pretty quick order to because it would be very It's very unlikely that the forecast that gets published won't have
this this impact in it. So they're gonna the Bank's going to have to work pretty quickly to get get it all incorporated. I mean, I think I think they would have been surprised. Bottom line, to sort of go to your point, I think the would have been surprised by the site. They had known there was going to be some stimulus coming. I think the scale of it
will have will have surprised them. So Yeah, and I say, going back to how that that will sort of be reflected in their communication, I think, you know, cautious, cautious guidance. But also it's quite possible that we don't get a all of the can voting for a cut again, you know, you get a un get another split vote. I think it just remind us of where we were a last
time around. Yeah, in September, it was it was eight to one for a hold, and I think the way the data had been moving there was there was a real possibility that we got a nine nil in favor of a cut in in November. This is all prior to the budget and I think that that in itself may have sort of sent a signal that the idea of a December cut was on was on the cards or a possibility and something that was being seriously considered.
Now I think you'll most likely get some at least one, possibly two of the more hawkish members of the committee saying, you know this is this has changed my thinking again, particularly with the I think with the national or national minimum wage increase, so you.
Know, all of it, all of it.
It's going to have a significant bearing on how the Bank communicates its latest decision.
Yeah, it makes the job much more complex as well. Just size us where the BOE is in this, the global landscape of this as well, because obviously we had the big rate cut from the FED and the ECB's one preceeding kind of fairly steadily along the line as well. I mean, is it going to get into a sticky situation for the BOIE if they're not cutting next month, then everyone else is rolling forward and cuts, and of course if that's something that we can better on either.
Yeah, I mean there's always that, isn't there the sort of the disconnect between global central banks. I mean, I think you know, you look at the US and we'll get jobs numbers and the like. But you know, the US economy has been holding up pretty well as well. I mean, the European economy does look weaker than it sort of, I think people thought sort of two or
three months ago, and that's why the ECB is going sequentially. Yeah, I don't think it's a huge deal if the bank doesn't doesn't follow them one for one, you know, they did obviously on the way up, it was almost sort of matched all all of them did slightly different speeds, but pretty much the same. I think on the way down, I think the idea that the UK, the UK's inflation problem probably is a little bit stickier still holds. So I think the bank probably will be a bit more
cautious about how quickly quickly they cut rates. You've got, as to say, in Europe you've got a definitely evidence of a weaker economy. In the US they have a slightly different mandate, which I always people place different weight on this place, quite a lot of weight on it. It just makes it easier if you see some signs of cracks in the labor market, you can just focus on that a little bit more. The bank is just
in an inflation targeting central bank, that's its mandate. So I think it just is going to move more gradually, and for us that means at a quarterly pace over the course of over the course of twenty twenty five.
And rates staying a little bit higher on the long term or the medium term. Is that a likelihood as well or possibility?
Yeah?
Yeah, I think so.
I mean, there's this huge debate, isn't there globally about where rates will eventually set, you know, the neutral rate as people call it, the rate that doesn't speed up or slow down the economy, the sort of equilibrium interest rate in the economy. It's undoubtedly higher than it was sort of prior to the pandemic. Is it as high as it was prior to the financial crisis?
Probably not.
But I think the weight of evidence, given that economies have been in the face of the tightening, that we saw economies held up pretty well given what was thrown at them. You know, the evidence is it is, you know, in our view, somewhere probably between three and four percent, So somewhere in that range. Knowing exactly where it is is very difficult, But if you just sort of split the difference around three and a half, you know, maybe they're our forecast, they go all the way down to three.
So but it's it's very uncertain. I think the bigger picture is that it is not We're definitely not going back to where we were sort of in during the pandemic, but even prior to the pandemic of you know, basically zero interest rates.
Okay, Don Hanson, ARCHIFUK Economists, thank you so much for joining us, And of course we'll have full coverage of that bankving in decision when it comes on Thursday. Across our Bloomberg platforms. I'm Stephen Carolyn London. You can catch us every weekday morning here for Bloomberg Daybreak Europe, beginning at six am in London at one am on Wall Streets.
Tom, thank you, Steven, And coming up on Bloomberg day Break Weekend, an earnings preview from some of Asia's biggest automakers. I'm Tom Busby, and this is Bloomberg. This is Bloomberg day Break Weekend, our global look ahead at the top stories for investors in the coming week. I'm Tom Busby in New York. Japan, known for its massive auto industry, which accounts for twenty two percent of that nation's sotal exports, and this week we'll get a number of key earnings
reports from that sector. For more, we turned to Bloomberg's Charlie Pellett news anchoring the day Break Asia podcast this week.
Tom will get earnings from some of Japan's largest automakers next week, including the likes of Nissan, Honda, and Toyota, and joining US now for a closer look. Tatsuo Yoshida, senior autos analysts for Bloomberg Intelligence in Tokyo, set the landscape for us. What is the backdrop heading into these earnings reports.
Actually, macro environment is pretty much mixed, and then also regional autoboon wheel market is also mixed. The macrowise material prices is easier than before, and then yen is now coming back to the weak as side. This is obviously positive. However, inflation is persistent, such as wages and then logistics costs
those are higher than before. Commenting on the digital automobile market, Japan is recovering from the impact of the output cuts due to the certification scandal, and then US market, the market is kind of stagnant, but stone Japanese makers are
still have a room for growth. And then China OBOL market is gaining momentum due to the government support, but Japanese automakers are struggling, mainly because of the lack of haartpure new energy vehicles, which is basically battery electric vehicles and plugging hybrid vehicles.
All right, So company by company, let us begin with Toyota, the world's top carmaker. What are we looking at there?
The company Also situations are mixed Toyota and then together with Honda, those two companies are ahead of their guidance tour. For example, they are des in Japan is stagnant because of the certification scandal, but UH sales and uh us and then Cells in India or other part of the Southeast Asia countries, those their selves are very strong.
And Nissan motor Water analysts expecting.
There Uh Nissan, I think uh, they're behind the guidance and then market is a little bit costious about the company. And despite the weakening and laterly UH, there still remains a possibility of the guidance downgrade.
How does the global shift to electrification play into these coming reports?
Actually, the electrification is diverse, not just battery electric vehicle but also the hybrids. Clublan hybrids also a big part of the electrification. Japanese a little bit behind, but the electric vehicle advancement. However, they are lutra strong in hybrid earthtic vehicles, and then I think hybrid earthic vehicle sales at Honda and then Toyota are strong and then driving their earnings. Actually Tourda Honda, they're gaining a lot of profit from their hybrid vehicles.
A quick question about tariffs, either declared or potential involving Chinese made evs. Do Japanese automakers expect to see any potential gains because of tariffs imposed on Chinese vehicles.
Actually, Chinese and Japanese are not competing head on outside of China, so the paddish thing, of course, that may benefit the Japanese a little bit, but not significantly.
And as we get these earnings reports, is there any one of the three Nissan, Honda, or Toyota that might stand out as an industry bell weather.
I would expect them may upgrade there through a profit guidance.
Tatsuo, We thank you, Tatsuo Yoshida, senior Auto's analyst for Bloomberg Intelligence, joining us from Tokyo. We move next to the hottest commodity on the street, Gold, the precious metal, is trading at records, extending a surge that has sent gold up over a third this year and joining us now George milling Stanley, chief gold strategist at State Street Global Advisors, he's in our Hong Kong studios. So, George, with gold at a record, what is it that.
Got us here?
I think there are really three things that got us up here. The first is that central banks have been very significant buyers of gold now primarily central banks in the emerging markets, buying gold because they didn't have enough in their official reserves. And that's been a process that's been going on for fourteen straight years, not going to go away anytime soon. The second thing, we've seen a
big revival in investment demand in China. I think Chinese investors responding to problems in the stock market related to real estate and turning to the traditional alternative, which has been gold for a very long period of time. And then, for different reasons, we've seen a revival in Western world investment, Western Europe and North America, concerned about macroeconomic issues and
also concerned about geopolitical issues. I think that combination is what's driven gold up to a whole succession of all time highs this year.
Well, does the current price of gold then justify current valuations?
I think it does. I mean, you know, if you think about it, the kind of macroeconomic scenario that we're in, with inflation still being sticky, especially on the Fed's preferred measure, and with the Fed having started to cut interest rates and clearly embarking on a sustained period of rate cutting that's going to run through next year if everybody is to believe it to be believed that I think is likely to lead to dollar weakness and then consequently gold strength.
And the geopolitical background a conflict in Europe with the potential to turn nuclear at the push of a button, and the Middle Eastern conflict having now spread way beyond Israel's borders where it was confined at the beginning, and now including open warfare with Iran and Lebanon, and the
potential for that to get even worse. I think all of those things together historically have been very helpful for gold, and right now they're continuing to be very very supportive, which is why we keep hitting this succession of all time highs.
Well, let me throw in one more piece of uncertainty, and that is the American presidential election. Potentially what might that mean for the price of gold.
I'm guessing that whoever becomes the president, we're going to see continued spending, whether it's spending on domestic programs from the Democrats, or whether it's spending to finance, whether it's it's tax cuts. We're going to see bigger deficits whoever becomes the president, and that I think is going to lead to further dollar depreciation and quite possibly a renewal
of inflation, which could be really very very damaging. At this point, as long as we avoid the dreaded trifecta, as long as we avoid one party getting the presidency, the House, and the Senate, which I think has always led to extremism in the past, I think that as long as we get the checks and balances that the US system is designed to incorporate, then I don't think that there is anything likely to be bearish for gold
in there at all. My sense is that you know, with likely increase spending, likely increased deficits, I've been hearing for twenty years that our deficit is unsustainable and we keep sustaining it somehow or other. I think that all of those things are going to lead to dollar depreciation, and that should lead in turn to a stronger goal price.
What happens if we don't quickly know the election outcome, how might that play into the price of gold.
I think all that would do, and I think is a very real possibility of that, given the way some of the candidates are talking, I think that all that would do is simply add to the general feeling of geopolitical uncertainty, the uncertainty about the conflict in Ukraine and the conflict in the Middle East. And if we have, let's hope it's not an armed conflict in the United States. But if we have a contentious election, which I think is a very likely outcome, I think that's simply going
to be even further positive for gold. I don't see any negatives out there right now. It's hard to see where the headwinds might be coming from from the gold point of view.
Well, certainly, we've got a lot ahead on the calendar. In addition to the presidential election, there's also a Federal Reserve meeting. What assumptions are you and your colleagues making about the Federal Reserve and the pace of further rate cuts.
I think that you know, Jerome Powell has said explicitly and many many times that he plans to be driven by the data, and that he's also trying not to be to put too much emphasis on any one month's particular set of economic statistics, because these are always open to revision. But if everything stays pretty much the same as we are right now, and he doesn't get any major surprises in the data, then it looks like the
market consensus is right. The market consensus has now settled on two more twenty five basis point rate cuts, one at the November meeting, one at the December meeting, and then a sustained succession of small twenty five basis point rate cuts through the whole of twenty twenty five to bring Fed funds rate down to somewhere around about the three percent level, probably a little bit higher than the sustainable normal rate, the neutral rate, if you like, as
some of the economists want to call it. But jer own power is indicated if the data keep coming in the way that they are. Strong economy, some signs of a little wobble here and there in the labor market, but nothing really dramatic. Then that will be the lightly outcome.
Two more rate cuts this year, and then a succession of rate cuts next year, and then somewhere toward the end of twenty twenty five, the Fed will will take a little pause and have another macro view, if you like the view from thirty five thousand, fear to see exactly where the general economy is and where all the other indicators that they're looking at, especially the labor market.
But Jerome Powell has made it very clear that he still wants to see an extended period of below trend growth, and he has seen nothing like that, and certainly in the last twelve months, and there are no real signs of anything like an extended period of below trend growth. That's what he wants to see, So he's not going to rush cutting interest rates at all.
Quick question about demand. You are talking to us from Hong Kong. China and India are the world's two top gold consumers. Is the demand story for the precious metal the same in both countries.
No.
I think there are very very different dynamics in each country. We have seen We've seen pretty good jewelry demand in China that nothing outstanding. We've seen stellar investment demand, I think because the Chinese investor is frightened of his stock market right now. India's a very very different story. What we have in India is that demographics population growth is definitely on gold side, with strong population growth there unlike China,
and the economic factors are also on gold side. The Indian economy has been growing, the IMF seems to believe from the most recent report. I think that India was really the one country that got top marks there and they're expecting seven percent economic growth this year and probably better than that next year. They're expecting the Indian economy to overtake the Chinese economy in size because the Chinese economy has turned into some decline with the growing of
the population. Very much different dynamic from what's happening in India. And of course, you know, we are now well into the Indian wedding season, which will run through until next May or June, depending on where in India one lives, and that has always been very good for an uptick in gold jewelry demand there. But investment demand is also running strong in both countries, and I think it's very important to look at both of those dynamics.
George milling Stanley, Chief gold Strategist at State Street Global Advisors. I'm Charlie Pelloton, New York in for Doug Chrismer this week. You can join Doug weekdays on the Daybreak Asia podcast. It's available wherever you get your podcasts.
Tom, and that does it for this edition of Bloomberg Daybreak Weekend. Join us again Monday morning at five am Wall Street Time for the latest on markets overseas and the news you need to start your day. I'm Tom Buzzby. Stay with us. Top stories and global business headlines are coming up right now