Surveillance: Fed Should Take Back Rate Hike, Kudlow Says

the FED. Do we understand them or we flying as blind as maybe something. I mean, I think it's pretty clear what the objective is for the FED, and that is to keep the recovery going as long as it possibly can. And so I think that's why we're talking about, you know, interest rate cuts. Now. The prescription when you're close to zero on interest rates is to move ahead of risks and not wait for the for them to fully materialize in the data. So we expect to see

some jobs slowing today. We expect to see a slowing trend. We've we've seen the global economy slow ah and it looks like it's going to be taking out some insurance but John, I'm asking you this question too, because you've got to ask us a card because he's gonna want a rate cut. What does a rate cut accomplish, John Farrell, very very unlikely that it will accomplish much, given how loose financial conditions already are. And Julie, and We've asked

the Federal Reserve chair this question. In the news conference. Tom Kane asked the vice chairman this question, What will it do if they cut rights at the end of this month. Well, let's keep in mind that the expectation of rap cuts is one of the reason financial conditions are so very true. So in the face of all of the risks that markets have to look out at, they have this insurance from the Fed to cut rates. They've built that in and that's kept financial conditions from

going into a tightening cycle. And so that's that's exactly how policy works. That's the transmission mechanism. So it's not like it's going to ease them more, but markets have already heard the Fed loud and clear that they're going to move and that's one of the things that offset some of the risks out there. So Junior, essentially we just need to validate market expectations. But beyond that, I

failed to see how it helps. I mean, it's the price of credit the problem in the United States right now, most people would say no, it's the price of credit the problem. In Europe right now, most people would say no. Likewise in Japan, where is the price of credit actually a problem? No, it's not really the price of credit, but it's short circuiting the transmission of these risks through the confidence channel, and so it's not necessarily and that

we see that in financial conditions. Okay, this is really really important, and we're talking with Julia Cornado with really significant experience in thinking through the mathiness of all this over to the behavioral nous of all this the confidence channel. Why don't they just cut rates this afternoon after an average or a shorter rate. That would be an immediate confidence boost, isn't it? Well, if it if they cut rates in between meetings that looks like an emergency, that

looks like panic, that wouldn't never fairly boost confidence. But if they move methodically and say, look, we're sking some slowing, We're going to address it. Don't worry, keep doing what you're doing, And that's how you keep confidence on track. It's a very tricky game, and we're in an uncertain period like this, but I think moving unexpectedly can actually hurt confidence. They try to set up expectations for easy policy, John,

I can't. And they how important this discussion is the history of this of successes in too many failures of guessing the future. There's confidence issues critical Or here's the line from the chairman, announce of protection is worth a pound of cure at the moment, though, Julia, there seems to be seems to be a disagreement. I think that's a different song, Julia. I think there seems to be a disagreement between what announce of protection actually is between

the Federal Reserve and where the market is currently. The market seeing announce of protection as a hundred basis points of cuts over the next twelve months. Does that sound like ann ounce of protection to you? That sounds like a lot. Uh. And I think that the said can afford to be more data dependent that they may have to deliver that much. It sort of depends on how much transmission we actually see to the real economy. So

it's a little bit chicken and egg. You're you're right, about that UM, and I think that the FED can just stay on course. Cut in July, see how the data flow in. If another cut is needed, then they'll do another cut and on they go. What data matters? If the data flows in after this ginormous jobs report in fourteen minutes, fifteen minutes, what data matters, Well, the

jobs data are very important, comprehensive data that they see. UM. The trade development, business investment is one one thing that they have identified right now, Well, business investment has been sort of sluggish, it's not contracting, it's sort of flattened out after a very strong couple of years. So they're

watching that other intrasensitive sectors, cyclical sectors, housing, UM. And then again right now the job's report really is front and center because it's the resiliency of the domestic service sector that's key here, that makes the difference between sort of a bumpy soft landing to tend in a recession. This is critical service sector. You bring up probably the most important question for a lot of people at the moment.

Looking at the labor market, manufacturing is really weak worldwide, and we started to see that weakness materialized in the United States as well. Whether it feeds into the service sector in a way that would produce a really big down turn beyond just returning to trent growth. Are you seeing any sign of that already, Julia, We haven't seen signs of, uh, something that's terribly worrisome. We have seen some slowing in the service sector indicators with everything else.

The I s M non manufacturing indexes come down off the highest, so has the hiring component of that index. It's not yet moving towards contractionary territory though, so it looks okay. I think the resilience story still holds up. Um. But again, if that's not going to take chances by waiting around, hopefully they're going to stabilize that. And so that's what we're looking for in today's report and India July report. Then we'll get at the beginning of August

to see how that domestic service sector holds up. For your statistical care folks, let's get a non farm number from Dr Coronado. Do you have a payrolls number off one sixties survey? Yeah, I'm I'm right around to survey m at one sixty five, So, uh, it's down. It's a bounce back from May, but a slower trend. Okay, it's still plenty. Remember our sort of break even is a hundred k. That's what we need to hold the

unemployment rate steady. Uh So anything above that is not bad, and so that would be a decent number, but it would be down from where we have been nicely frame Rica don at one uh Dr Coronado at one six and also after careful surveillance research, Dr Coronado likes mint chocolate. Show choice. What is it about I scream with you today?

Tell it's the time of year. It's that time of year, and returned to Jason Furman, a Harvard University a former chairman of the President's Council of Economic Advices and of course at the Peterson Institute as well. Dr Furman, what is the policy prescription right now for the two Americas we have? We have some kind of run rate of decent employment bouncing seventy two up to two, but a huge part of America seems disassociated from this fully employed America.

What is your labor prescription? Yeah, I think you see it in the numbers. UM this month, year over year average hourly earnings up three point one. That's actually lower wage growth than what we had about months ago, when it was running at nearly three and a half percent a year. I the good news is that, you know, means the Fed just doesn't need to be very worried about inflation. Yet another reason they don't need to be um. The prescription for that is heart economy and continued um

low unemployment rate. That hasn't been working as well as we'd liked, so I think we'd need to try a bit more of it. Adjacent, one theme for this program over the last couple of hours is whether we're returning to trend growth in and around two GDP and maybe

returning to more mature payrolls growth. Something a little bit more conservative away from two hundred thousand towards say a hundred k. Today's number makes that call a little bit more complicated, Jason, what's your base case for that return to trend growth? Is that something you see slowly happening over time this year? Yeah, I see that happening slowly over time this year. I think that's exactly the right word. And you know, I think historically evidence this trend is

more like one point seven five percent. I don't think we'll fall that far this year, but I think that's where we're heading. And you know, just look at the unemployment rate it has you know, basically you know, is falling at a lower rate than it was before. Um, so we're closing the gap more slowly than we were before. Jason Furman and John Ferrell will speak with Lawrence Cudlow

of the White House here in a bit. He's going to spin a supply side message that things are good, debt is good, we can grow ourselves out of debt. What is the thing that Larry Cudlo gets most wrong? No, I think it's that the underlying trend growth of the economy is more like one seven five to per cent, and that you know, it's like a super tanker. It's not something that turns on a dime. It's not a new president elected and all of a sudden everyone changes

their estimates um of trend growth. And just you know, look at job growth last year it was two hundred a month. This year it's about a hundred and seventy thousand a month. It's probably going to come down from there an absent master productivity growth. UM, we can't you know, we're not going to be able to generate the three growth at the White House. This is really important. It speaks to the tensions evidence certainly over the last forty

eight hours in America, a polarized America. David blanche Flower may very clear that the one way to jump start all this is immigration, and then that there's all these jobs that are skilled jobs that are unwanted and a growing population would help that. How do you study right now productivity in the body count of America? Can we get to a better labor America with a present population growth?

We definitely have very unfavorable demography right now. And you know, you can either have more babies in wait twenty years or have more immigrants and they can work right away. Um. Probably, Uh, you know, the ladder is a little bit more feasible. I mean, the latter is a little more feasible. And that comes from policy as well. You're an expert in policy prescription. I think you've been very fair, uh and indeed balanced and looking at those that are conservative and

those are liberal as well. Into the election, how are we going to address the debate on productivity? I mean, this is hugely emotional in America. What is the best prescription besides the trope of you know, everybody needs to be more educated. I get that. What's the immediate prescription? The problem is is not one answer. There's a lot of different ingredients. Immigration actually doesn't just help with the

labor force. It helps with productivity because you bring people in with a lot of skills and a lot to contribute to our economy. Um. I actually think we could do another round a business tactor form um And what way didn't didn't they get enough last time? Well? I don't think we need to lower business taxes, but if you take steps like shifting to expensing more favorable tax treatment of R and D. And if you do that, by the way, you can probably raise rates a bit

and and bring in some more revenues. You sound like you're positively Johnsonian on this. Are you talking about true? I mean, I mean I'm gonna use the phrase generally, but an investment tax credit to really spur domestic incentives to create jobs. Well, we have expensing in the law, but then it phases out over a five year period. Um, i'd actually make that permanent. But then you need to do some other things to make that work, like bigger

limits on interest deductibility and more. Uh, you know, and and and and potentially higher tax rate. But I think focusing on innovation. I mean, you know, the R and D tax credit is sometime with the United States pioneered, we're now way behind most of the world on it um. We could expand that, right I any day, folks, I expect Dr Ferman to start talking with the Texas accent

as he goes all the sixties at LB Jan's. Jason Furman has always thank you for the view on policy here off really quite good jobs for Dr Ferman, of course with the Peterson Institute at Harvard University. Right now, perfect guest Michael Darter with us with them CAM Advisers, and we see this as Karen was mentioning with real seismic change in the market and shift. Michael, what I would point out, and this is looking, folks at four

or five fancy charts which don't work on radio. We're about sixty or seventy sent back to where we were before rate cut certitude. With this good jobs report, do we eliminate or ameliorate or lesson rate cut certitude? Hi, Tom, thanks for having me on. I certainly hope not, because what you're dealing with here with payrolls is a coincident indicator, and the long leading indicators have been pointing down. Even with the backup in the tenure yield. Today you still

have an inverted treasury yield curve. That's been the case for over a month now. And so if we're going to take one piece of coincident data and have a parade about the FED not easing policy, that yield curb in version is more likely to persist in the business cycle is more likely to end in about a year's time. What is the leading indicators that matter to Michael darda Well. I like to look at the yield curve. Um it's frequently dismissed because it is such a long leading indicator

with variation from cycle to cycle. So it's not uncommon to see other data that still looks fine for quite some time. I look at monetary growth, so we've had some intermittent negative readings in the inflation adjusted and one money stock year over year. That tends to happen when the curved handcake. And then we can also look at credit markets and then some shorter term leading indicators like

jobless claims, and in those indicators still look okay. And so you know this is an economy that's not falling off a cliff. It is slowing. But I think if the FET is going to try to quote unquote get tough and defy those July rate cut expectations, then we could be headed into troubled waters. This is so important in folks. I'm looking at the Bloomberg screen future is negative twelve. They are negative five earlier? Is Mr Darta

mentions the yield two point zero one? Michael, I'm looking at the vanilla spread the twos in the tens you're expert at using the Bloomberg was spreads. I mean, all of a sudden, that vanilla curve was twenty four and twenty five and twenty six basis points point to five percentage points difference in yield between the ten year and the two year, and it flattens down to seventeen basis points. Is that the kind of thing that would be the final straw for the FED to see a point a

negative point zero one basis points on two s tends? Unfortunately, I don't think the FED is actually paying that close of attention to the to the curve, whether it tends to twose. I'd like to look at the ten year relative to the bill rate or the policy rate. Most of the academic literature, Yes, I agree, business cycles, you looked at a rate that's more harnessed to the FEDS policy rates. So the two year note yield has expectations of rate cuts in a multiple rate cuts, which is

why that spread is still positive. But for the FEDS part, I think they're looking, you know, mostly at the macroeconomic data. They're looking at payrolls, are looking at joldless claims, they're looking at the unemployment rate, and that's all well and good, But aside from claims, you're really looking at a set of coincidence or even lagging indicators. And you've got the stock market up strongly. So you have some members of the Fed getting increasingly uncomfortable with the amount of rate

cut expectations that that we have in the market. So you could have a showdown here going into the July meeting where the Fed quote unquote tries to stand tough. I think that would be a serious and potentially catastrophic mistake for the business cycle. But we get more data

between now in that meeting. I want to revisit again the kind of data that Vice Chairman Clarato will be looking at with this set of PhD s. I mean, is it just retail sales and that kind of consumption data seventy of the economy or is it more on the business side. You know, Tom, I think it's both. But one problem we have is you don't want to

focus too much on one data point. And so let's take today, for example, two thousand, quite a strong number, but if you look at a three month average, we're running at about a hundred and seventy one thousand for overall payrolls for private sector people. Dr right, So go back to the January of this year, those three month averages were two forty five and two forty respectively. So so if we're looking at trends, there's a clear slowing trend.

Now that doesn't necessarily mean that you're headed off of a cliff, but slowdowns by definition must pre recessions. So the FED should be a bit more alert here. Um, you've mentioned Vice Chair Clarita. He watches inflation expectations very carefully, and we've had a pretty significant pullback and bond market inflation expectations that alone in my books with Justice well, but this is important, Michael we've got service sector inflation.

Three issue, we've got goods inflation near deflation. Do you see evidence yet, given all of the trade and manufacturing and slow down in that, do you see evidence yet that we are importing disinflation and deflation from abroad or from the US goods sector over to that core service sector inflation. Well, keep in mind that the core service sector inflation is sticky price inflation. It will tend to

lag the business cycle. So I'm afraid what's happening here is forward looking bond markets are anticipating a slowdown in aggregate demand. So nominal GDP growth, which ran up to the high end of the recovery range last year, is already slowing and is likely to continue to slow. So really, if we're going to be importing disinflation, I think we're importing it from simply a slowdown in aggregate demand. Just the A S A D model, Tom, Yeah, Well, the S A D models one model to use. But can

these models be efficacious for a FED? I mean, have they gone beyond beyond any kind of traditional econ one on one analysis to where they literally have to make it up as they go based on leading data? I think that the Fed's in a position now where they're they're going to be forced to take a bit of a leap of faith um in the forward looking indicators in order to avoid the risk of a downturn and

a repeat of the zero lower bound scenario. If they're not willing to do that, then you know, it's more likely this business cycle comes to an end, and when the FED does get around it easing, they're going to have to do a lot more of it. And so let's try to avoid that eventuality if we can. But that means that you don't play this in a totally conventional way, fixated on coincident and lagging information. That's a good way to be continently behind the curve. Michael, thank

you so much. Michael, daughter will clinic their folks, MKM partners. The Trump Administration's views on the jobs report. I'm pleased to say we join now on Bloomberg Television and on Bloomberg Radio by Larry Cuttlow, National Economic Council Director. Great to see you as always, Larry, Thank you, Jaathan appreciate it. Really really strong job number's a really nice bounce back from the month of May. Do you think we're overestimating some of the weakness that some people think will come

through nineteen into well. I don't know why, you know, there's always this course of people who want to be pessimistic. I would simply say that the big numbers today two thousand, uh, you know, good wage increases, still about three low unemployment rate. We are still in a very strong prosperity cycle. It's a growth cycle. It's a prosperity cycle. Here July four life liberty and the pursuit have happened as things are

looking pretty good. I can't explain the chronic pessimism. All say is we have very good pro growth policies, low taxes, deregulation, opening, energy trade reform. I think the incentives of our supply side policies are working, and I don't know why people don't want to see that. I'm very optimistic because you might guess, Larry, you haven't been afraid to wait. In to the debate around the Federal Reserve, a lot of people asking the question, what does July five the dates

of today? I mean, for July thirty one, the Federal Reserve meeting, what is the case for a rate cut? After this labor market report Larry. Well, look, I don't think you know, here we go again. Um, I don't think there's a Phillips curve trade off between strong jobs, for example, and higher inflation and interest rates. I don't believe that. I think more people working and succeeding as fabulous, and I think the evidence shows that the inflation rate

is rock bottom. You know, I was just looking at some of the market figures on the way over here again, and not only do you have an inverted you curve, which I think is somewhat troublesome for the longer term, but the break evens on the inflation, you know, the tips break evens the five year Jonathan is one and a half percent, and that's the CPI number. So the pc deflated that the FED users would be about thirty

basis points less than that. So you're one a quarter percent inflation, which is way below the Fed's target and what most people want. And that's the reason I think they should take back the interest rate hike. Now I'm not encroaching on FED independence. I'm actually just reading the market tea leaves if you ask me, the Federal Act in its own time. But I'm just saying I think that's the case, and then I guess secondly, with a weak global economy, uh, taking out an insurance policy is

not a bad thing. So, Larry, I think the debate a lot of people having is how level weights will actually help whether the price of credit is the problem inside the United States, whether the price of credit is the proble them in Europe. And most people are answering no to that question. How will the lower rate actually help address some of the issues you outline, Larry, Well, Look, I just don't want anything to interfere with this strong

prosperity cycle. That's my principal point. And I think as market signals have been suggesting for quite some time, the interest rate story is that it looks unbalanced. I mean anytime. It's not that I'm going to inject stimulus here. I'm not really looking at that old model. I'm just saying that when ten year treasury paper is trading well below the FED funds rate or the three month treasury bill rate, I think that's a message to the FED that their

target rate is too high. Frankly, and I think they're looking at that. I'm not sure that our views are much different than the Fed's views. I don't know when they'll act there an independent agency, but that that's my basic point. This is not so much about stimulus as putting more balance into the financial sector and the yokerve. Let's talk about trade chant weight. There's some talk, some reports we might get face to face meetings sometime soon,

perhaps even next week. Can you talk to me about that? Could they begin next week to face to face talks between the United States and China. Well, I can't confirm the face to face next week. I know there are discussions ongoing that will get the two teams together at some point in the near future. What I want to say is, UM, they're on the phone, the leaders, the senior people on both sides, Liu Hey from China, Ambassador Lekheiser, Secretary Ammunition for the USA. They'll be on the phone.

They've been on the phone. They'll be on the phone this coming week. I think a face some based meeting is in the cards. I don't want to get ahead of that story, but I think it's a positive story. UM. As you know, last week or two weekends ago, the President UM basically reopened the talks. I think it's always better to talk than not to talk. Let's talk about the content of those talks. Do we restart from fresh? Secretary Mannuchin said, we've been ninety percent of the way there.

We were the way there, and I'm wondering if that's the starting position or whether we start again, Larry, which one is it? Well, I know that the US team much much favors where we left off last May. Now again, I don't want to get engaged in a lot of hypotheticals here, but I think what Steve Minushan is saying, and I think Bob Lah has your agrees. I know

I certainly do. We made a lot of headway. Then the talks stopped in May, as you know, and now they're going to resume, So why not start from where we left off. We didn't have a deal, but we made progress on a lot of fronts. Now, I want to reiterate something because there's always things in the newspapers

and on the media and whatnot. Let's not forget the basics here with respect to ending intellectual property, theft, forced transfer of technology, various cyber hacking and cyber interference issues, tariff and non tariff barriers, unbalanced trade conditions in general, and of course perhaps the most important one is the enforcement mechanisms. Now, having said that, Jonathan, the U S I believes we did make headway and that's exactly where we should pick up the story. The President indicated as

much at the G twenty talks in Osaka. So that's our view. Basically, let's try to cross the finish line. But it's still going to be difficult, no question. Well, let's talk about some of those difficulties. The President has allowed Huawei to stop buying technology from U S firms once again, suspended another round of tariffs perhaps as well. What did the President get in return this last weekend, Larry, Well, look, um, the talks have been reopened, and there is the expectation

that China almost in good faith. But I hope as a matter of continuing, policy will continue, or we'll pick up purchases of US various US imported goods and services, most particularly the agriculture and farming sector. We think that's actually um part of the goodwill agreement in return for which, as you noted, the President said, we will suspend tariff increases from this point on. But look, it's that so much tipped for TAD. You didn't get any new deals

coming out of Osaka. What you got was a continuation of the talks, which is a good thing, and let's see if we could make any forward progress on where we left off last May. There never any preconditions, The United States has never suggested any preconditions for this. But I think the relaxation of the h of the tariff threat is a positive goodwill gesture. Larry, you've said in the past that the Kuawei issue is separate from the trade negotiations. It looks like it's part of the broad

of trade negotiations. Now, can you confirm that, well, actual, I've never said that they were separate. UM. Maybe somebody else did. That's not my view. The President's view, which is what matters, is that they will be part of the general talks regarding trade, and I think that's quite evident from what happened in Osaka. And again, if there's any confusion, Jonathan, let me try to clear up with with respect to UM, shall we say a little UM,

a little more lenient treatment of Huawei. We're not talking about family jewels, we're not talking about five G, we're not talking about core issues with respect to telecom and so forth. We're talking about what I've called general merchandise. The Commerce Department may decide to grant some additional licensing for telecom products that are the low tech and are readily available around the world. Jonathan, I hope. I want

to make this as clear as I possibly can. Stuff that could be bought in Asia, for example, uh that will probably be relaxed. But Huawei remains on the end of the list. We remain very concerned that Huawei's relationship with the Chinese government may be a difficult problem sensitive issues for national security. We will not open licenses for any national security areas, be they chips or whatever. We're just looking at stuff that's readily available on world markets

and does not have any national security inferences. But Larry, that gets a little bit complex because from a foreign diplomacy point of view, how can the United States have any diplomatic influence on foreign governments and their interaction with the likes of Huawei when the United States but suahwe is part of a broader bilateral trade negotiation. That gets a little bit complex, doesn't it. Well, I'm not sure Johnathan,

where you're going on that one. I mean, remember, we are in very close touch with our allies, the Five Eyes, uh Germany, France regarding the Uahwei problem, I mean, the national security related issues are enormous in the US, in Asia and in Europe and all these governments, and we're in touch with them, you know, Secretary Pompeo, John Bolden and many others, including myself, We're in touch with these nations to talk about the Huahwei threat to our security.

So this is part of the overall at diplomacy. I don't think it's a breaking diplomacy, and we're all working towards the same end, which is a safe and secure alliance to make sure that Chinese inroads into our security are prevented. Frankly, funny question for you, Larry, just on the timeline. Are you comfortable with these negotiations running into an election year? What do you need to get this addressed in the background of this year. Well, look, there's

no timeline. We've said this again and again. I've said it on your show and others, trying to clarify. The President wants a quality deal. He said this in Osaka and he's many times before Osaka. We want to resolve the sticky issues. We want to resolve the security issues. We want to resolve the trade issues. This is of course crucial to the economy of the US, to manufacturing, to farming, to technology, you name it. So there's no timeline. The issue is we want quality, we don't have to

have speed. And frankly, I don't think that's linked to the elections in I think that's a matter of US economic, trade and national security policy. We will only sign on to a deal that is in the interests of the United States. As President Trump is often said, it has

to be a great deal. Larry right to catch with you, hope you Well, let's get to see it back in front of the Candra with this, Letty count that the National Economic Council Director joining us from Washington, Simon Kennedy, has done extraordinary duty for Bloomberg News over the last number of years, leading our Brexit coverage, leading all of our economic coverage as well, and drives forward the gossip.

The i m F wrapped a little bit around the realities. Simon, your important story moments ago that Governor Kearney is vetted with Irish and British passports to be a European at the i m F. That is the tradition Michael Kabezeus and others over the years. Great, what is the likelihood of managing director Kearney. He's actively been discussed in European capitals. He ously been a subject of speculation both on Bloomberg stories and elsewhere this week, but we moved the store.

We advanced the story a bit forward today in saying that his name is absolutely being discussed. Our conversations within European capitals about Mark Arney uh and even there's a chance that there could be finance ministers next week which a single nominee could could come back to have come out of Europe. He may be challenged by mergery, marketing, may even be challenged by European candidates. But it is interesting that, given he is not a European by birth,

that European governments are still working to discuss his candidacy. Simon, you and I have sat in the bar of the St. Regis Hotel and wait for the white smoked rise out of the I m F headquarters in Washington. How do they actually pick a replacement to Madame Legarde? How do they what's the process? So the process is that an official process, the twenty four member Executive boarder of the I m F receives nominations and then UM picks a

winning candidate. But of course you can't get past the politics. You can't get past nationalities. There is a tradition UM that the I m F job is picked by the European governments and that the World Bank presidency is picked by the US administration. UM consts every time the job came up, just did with David Malpas of the World Bank a few months ago, there's a debate about whether it should be opened up UH and every time the status quo is is maintained. So of course emerging markets.

Emerging markets in the past have have pushed for pushed candidates on the basis of the increased heft that the likes of China, India, etcetera play in the world economy. They've never actually coalesced really behind a single candidate, though, and they can be outvoted by the U S and the Europeans on the on the executive board. But again we may see some European sy some emerging market candidates come forward, and then the test will be if other if all the emerging markets can kind of line up

by one, and that would be a greater test. So simon, what do you think the whoever is the next head of the I m F, what is number one on the to do list for that next head? Well, number one is playing a part potentially ensuring up the world economy. Uh, were clearly slowing. It's in the worst shape since just after the financial crisis about a decade ago, um and so be ensuring that the I m F is a as a as a place at the table shoot things

that start to go wrong. Incidentally, Mark Harney delivering a big speech this week on those risks UM and talking about the potential for a larger than currently anticipated slow down. Pretty good job application in that speech, UH, and so that would be their main, main role. But at the second time they're looking Christine Leguard will be leaving at the same time as a negotiation would be taken place over a recapital inkery getting more money, more firepower for

the IMF. It's been a bit quiet lately, which is it's always a good thing when the IMF is not in the headlines. UM Argentina obviously getting the biggest loan ever last year, but generally the IMF has has had a quiet time, which is no bad thing, uh, and so the challenge really would be maintaining ability in the world economy. Simon Kennedy, what does the first Laguard press conference look like as Philip Laine sitting next to her, pushing her notes so she can act smart like you

do with me. I don't think so. I think Christine regards a pretty as Bloomberg Bloomberg Opinion rights today, a pretty effective leader. She's had lots of big jobs in law and in finance ministry in France, at the i M f M. This is someone who you have seen her at the press, commerce and the like, who clearly is a master's her brief and it knows what today and to some extent she could actually be just reading by then, reading from the Mario Drug playbook. And that's

not well, that's not criticism of her. Who Ever takes over from Mario Drug will more likely than not inherit a playbook from the Drug will have put in place in the final months of his of his presidency. That wasn't his intention, but the world economy might drive in

that way. Is Mr Kennedy knows there's an art to this and some of the humor there of me saying, Philip Laying the esteemed Irish economists as chief economists, that UH E c B would push your notes very often to any given question, particularly from Bloomberg News assembled in frankfort Mario, dragging literally Paul reads off a statement. I mean often not It's not an unusual event, Paul assignment. I've got to rip up the script and go to

a one four weaker pounds sterling. Does sterling matter within the litmus paper of Prime Minister Johnson, prime Minister Hunt or is it a beast of its own? I think it's I think they'll the prints has always been pretty

good on this. I'm maintaining a currency step by markets. Um. Obviously it's going to take some place from breakfit and and internally Mark Connie uh and the Bank of England perhaps more hawkus than the said, and the see maintaining some kind of support under the pound because you know the free fall is becoming noticeable the last number of days. Can you give us a y? I mean, is it just political, the whole political stew of this government race

they're in. I don't know, I don't know if that's really taking it taking having an effect to certainly some talk with the Bank England. The back Wingland is going to have to trim that the hawkishnist it's previously shown. The day has not been great. There is concern about Perhaps it's not the politics, but there's certainly the concernness and no deal breakfast is much greater. Now you've got to Jeremy Hunt and you've got Boris Johnson kind of trying to trying to prove their metal to the to

the Conservative Party that still let them. Simon, thank you for the time this morning on short notice, Simon Kennedy running all of our economics and putting on an important report. It brings forward Governor Karney perhaps as a managing director. Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keene before

the podcast. You can always catch us worldwide. I'm Bloomberg Radio