Surveillance: Rate Hikes with Fed's Williams

of the world. That has been her tour to force at the International Monetary Fund for a number of years, but it is new duties for Geta Gopinath. She is first Deputy Managing Director at the International Monetary Fund. I could stay Geta. There was a celebration across all of economics with this announcement. What is different from your economic duties versus being first deputy managing director well as chief economists. I would see my role as an advisor, but I

suppose deputy managing director. I'm in management, so I'm taking a lot more difficult decisions. I think that would be an important difference. You've been spiriting the pandemic and I must ask on an update on the way Asia and the way China is prosecuting their pandemic. What does the I m F need from China to help Asia do better in the pandemic. The pandemic has evolved, as you know, compared to the last two years, we have much more

burau in strains, which is making it harder to contain. So, like every other country is recalibrating their strategy in terms of how to deal with the virus. I mean, our advice to China would also be that some recalibration would be very helpful. Do they need American vaccines to fix this is a heart of the matter. They need mrn A Visor Moderna to get China vaccinated. So firstly, they need to get more coverage of their seventy plus population.

While they have overall very high vaccine coverage, if you look at the very tail end in terms of age distribution, you certainly need a greater coverage. Secondly, they would need booster shots for their older populations, and effective booster shots would be very important. Do you have an amazing bird's eye view right now of how well prepared we are to combat an additional strain that possibly the vaccines don't cover, or an additional pandemic with the additional rollouts of vaccines

similar to what we just saw. Are we much better prepared to tackle it more quickly that we did this last time around? We certainly have the signs. We certainly have the knowledge from having dealt and lived with over two years of the pandemic. What I am worried about is that everybody is hoping for the best case scenario, which is that this is a mild endemic virus. But what the experts tell us is that we could have much worse downside scenarios, and we need to prepare for that.

And that's the pot where I think more needs to be done. We needed on the fifteen billion in grants this year to get the right amount of preparation in place, and then ten billion every year four pandemic preparedness. What does preparation mean when we've seen that a lot of the money and a lot of the tools that have gone to certain countries haven't really gotten out to the public, and you deal with people who are so hesitant to

actually get vaccinated in the first place. So the huge discrepancy between the vaccination rates in high income countries, which is around seventy versus low income countries, which is eleven. That gap has to be closed. Now. It's true that you are seeing vaccine hesitancy in different paths of the world, and you are seeing UH absorption capacity constraints, but still we need to get at least the most vulnerable population in every part of the world vaccinated. You don't want

to turn to your tour to force here. We could get out front and make some breaking news today and the World Economical look, I think it comes out next week, but if you want to slip any numbers out this morning, that's fine. The w t O shocked the other day with a number that truly shocked me, two point eight percent global growth. I don't want to front run the great I m F work that you do here, but we're on I don't but we're under three pc. It appears in global growth. Have we been here before? Is

the global slowdown now original and tangible? So Tom, you will get the numbers next week and I won't be leaking any numbers right now. You can do it on Twitter, elon muscle, let you do it on Twitter. What is true is that we will have a significant downgrade to our growth projection. So the last number we had for this year was four point four percent. We will have a significant downgrade motive to that number. You know, what is true is that we will remain in positive territory

for global growth. But that's said, we are very very difficult times. The pandemic is not over. We have the war framing. I'm going to interrupt there. That was stunning what you just said. You're framing a probability distribution, a fan distribution. We will see next week, and you've got a lower bound of telling me it could it will be positive. No, that's not what I said. I said that the modal estimate, which is what we put out in terms of our baseline, will be a positive number.

But if I look at the fan chart, of course many other things are possible. So we are still living in a time when they're very high railed. From that, I heard what she said. It's Lisa, we're talking here sub three percent global economic growth. I've never done that well ever. And part of this is because where does the growth come from? Right, We've always talked about China, about India driving growth. That's no longer the case. Now

we're talking about the United States driving growth. How much does the United States have to grow their GDP this year in order to prevent the world's economy from flipping into recession. Okay, so firstly, I would say that much of the world economy towards the end of last year had the momentum coming out off the pandemic reopening, so there was growth coming back in and we're seeing labor markets in many advanced economies being very tight, so there

is a momentum to sustain growth at this point. But you've hit shock after shock, so you've had the pandemic that's not over. You had the war. You're seeing inflation and members we haven't seen before. Just as a simple comparison, before the pandemic, global inflation was around two Today global inflation is eight percent. So this is in numbers that are a decade or highs, which makes it very challenging, which which is why one should be careful about projecting forward.

I think there were very big risks, and I agree, and this is the magnitude issue, and we can be on the Y axis. I'm far more interested in your work next week in a particular financial stability in world economic outlook the X axis. Do you have a framework of how long the duration of four and five and six standard deviation inflation will be Do you have any sense of the width of that given the cacophony of

issues you have. If you're thinking about a target of two percent, and your question is how long will it take to come down to it? The two percent target number that would take, you know, we're looking at towards the end of next year, so it's going to take

many months before we see inflation coming down. Now, if your question is has it peaked and is it likely to come down again unless we're hit by another escalation of the war for the major events, the expectation is that the second half of you we should start seeing inflation.

We need to adjust to Adam poses three DR pose and will join us today and Blanchard into an extent out of Posen are saying we got to forget about two percent, which I understand is the company line, and we have to bratchet that upward or band around three percent. Do we need to start thinking about that? I think what feed will realize that coming down bringing down inflation to four percent is going to be somewhat easier than coming down the rest of the way, which is from

four to two. So you know, while it is important, of course, to communicate very clearly and having a framework that people understand it follow is important. You know, these are importan it's important to decide about where you're going to land. The i m F has just tweeted me and they've said on my d I they've said, that's way too much economic talk with Dr Gopinath, thank you so much for joining us as first Deputy Managing Director

g to Gopeneth. Of course, here at the International Monetary Fund, we are advantaged by over the years wonderful guests who have provided us with decades of perspective and they're changing views on what matters to you on radio and on television. One of those is Adam Posen of the Peterson Institute, one of the great German authorities of American academics, but far more at the Peterson Institute, looking at the things that matter, and particularly this original inflation that we have.

We spoke to his colleague Olivia Bonchard, of course, the former chief economist of the i m F, the other day and we advanced that conversation forward this morning. I was talking I believe it was with ge to gop and FF. I can't remember about once again the certitude of elites saying we've got to get inflation back to two percent. No one has led to charge in the world for a readjustment of that decades old certitude than you are we heading back to three inflation? I hope so, Tom.

I think the ECB, which you and at least thing guy were just talking about, is important to set out a different path than the FED, notwithstanding is saying another's remarks because the inflation is different in Europe than in the US. It's different in Europe, but nevertheless, you've made worldwide impact, and Economics was saying we need to reset and some way maybe it's two point eight percent. Who's who splitting her tenth of a point as well? We are since the last time I talked to you, we

are six standard deviations out on so many statistics. Now there's a glide path back we get how do we get back to two inflation for those days over? We can get there, but it's probably not worth the cost. In my view, I think you have to get it wailed below four percent in the US, and the FED is on track to do that. The choice point is how far and how fast? Echoing something Lisa just said it takes to get from four to two or four

to two and a half. So between now and say first quarter of the FEDS tightening is baked in right two or fifty plus basis points, and inflation is probably peaking in the US or not elsewhere. So you're going to get it down below five by the end of the year. I'm reasonably confident. The question is how fast and how far do you push it down from there? And I'm hoping that they accept running something in the

high twos or even three and take it. How high can inflation be without crippling consumer confidence, without crippling the ability to go out and spend. It's a good question, Lisa, But I think right now what we're seeing is, for all the talk consumer confidences determined by other things, we

are seeing continued spending in the US. Right well, we're going to get actually retail sales coming up, and we have seen them decelerate dramatically, and on an inflation adjusted basis, they have been increasingly negative over the past few readings. So yes, people are still buying, but with an asterisk. I mean, at what point do you start to worry given the fact that this inflation rate is certainly affecting.

There's no question. I mean again, I'm totally on record, and I was on record a year ago saying, I mean literally April one last year saying inflation is going to come in way beyond the Fed's forecast and they have to start moving. So but that the two are

are not the same thing. The idea that they've took a gamble, in my view, the gamble didn't work out, and now they got to rectify it is one thing, and that's separate from what would happen if they don't grind the US economy down to get from three point three to two point five. And that's the question for Thomas sol the great conservative economist, wrote a book on classical economics now, and I've seen so much static analysis right now, I feel like I'm launching back pre Javonian,

back to David Ricardo and almost nineteenth century analysis. Of all the noise going on. The optimists like Adam Posen would say, we are a dynamic system, we will compensate and we will get beyond. This is the great compensator the currency market, and that we could see substantial depreciation and devaluation in some countries in crisis who don't get it right. I think you're going to see some of

that even if they do get it right. I mean we're coming into the spring meetings of the Bank and the Fund and as first step you Imagining Director Gopinat said earlier this morning to you there's in the secretary yell and said last night, there's real stuff going on

in that world. There are food shortages, there are energy shortages, their price spikes, there are interest rates being past on by the US necessary actions, and so you get to a point where there are going to be dead problems and there are going to be recessions and maybe unrest. But it's not because they didn't get it right, because it's just the world is hard, and we're not very fair about sharing the ability to to to to keep the floor under things. Adam, We've got to move on

in an incredibly hectic day. But can we see you against soon. Thank you for having an imposing Thank you so much right now it is an extremely timely moment. Michael McKee speaks to this fedeficial, that fedeficial, and he will look at the official they listen to with the New York Fed. John Williams Michael, thank you very much, and we'd like to welcome President Williams, the president of the New York Fed, to Bloomberg Television and Radio worldwide.

We should also mention you are the vice chairman of the Open Market Committee, so second in command of the group that makes the interest rate decisions. You have to decide what you're going to do and how fast you're going to do it going forward from the data that you have. We just got retail sales numbers, inflation boosted sales up half a percent. What's your take on I know you've looked a little bit at the numbers on this, so we're seeing any decline in demand? Well, first of all,

it's great to be here in person, Mike. It's uh, it's nice to be able to do this today. You know, we are seeing I think some signs, early signs that consumers are shifting their purchasing patterns coming out of the pandemic away from all the purchases of goods of the

past few years and more to services. I won't respond too much to one months of data, but one month of data, but I do think that's how a pattern I'm expecting to see continue during the year and I think it's a very important part of this story is to see consumers as we get past the pandemic, be able to move back to more normal patterns of spendings. We'll have to watch that data carefully, but that as

a trend I am looking to see this year. Well, it's been interesting over the last week or so a number of your colleagues have seemed more concerned about the pace of inflation and have suggested they're changing their mind about how quickly you should do that. Are you still believing that the that you can do this at a measured slow pace. Well, I don't think we're going to do our policy adjustment and measured slow pace for sure.

I do think we need with high, very high inflation, we need to really focus on bringing inflation down to our two percent longer run goal and to do that over the next few years. So that is the number one focus. And we I say that because the economy is strong, the labor market is basically back to a close to where it was before the pandemic, with the unemployment rate round three and a half percent and other indicators showing that we have very strong demand for for

for labor. So I do think from a Monterey policy point of view, it does make sense for us to move expeditiously towards more normal levels of the real funds rate UH, and also to move forward on our balance sheet reduction plans. If there was one phrase it sort of sums up where your colleagues are, it's get to neutral by the end of the year. Would you be on board with that? I do think we need to get back to a more neutral and normal level of

the federal funds. Right whether it's at the end of the year or exactly when that happens will depend on the data. We We will continue to be a data dependent but given where the economy is, and especially given where inflation is, we really do need to reverse the policy actions that we put into place back in March, move that forward UH, and move the federal funds target to neutral. And again, whether it's by the end of the year or exactly when it happens, I think that

that will depend on the path of the economy. But yes, I agree with them. So fifty basis points on May fourth, Well, that's not a decision we made yet, but I do think that, well, you can make it right now, that's not a decision we made yet, MIKEA. But but I think that's a you know, a reasonable option. I think that for us, because federal funds rate is very low, we do need to move UH policy back to more neutral levels uh later this you know, through this year.

And I think that's a very reasonable option. Speaking of neutral, what do you think neutral is these days? You were sort of the guy who invented, along with the late Tim law back the our star concept measurement, and that's the key indicator for what neutral might be. So it's hard to know. I've always started any question on the neutral interest rate with it's it's it's an uncertain thing.

It's something we don't measure directly. We have to infer it from other indicators coming into the pandemic, and our estimates, most estimates of neutral were quite low. And I think that's consistent with the my colleagues, the f O m c's view that the normal nominal federal funds rate is probably around two and a half percent UM. So I think that I think about, well, where is it today? It's uh, it's the economy is being pushed around supplying

demand dramatically by UM pandemic. Obviously, H the invasion of Ukraine and and and other factors are moving the economy around. But then I go back to what are the longer run drivers of a neutral rate? And economists I think have studied this pretty carefully. They've identified demographics, productivity, growth, global demand for the safe assets like the US dollar. I don't think those have fundamentally changed since before the pandemic.

So I guess my my baseline assumption is a neutral UH nominal federal funds rate in the long run is probably still in the very low two percent to two and a half percent range, So I don't think that's changed. But again we have to have an open mind and see how they can follow the data. How far above that do you think you might have to go to

bring inflation down? That? You know, I think that's a really important question as we as we get back to you know, neutral uh nominal neutral levels UH, that we have to I think to do two things. One is we have to keep focus on real interest rate, so it's not it's not just a nominal interest rate like

the federal funds rate. But whereas inflation so I do think that we do we will need to real interest rates mean nominal interest rates adjusted for inflation or expected inflation back to more normal levels uh by by next year, um, and we may need to go a little bit above that depending on where inflation is. I think the economy right now has a lot of good momentum. I think the economy can withstand uh neutral or real interest rates

or you know, at neutral or a bit above. But the decision, those decisions we made, you know, in the future, depending on how the economy evolves. Well, where is inflation these days? The general consensus of analysts coming out of the CPI report this week was inflation has peaked. Well, I'm not gonna make a prediction about whether inflation has peaked because clearly energy food and energy prices have been

quite volatile and affected by by this situation Ukraine. So and uh we you know, the oil prices could go back up. They're volatile. So I don't know about peaking. I do think that my view is with Monte policy reducing uh, you know, the imbalance between supply and demand and the economy. That's by bringing interest rates back to more normal levels. That's going to bring demand and the economy back to close to the supply. With some of the supply chain issues gradually being resolved, and also this

rebalancing between goods and services. I do think that the underlying trend inflation is probably going to peak soon hopefully and start coming down later in this year. The black Rock Analysts, world's largest asset manager, say that you can't raise rates high enough to bring inflation down to two percent in the short run without an unacceptable level of unemployment. How high are you willing to go on unemployment? Uh? They also suggest you may just learn to live with

three percent inflation instead of two. Well, I'll start with the last part where I don't agree with that. We have a two percent longer run goal. We we've discussed that thoroughly. That is our long run goal, and that's what we're gonna stay with. So we're going to get inflation back to two percent. In terms of the unemployment and the risks there, clearly this is a period of

great uncertainty. Um. This is a challenging circumstances to conduct Monterey policy bringing inflation down while trying to keep the economy the labor markets strong. I think we have a couple of advantages over previous episodes. So one is where is the economy the strongest. Where are we seeing the kind of demand um, you know, exceeding supply. It's really

in the interest sensitive sectors. It's in durable goods, in autos, in housing, and so as we brought up expectations of interest rates, as as yields have moved up, mortgage rates have come up, that's that's going to help bring down that excess demand for that sector relative to supply. So I think that our monte policy tool this time of interest rates is actually really well suited for the imbalance we have in the economy. So I think that's an

important point to remember. The second is we have a very unique situation with the demand for labor obviously much stronger than the supply UM. So the goal here would be to reduce that excess demand. We see it in the record number of job openings. For example, Let's get the number of job openings down to a level that's consistent with maximum employment. So I don't think we have to decrease employment or raise unemployment. So much is just take the froth, if you will, out of the economy

and get in a more sustainable basis. So you disagree with your predecessor at the New York Fed Bill Dudley, who said, uh, you can't achieve a soft landing. I think we can achieve a soft landing. I think this is a unique set of circumstances, as we've talked about with the pandemic and uh with the Russian invasion Ukraine creates a unique set of circumstances as well. It's not gonna be easy. I'm not gonna pretend this is a uh you Monty policy and this type of situation everything

goes exactly according to plan. But I think we are in a good place with with Monterey policial policy. We've seen a dramatic, significant movement in yields and financial conditions over the past several months, and that's um you know, already positioning I think policy well to get supplying demand in kind of back into balance and to set us up for bringing inflation down over the next couple of years. I have to ask you about the balance sheet. Obviously

you're gonna make that decision. Lile Brainerd suggested you announce it in May and it starts in June. Is that your anticipation. Well, again, a NodD decision we made, but that is what I would expect I think we should get the balance sheet reduction process underway. We've set out the principles around that. Those are I think really important, and we worked hard and coming up with a good

plan for that. UM So, yes, if we do make the decision in the main meeting, technically that process of reduction would start at the beginning of June, but it would obviously continue for quite some time if we get the balance sheet down to Two quick follows on that one, what is your estimate of the impact on rates from reducing the balance sheet and to what would trigger sales

of mortgage backed securities? You said you might do that. Yeah, So this question about what's how do you convert the balance sheet reduction into a like, how big of change in the federal funds target is that equal to? I think it's really hard. I think the way I think to calculate that kind of number, given all the uncertainty, and given that the balance sheet policies affect the economy in different ways than the normal uh same moving the

federal funds target. The way I think about it is that as we reduce the balance sheing is we've announced doing that, you're seeing basically upward pressure on longer term interest rates in the term premium, and we're seeing that in the data. If you look at five year, five year four rates in the treasury yield curve, UH, look

at tenure rates. Clearly we've seen over the past several months movements for movements up in those rates, which I think reflect the markets expectation that we're gonna conduct the balance sheet reduction. So I see, I see that is primarily the channel by which it affects things that raises mortgage rates, of effects longer term meelds, which affects borrowing costs. So we're seeing that happen. I think a lot of it has happened because it's through the expectation of our

future action. That's in parallel obviously with our short rate the path of federal runs rate, which is also removing monetary accommodation. So important point here, I think is both of these are happy at the same time. Financial conditions are being adjusted pre significantly with both of these tools. In terms of nbs UM sales right now, uh, you know, the first part of the plan is really UH doesn't

incorporate sales. It's really about um letting the balance sheet. UH. Fall kind of organically or be reduced through an organic process, and I think that's where we need to be focused. So to me, the first stage is really getting the uh, the size of the balance sheet down. There is this longer term issue. We got to also want to get the composition of the balance sheet to be primarily treasuries. So I see further down the road, once we've got

the balance sheet reduction well underway, is the time. But we can contemplate, well, do we want to add to the mix some sales to really get the long run composition right. But that's not a decision for now. John Williams, President of the New York Federal Reserve, thank you very much for coming in this morning. Let's not delay because right now our next guests are the pre eminent thinkers

in both Russia and energy is important. We've been doing this for years and I think of one moment at Davos ken Rogoff and Joe Stiglets Ken Rogoff and Joe Stiglets and Davos a couple of years ago, but they weren't married. This is wonderful in international relationship to have with us. Angela Stan and she's brought along Daniel Jurgen this morning with true expertise on Russia and are shattered

commanding heights. Wonderful that both of you here. I want to begin simply with I did a survey last night. I called up the New York Times and I said, okay, I tried to read every wedding announcement. The record for number of academic citations and a wedding announcement was a few years ago when YouTube you were at the Times of London right now, I was actually a car. I mean while I was changing by PhD. I was a correspondent for the Time's Higher Education And were you abouming

the subways of London or something? I was floating around as a graduate. How did you to me? I mean, I'm wrating the class on French history at Cambridge University. She she allegedly ran out of ink and I gallantly produced a patent. Serious and he has written every book on it. Let's get to this, and Angel, I want to start with you. And I've got a quote that's ugly.

So we're in our studios in New York and Bloomberg surveillance is always trying to be smart in the immediate and I looked down at my screen of ten fifteen monitors, whatever it is, and there is Vladimir Putin in the far east of Russia doing a junket. First time really after the beginning of this war. Associated Press did a translation of his comments. Clearly for the Russian consumption. Putin two days ago. The only question was one of timing the thing we do. On the one hand, we help people,

saving them from Nazism. On the other hand, we take measures to ensure Russia's own security. He reaffirms this concept of Nazism in Christina Gryava's Eastern Europe. Where did that come from? Well, this is a way of dehumanizing, you know, the Ukrainians. Right. The great moment in Russian history that Putin keeps talking about is the victory in World War

two where the Soviet Union defeated the Nazis. So if you say that the Ukrainians are Nazis uh there and they're committing genocide against Russians, which is what he's also said, then in a sense you tell these young recruits on the field to go out and kill these Nazis uh and and even those Russian soldiers are confused. But it

is it's the dehumanization and the demonization of the Ukrainians. Angela, do you think that within Russia there is a realization of what has been given up for the stability that Vladimir Putin has represented over the past number of decades. I don't think the Russian population fully understand that yet. I mean they can see things that disappearing from their shelves.

It's hard to access a t m S. They're getting poorer, but they're being said all these lives, they're being told that they're defeating Nazism, and then if they don't do that, Rustaurant self will be invaded. So I think we have a reckoning to come, but I don't think we're there yet. And Dan, you're again with your expertise on the energy markets. They are being kept afloat from some of these oil

and gas receipts, and we have seen that. Vladimir Putin today came out and said it is going to be very difficult for the world to move away in Europe, to move away from their gas. Do you see a different story, well, to some degree. I mean they're right now. If this year, at this price, they're going to earn about two hundred and fifty billion dollars from European purchases of oil and gas. I think we're going to start

to see sanctions, I guess. I think the last two weeks have really changed in terms of what people have seen as the Russian troops have withdrawn as the war grows closer than the dawn boss intensity. And so I think we'll start we're seeing the self sanctioning, and I think it'll be progressive sanctioning that will cut back on energy. Oil will be easier, particularly crude oil, will be easier to cut back on than gas. That that is his

strongest point right now. But I think you're going to start to see that to the pressure just will mount. Are the commanding heights shattered? Well, well, I think in the sense what we've seen as a return to government control. But I think the sense of a global economy and integrated global economy that Russia was part of, that's finished. I mean, Russia is going to end up in dependency

of China. That's what it will be in greater global economy is shattered or ending or nuanced into something new. The great fear, and I would suggest the great fear in this building is what I would call block is m B L O C. Block is um of a regionalization of our trade. Is that where we're here? Yeah, I think I've used a phrase a fragmented globalization, but I think block ism is a fair way to describe it.

To that this this thirty year period that we've been in the world, economy connected and people generally benefiting from an economic growth is really under great pressure right now. Angela, there's an issue of what this will do to bring the war to an end, right of basically pressuring Russia and Russia's isolation, and whether that actually will allow Ukraine to survive to some degree. What's your view on that. Well, Putin is in no mood at the moment to bring

the war to an end. Now the Russians are regrouping, they wonder at least take the don bus since they failed, of course to take Kiev. So right now the sanctions don't seem to be driving Putin to do that. I really think the only solution is that the US and its allies to keep armoring the Ukrainians and to enable the Ukrainians to push back against the Russians so that the Russians really can't declare victory, but Putent's not going

to accept that yet. How long do you think it will take for people to really move away Europe, in particular from importing gas from Russia to truly isolate Russia to the degree that many people are expecting. Yeah, I think I think I'll take a long time. I think I think we'll see crude oil for first. I think

that the pressures definitely will grow and the restrictions. I think I think you can start chipping away at the gas and I think people are saying, well, maybe it will start with not taking Russian Ellengy for instance, into Europe, and I think to three years. I mean, what the Germans have to do is build those receiving stations for l en g and over the next two or three years. But I think I think it could actually come sooner, depending what horrors come out of Ukraine and the pressures

will be so great. Angel sent one final question to you. There is a primal scream for the cliche of a martial plan. How do you envision a martial plan of the Allies to Ukraine. Well, it's going to be incredibly costly, but obviously they are going to have to pay and mentioned yesterday. She says mag to Tun is the issue. We're thinking in billions instead of trillions. Do we bankrupt ourselves? You'll be quiet? Do we besel we have? We have all of these Russian assets that we've impounded. We used

those also partly to pay for it. We forced the rusting. Yeah, that's what I think. We'll use the Russian assets and use those Russian yachts as long as you can find buyers for those shots. Well, that's a key question. I mean, can you if you're talking about what brokers were there? Seven million dollars a lot of puts we got you ought to buy something for you. This has been wonderful. We hope we can do it. Took most of negotiations between us. Whoever is the next book coming up? At

the moment, we're still both so engaging. We're living our current books every day every days, and Daniel can thank you so much. Not a usual interview at the International Monetary Fund in these unusual times with the spring meetings in one week, we are out front with the first interview with Kristilina Gorgeva, the International Monetary Fund Managing Director. An extensive interview and I'd made clear to her. If she wants to go longer, we'll let her go longer.

On the morning, so much to talk about. Thank you so much for having us here. It's been a wonderful conversation through the morning. I want to talk and go to a quote which I just spoke to Angeluston about the great author of Putin. This is Vladimir Putin in Russia two days ago uh an Associated Press translation, obviously for the Russian audience. The thing we do, on one hand we help people, saving them from Nazism. On the other hand, we take measures to ensure Russia's own security.

You are more qualified than anyone. Your heritage of Bulgaria. Your grandfather was a patriot of Aulgaria. You have lived under this car Marks University and such. You personally must be thunderstruck and with members of the Greater Gorgava clan in Ukraine. Now, just for a moment, what is the last fifty days been like for you and your family? It has been horrific. A war is a terrible thing

for my family. What it means is threat to their safety, more difficult to find foot and more expensive to bite, no medicines, and above all that sense that the war would not soon end. Getting out there in Harkif in distant part of Ukraine is close to impossible. Why they are very close to the Russian border and very far from the Polish and other borders of Ukraine. But in this horror of war, what impressed me the most is the strength that they demonstrate for the future of Ukraine.

My sister in law's messages, we will win this war. Can they do it alone? In the distinction of my interviews with the right and the left, the politically savvy and not is this timidity about starting a World War three? Now that's not your mandate, it I m F. But I would like you to comment on how you perceive the shock of the Western world and their tentativeness in assisting not only Ukraine for all of Eastern Europe, frankly the Finland. But the reality of this war is it

is about Ukraine, and it is beyond Ukraine. It is about Ukraine because its existence is being threatened, but also the post world order is being threatened, and it this sends The war affects all of us. If we are to allow a twenty first century military takeover of a country in Europe that is detrimental to Europe, it is detrimental to the world. And what we have to recognize that the war is having consequences, reaching far and fast.

It affects hundreds of millions of people through three main channels. One. Commodity prices especially food, energy, but also metals and foot prices are up at the time they were pushed already up by I want to talk about the food in a minute. That's going to be the main part of our conversation with what we see the challenges of the I m F and helping Sri Lanka, prow and others. But I want you to comment on the scope and scale we see. This is something you're expert in academically.

And another expert, Janet Yellen, who has a little bit of experience with the trillions word, says we're getting the magnitude right. Yellen says, we need to think in trillions, not billions. Because you go to your Spring meetings and frankly to your October meetings, do we have the magnitude wrong of what is needed? Well, Janet Plan is right. We need trillions and we have been talking about these

trillions for years. How can we transform billions into trillions. Well, First, by all of us working together, we cannot have fragmented deployment of scarce development international finance resources. Two, by embracing a very simple principle public money should be used for only one of two things. To finance what private money would never finance, and to remove barrious for private finance in emerging markets and developing economies. And we are still

short of embracing entirely this principle at d Imath. Our concentration is when we have a program in the country, is this program going to open up space for private sector let growth, for jobs that come because vibrant investments are being made. And when we when we look at the countries that are now in difficulty, we are determined to have helped them have fundamentals that would make that

private sector let growth possible. I want to talk about the mechanisms here and then get to the food crisis or Eric Martin is front and center on this and looking nation to nation where the greatest challenges are. The nuance here is the solution domestically for these troubled nations and food is price control. To keep the price of bread down and keep the price of week down. The price of rice down, etcetera. The I. M. F Comes in and says, okay, you're broke, fine, let us help

you fix it. But there needs to be a new mechanism given the magnitude and the shock of this inflation. Explain the new mechanism or process you will use to move from domestic controls over the something that's more modern Western capitalists, how do you how do you get from A to B? We have been on this now for quite some time, and you're right. We have to get

even faster on that path. And what we are working with countries to do is to have targeted assistance, so there is social protection that identifies who are the vulnerable that need to be helped. What is the problem with price controls? Everybody benefits from it, the rich benefit and the poor. But if the country doesn't have a social safety net, if they don't know who their vulnerable families are, they are bound to go for price controls because that's

the only thing they can do. And by the way, at this moment of time, in some circumstances, we would say this is not your first best, it's not only your second best. But given the speed with which prices are jumping. There is some some logic in making sure people don't go hungry. How do we think about this in the future. We have to two complementary strategies. One is what I just described, target or your public spending. For God's sake, don't throw good money in the direction

of rich people. Second, think about food in a more sustainable manner. Remember this year, food crisis has already been knocking on the door before the war, because of climate change, because of climate shocks, because agriculture in Africa rain fed. You have no rain, you have no food. We have to think about sustainability and resilience in a more shocked prone world differently. Okay, well, let's I want a digress here and I do want to come back to food

and folks. So if you're just joining because on Bloomberg Radio Bloomberg Television, Crystallyna Gore gave of the i m F Managing director here in a conversation, I can say, in all my years of doing this, a critical point into the spring meetings of the i m F next week, I want to digress here on climate change. I was at the Paris Accords and the advancements that have been made. Tell me of the derailment of the need to burn call. How temporary is that? Or has there been a seismic

shift for climate change? It is temporary. I don't see call persisting for much longer. Why because one of the benefits, the silver lining, if you wish, of high energy prices is they make renewables more viable and they inevitably believe we see so the yes, how long would it take? I'm not antige expert. I would not guess, but the direction to travel is uh cleaning, Okay, fine, just because of time. I really want to get all these issues in. We see Peru, we see Sri Lanka, we see Egypt,

which is a much larger, bigger problem. That's a focus of our Eric Martin, If I see these different companies in maximum distress, it alludes to the Arab spring, to the Tunisia and almost the domino effect of an unraveling. Are we near not an Arab spring but a war crisis where we get a domino effect of food crisis. We have to get on top of the food crisis. We need to front it right now, and we can. We have learned lessons about it, we know how to do it. But even if we front it, more countries

would be in trouble. Why because in everybody had to borrow more to sustain an economy. Instance, still the largest increase in that because of the pandemic in twenty one. Servicing this that was easy. It was actually cheaper in some places because interest rates were so low or negative two No more with technic of financial conditions, servicing that is getting more expensive. Now good news, not so good news.

Good news is that we see that we follow it and we are already zero inking on on the countries that are in need of that restructuring. We have to press for that. Right they're coming in the doors, they're gonna and we will. We would sit with Egypt, we would sit with Tunisia, and we would discuss with them realistically what needs to be done. One one thing that I saw Sri Lanka has appointed very prominent Tri Lankan

economies to be advisors. That gives me hope that they're saying, okay, we got because the time I've got to move on. Everybody in G seven is focused on the six. Mr mccrawn he's got to get reelected, so we'll give him a pass. Right now, what do you need from G seven to affect maximum I m F tactics and issues in this crisis. We need from the seven support for deploying the full set of instruments of the I m F FAST and we need space to build it for

the future. Yesterday our board approved a new instrument, first time in the history of the IMF. We have a long term financing instrument specifically for pandemic preparedness and for climate action. What we want is to think of building that resilience I talked about in a more comprehensive way before. When I m F says resilience, we mean banking sector financial stability. Now it is broader. You have to have people that are healthy and educated. We have to have

economy more vibrant. We have to have digital money integrated today in the way we would function tomorrow. You are a tough not the way you came up with some real struggle in Bulgaria. Your academics and the work, and you've just got that certain manner of you do this thing and you're like, let's go, let's go, let's go. What do you say to the I m F nations supporting mr Prutin, whether it's direct maybe it's someone indirect

I think India, China, et cetera. How does the I m F address those nations that aren't on board helping Ukraine think of the interests of your people. Over the last decades of integrated global economy, we have tripled the size of global GDP triple who benefited the most emerging markets developing economies their size increased four and a half times. Their poor poor people are fewer, their their middle class has expanded. An integrated economy in which we can work

together benefits you. Crystal nnagor Gaba, Thank you so much for joining us more a wonderful start to the spring meeting. She is the I m F Managing Director. Joining Bloomberg on radio and television, this is the Bloomberg Surveillance Podcast. Thanks for listening. Join us live weekdays from seven to ten am Eastern on Bloomberg Radio and on Bloomberg Television each day from six to nine am for insight from

the best in economics, finance, investment, and international relations. And subscribe to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg dot com, and of course on the terminal. I'm Tom Keene and this is Bloomberg,