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I think inflation is a huge part of the story, a huge headwind to politicians, and it's not going to be a meaningful to wind anytime.
See Welcome to voter Nomics, where politics and markets collide. This year, voters around the world have the ability to affect markets, countries, and economies like never before. So here at Bloomberg, we've created this series to help you make sense of it all. Back for another week. I'm alegro Stratton, I'm Adroom Woodridge.
And I'm Stephanie Flanders. This week in Dubai. Why are you in Dubai, Steph, Well, you know this, this vast empire that I control of Bloomberg, or at least this large number of reporters in economy also include Dubai. Absolutely it does, and there's different bits of the empire converge in Dubai.
Well, at the top of the show you heard from Karen Ward of JP Morgan Asset Management. We're going to speak to her a little bit later and she's going to help us unpick those difficult dynamics between economics and politics. Also on the show this week, we have Bloomberg reporter Craig Trudeau, who is our tesla expert here in London. Steph, how big is his team? See? Does he fly solo or has he got lots and lots of people?
I suspect he's got more and more people. We have discovered that you can support a whole Elon Musk podcast, and I suspect over time we will just acquire a larger and larger team covering what he's doing.
So he's going to be for those for Muska fiscionados. He's going to be joining us in a second to talk about Elon Musk's deal with China and also what the TikTok bill tells us about this phenomenon of tech decoupling. But first, Adrian, you have a B in your bonnet.
Yes, I was very struck by William Haig's column in The Times this week. And I think William Hage is a very good columnist. I always enjoy his column in the Times, but this week I was a bit disappointed. He argued in this column that this is the era of elections, which is what we're all about here, and he said, so far it's been a great trime for democracy. More than four hundred million people have gone to the polls, and those people have been exercising their rights extremely well
with good effects. And he points to the example of Turkey, poland various other examples. And as I read this, I thought that may be true, but they haven't really changed the direction of history. And the one big election that looms over everything else, which is the US election in November, that can hardly be categorized as a trime for democracy.
We have two really old candidates, one of whom has led an insurrection as many of us would see it, one of whom is looking visibly very elderly, and a real possibility that election will go down to a very few votes in a very few places, which will spark civil disobedience. So looking at William's excusamples of a few good things about democracy, I didn't feel myself really thinking, yes, this is a great system in the great flushings of triumph.
I felt it was a bit of a list of elections that have taken place, and I wasn't sure. I thought perhaps there was a little bit of cherry picking. And actually, for me, the more interesting things are how you have across the Western world or more developed, richer economies.
This deep dissatisfaction with democracy, and you can see in the polling in developing economies, actually there's more of an enthusiasm and a sense of that democracy may yet deliver for them, and it may yet raise living standards itself.
That Hague is writing that column at the beginning of this huge six week process soon say, of the Indian elections, and that is an election which really features one man. There isn't really a significant opposition to Mody, and Mody is an illiberal democrat. He's somebody who, whilst quite popular and going to win the election, is eroding basic many of the basic constraints on the power of central government. He's a sort of ceo figure. He's a strong man figure.
He's not an example of liberalism. He's the worst sort of modern democracy. So again I thought, actually democracy only really works when it's qualified by liberalism. Democracy as a sort of triumph of populism isn't very good. So even in the emerging world, where you do have a general sense of optimism and growth, indias growing by six or seven percent a year, you don't have an ideal version of democracy being put in place in the world's biggest democracy.
Because we're guarded the way through this huge year of elections. What do you think the picture is when we're fully through.
I'd say that my example would be India, the world's biggest democracy, a strong man winning, and the United States, which I suspect will produce a lot of civil disorder. I think if it was a close election, it'll be a very unpleasant election. And it's a choice between two people, neither of whom, in my opinion, should be running because the party apparatuses couldn't get it together to choose in this vast country, two people who are a bit more appetizing than Trump and Biden.
I did think it was a reminder, since you're dumping on William Haig lifting up his column only to tear it down again, I thought that it was a useful reminder that these a lot of elections have already taken place that involve a large chunk of the population or are now ongoing. So and if you think of Indonesia, Russia and India, by the time that's finished, that's nearly
two billion people who will have cast their vote. Although we make a lot of the uncertainty created by all these elections, that two billions were were never in doubt. We've got all places where the incumbent won and it was no surprise. Whether it's Pakistan, Taiwan, Bangladesh. I'm not sure I would read the results as positively as William
Haigu does. The Pakistani voters did deliver a rebuke to the military, but the military rigged the system so much that still nothing's changed, and the same person became Prime minister Bangladesh, the incumbent authoritarian one, even though there was something of a backlash, the strongman one in Indonesia. So I think it's so far it's the incumbents, and as you say, Adrian the not necessarily the most democratic of incumbents.
And one last point for me, which was in his piece, he ended up talking a lot about the importance of local elections, which obviously we're going to see in the UK this week. To be clear, we're recording this before people have gone to the polls. But one of the aspects which our reporter Alva Ray points out in her piece from she went to both Teaside and West Midlands was that it's looking like turnout will be incredibly low.
So we keep having these establishment figures saying the answer is drive power out to local elections, have more power nearer to people. When you actually look at those elections, people sort.
Of shrug yeah, because they're so denuded of any power in the UK.
Look at what Ben Haushin's done in Teaside. He's done quite a lot with what he with the powers that he does have. But it will be interesting to see the turnout when we've actually got some facts to dissect. So let's get to our on the ground reporters for the week. We're fortunate enough to have this week's guest with us here in London. Reporter Craig Trudell. You dedicate most of your waking hours to following the latest Tesla and Musk news, don't you, Craig.
It's been a few crazy few weeks on the Musk. Be it fun.
So Mauksk has obviously been to China. Just give us what it all means.
Yeah, this was a surprise. It was a sort of over the weekend wake up and oh Musk is in Beijing in India. But then yeah, a week earlier he was due to be in India and he was supposed to meet Prime Minister Modi. It was a highly anticipated trip where everybody was expecting Tesla to announce a new plant in India, which would be quite a big deal. That got thrown out the window at the eleventh hour, and a week later, Lo and behold, Musk shows up in Beijing. And I think it really speaks to the
idea that Musk still very much needs China. He very much rode their support to the position he's in today of having the world leading electric vehicle company, and in order to cling to that position he needs some help again from the CCP.
He actually did achieve things with this trip. It did actually move the ball out of the pitch for him.
Yeah.
I think a couple of hard developments that did come out of this. One was a partnership with Baidu, which is China's Google, effectively a deal for mapping and navigation, and that's one element of if you want to put these systems on the market in China, you need to have such a partnership. And he also just got another sort of incremental regulatory step having to do with something very similar with data collection and storage in China.
I maye Craig have got to the point where I'm just seeing decuttling and deglobalization everywhere I look. But I was very struck by that deal sort of cementing something that we see and you feel very much when you go to China is just a completely separate economy being developed in sort of key ways, particularly since COVID you can't use Western cards, people constantly having to borrow money for the taxis because all the things that used to work no longer work, and things like Tesla. If you're
working for the Chinese government. Someone had told me who works with Chinese government, you can't drive a Tesla into a government car park and leave it there. There's constraints on what you can do. So the idea that you're actually locking in parallel technologies and potentially laying the ground for a complete technological decoupling struck me as it was coming through very strongly in this deal and being cemented. Yeah.
Absolutely, and this goes back a couple of years. Actually, we broke the news about this idea that China had moved to ban Tesla's from military facilities, having to do with the concerns that these driver assistants systems that Tesla's betting big on are reliant on cameras and so these cars are rolling around everywhere, taking in footage everywhere they go, and there's a real concern on the part of the government of wait a second, where is that footage going.
Is it staying here or is it going back to the US? And at the moment, given the fact that Musk is trying to perfect or improve these systems by training them with supercomputers, there's real concern about that data going from China back to the US. And I think we're seeing this kind of left and right in the car industry, where when you go to China you can find incredibly cheap evs that you can't find in the West.
You can find these driver assistance systems for much more affordable prices than you can find in the US if you want to have this similar capability in a tesla. It's absolutely the case that there's a sort of dual track here.
But on the one hand, we've got this duel track economy developing. On the other hand, the world's richest America goes over his genre and solves an American problem and stop valuation goes up. Isn't that an extraordinary confusion?
I think so.
I think it's fascinating because this is someone who, oh, by the way, has just you know, more than just Tesla as part of his business empire, and has repeatedly made these accommodations or these statements that are very China friendly. I go back to some of the comments that he's made about Taiwan and weighing in on things there to where Taiwan has no interest in, for instance, using Starlink
his satellites business that he's building with SpaceX. I do think it is also very interesting that this is coming on the heels of the TikTok ban or so called ban and in the US, and he has also taken a position on that. While we're talking about this idea that he's very China friendly, even as the owner of X formerly Twitter, he came out and said, you know what, I don't think that we should do this with the US.
Which cool the sort of double standard that none of the big US social media firms, none of them can operate in China, but you now have the US legislation to potentially band TikTok if they don't transfer ownership to a non Chinese company. It did also it just it struck me that the definition of a strategic asset of you know, what is a national security threat just keeps
broadening all the time. China has always potentially had a very expansive definition of that, as we've seen in the controls it already had, and the US are starting to go down that road. It makes you feel when Jake Sullivan talks about having small yards with a high fence and the sense that we're not really going to decouple or divide the global economy. We're just going to have certain things that we protect. The certain things we protect seem to be expanding all the time.
Yeah, and I think that's absolutely right. And along those lines, I think one of the things that we've been reporting out of Washington recently, there have been concerns among folks, whether it's in Washington or in Brussels, about how cheap these Chinese electric vehicles are, and China has much more capacity than they have demand. That's something that Janet Yellen has made quite a lot of noise about recently, including
on her trip to China. I think it's very much the case that in trying to put up barriers to keep Chinese evs out of the US, Gina Romando is talking about not just raising tariffs that, by the way, we're raised under the Trump presidency, but looking at whether or not there is a path to blocking these vehicles on national security grounds, which is very reminiscent of exactly what China was doing over the last couple of years of being cagey about where Tesla's can go on its soil.
So you do think it could be an election issue in Washington.
I absolutely seeing it being the case. I think Biden absolutely made EV's a big part of his Inflation Reduction Act, his signature of climate law, and the fact that Trump, on the other hand, very notably recently referred to the idea that for the auto industry, if he doesn't get elected, there will be a quote bloodbath. We've absolutely heard a lot of back and forth, including late last year with the UAW strike and Biden going on the picket line, the first US president to do so here in the UK.
I don't necessarily see it breaking through, but it is fascinating to me that as an American reading the papers here day to day, the sort of alarmism of whether this whole ev transition makes sense or as worthwhile or is bogus, it is relentless. I just find that there is quite a bit of negativity about whether these evs make any sense, despite the fact that they have been making really remarkable progress the last half decade.
So a comparison in contrast of the UK and US election seems like a pretty good place to leave that chat in this latest edition of Photonomics.
Thank you very much, Craig, Thank you, Greg.
That was great, Thank you that was fun.
Yeah, you'll be back you so much.
So.
Last week with the first edition of Photonomics, you guys talked to Neil Ferguson about his reflections on how economics and politics are colliding in America. It was a punchy chat.
Adrian, absolutely I learned to iard a great deal. Some of it I agreed with, some of them I didn't agree with. But Neil is always informative and provocative.
I also noticed that the comparison we were a little bit ahead of the game. We were thinking of the potential comparisons with sixty eight and politics. I became increasingly glad over the course of the last week discussion because I read an awful lot of people just deciding that we were potentially even with the Chicago conveyed in August, that we wereating a rerun of sixty eight.
We're with the first people to throw Richard Nixon into the mix.
I think so if that would say that, regardless of whether it's true, I'm convinced it's true.
So if that was Neil Ferguson last week. This week, to help us chew over these issues, we've invited JP Morgan, Asset Management Chief Market Strategists for Europe Karen Ward to join us in this week's conversation. Karen was a former Bank of England economist and also a former advisor to the UK Chancellor dix Chequer Jeremy Hunt. We started by asking her if she's seeing the theme of this podcast photonomics, so economics and politics colliding cropping up in her day job all the time.
Yes, absolutely, and there's always a question as to when it becomes the dominant force that's impacting markets. One thing I've always found amazing in twenty years of doing this is ignored until a single day and then it's the only thing that we talk about. We haven't quite turned back corner just yet, but I think certainly trying to think through what are the policy ramifications of different electoral outcomes is starting to come on to the radar for sure, and.
What in that context, what are the sort of pieces of advice you're getting ready for people.
I think in the US it's really through three lenses. The first is the obvious one, fiscal policy, what's the outlook for tax and spend? And I think our starting point in the US is what's concerning because the US has an incredibly strong economy, but it also has a six percent fiscal deficit, which is rather an odd point to be at when you have record low unemployment. You really shouldn't be running a six percent deficit at that time. So what are how does that evolve and what do
the different parties mean for how that will evolve? Are any parties credibly talking about how they will reduce spending or how they will raise taxes? Doesn't really seem to be a big part of the dialogue. If anything, the discussion is more about whether there's any prospect for further tax cuts, So fiscal policy always the most critical edge.
I think the other two aspects that are particularly key for me when looking at the US are how some of the policies might feed into inflation, because certainly for markets for bond yields. The question of whether those inflation problems are really behind us or not is still absolutely critical, and the two policy pieces that fit into that puzzle
are migration and tariffs. The US has had this enormous flow of migration into the economy over the last couple of years, and that's really helped ease the pressures of demand on supply. It helped that economy cope with record low unemployment and still bring down wage growth and eased some of the inflationary pressures. So migration's actually acted economically
like a real safety valve. Now, when you look at what voters are saying about what's concerning them, they are clearly less convinced about the economic benefits, and it's one of the key points of concern amongst the electorates. So how the different parties tackle migration is the other. What they might do, how quickly they might turn off any migration taps is really key. And then taris, who taris will be placed on, What are the scope for those tariffs?
How that is part of the geopolitical tensions that are another central feature. But then how the tariffs play into the inflation story.
Also, is it possible to look at the United States presidential election through this very rational economic framework that you've just laid out. When you have such a bizarre and intemperate figure as Donald Trump as the sort of one of the two main players.
I think you have to sit back. Certainly in my job as a sort of medium term investor, you really have to do that exercise. And actually, this isn't really just with regards to the US. It's with every part of the world and every potential politician. And you sit back and you think, Okay, this is what they're saying, but let's just think through the economic reality of them
delivering what they're saying. And I think quite often when you do that rational exercise of thinking, that's what they're saying, but if they do that in practice, the domestic economic cost of doing so might be really quite grave, and so actually, when they are in office, they may choose
to take a different route. I think it's really important whenever you're hearing particularly very strong political figures making big statements, to think that might sound good to the electorate now, but what are the realities of delivering that, and therefore, when in office, is it really going to happen?
Sure? But for the last thirty years or so, we've had economics as the master science, and everybody's really deferred to economics. Now we're in a different world in which politics is much more important and politicians do sorts of things that economists would never have thought that they would. I mean the Trump tariffs being in the last Trump
presidency classic example of that. Isn't it just the case that we don't live in a predictable, rational world anymore and politics is just much much more volatile and much more of an independent variable.
I think we do have to our professional economics profession really has to think about what is the lens of different cohorts or different members of society, what is their economics,
and how might that influence the politics. So what I mean by that is, for years you've heard the IMF, these big international groups acknowledging and understanding the fact that globalization, for example, has seemingly done tremendous economic good what the economists would all have predicted should have happened for everybody's benefit. But we know the benefits weren't spread equally amongst society, and we were left with a segment of the population
that was termed the left behind. And I think for those individuals, they are still operating I'd argue on economics, but it's their own personal economics. They're not seeing their income levels rise, they're not seeing their wealth rise like certain other segments of the population. They're not feeling confident
their children are going to have better living standards. And I think that's where our profession has to be a little bit careful about assuming the aggregate economists is right or that's the way things are going to flow.
And that was that somewhat related to that. I was going to pick you up on one of the things you were noting about the US, and the classic economics approach to this is to welcome immigration as a source of labor force growth because what's often driving the growth in overall output. But it is also one of the things that when you look across quite a lot of elections this year, some of the common features are great concern around immigration and whether well founded or not, and
great concern around housing. And if you look at somewhere like Australia or Canada, the two are combined. They've had massive immigration, and actually that has caused enormous pressure on housing market because they haven't built enough houses, and we've actually looked at how that can also mean that a country that looks like it's had decent growth from your perspective for ordinary people, actually the per capita growth, if
you like, per head has not gone up. I think there's thirteen countries that we estimate across the developed world have had per capita recession. So if you're just looking at growth per head and not growth overall, which doesn't necessarily affect individual people, if it's accompanied by increased population, pretty that's a very politically salient aspect of the economic model that we've had in many of these countries.
Absolutely, it's a very contentious topic, whether it's about how people are integrated socially, how they're integrated economically. The Pew Institute says that migration is the top concern that the US citizens want their new government to tackle.
And we as economists are saying, oh, great, there's no recession in Canada, Australia, But actually the people have had recessions and they've noticed even before you start thinking about inflation, because their income has not gone up.
You have a very peculiar situation in the United States at the moment, don't you whereby we should have an incumbent president sailing towards reelection because the economy is doing very well, and for the first time in sometimes people at the bottom of the income scale are beginning to
share in some of the prosperity. But you have a lot of angst in the country, and there are many reasons for that, but one of them, surely is the angst about uncontrolled immigration or a fe of uncontrolled immigration, Isn't it?
Absolutely that's what all the surveys point to of the electra What is the chief concern that they want tackled, and yes, whether it is alleviating labor market pressures. And again it comes back to my point about individual economics that versus aggregate economic it's an individual will say, well, okay, you may think that, isn't that wonderful that wage growth has eased because migration has eased some of the pressures in the labor market. Hang on a second, wage growth easing,
that's not good for me at all. I want my wage growth to continue accelerating. So I think that's the real challenge is the individual economics presses agrigate.
One of the things that's doing the rounds as we say, is that somebody has told Andrew Marre at The New Statesman that a Labor government wouldn't necessarily reverse Rwanda the Rwanda Plan immediately, and that's going to cause all sorts of trouble for kised Arma because he's either got to come out and say yes I will, which point that's quite tricky for him, because there is a swathe of the constituency's now trying to win in the Red Wall who want to see him having that tough line on
immigration for the reasons you're discussing. And then there's also another constituency and it's being pointed out on Twitter a lot today, which is if Labour's about to do incredibly well in Scotland, that's a place where actually this harder line on migration doesn't go down so well, that's not
what they're looking for. And because some has this coalition which is not dissimilar to the Boris Johnson coalition that he's trying to assemble, which is on the one hand, those Red Wall voters as was became conservative, some is now trying to win them back who want that toughness on immigration, and then on the other hand that's softer left politics that really don't and it sends a kind
of a smell test for them is not good. So we'll read today we're seeing the politics of this in the UK being quite uncomfortable.
And honestly, that also takes us right back to some of the divisions that we saw in the ultimate result within Brexit also in how for such Obviously, when you ask lots of different people why they voted for Brexit, there were different reasons amongst different cohorts, but certainly amongst a specific cohort, migration and the free flow of workers was the major reason for voting for the sentiments from
the EU. So I think how the topic of migration enters UK politics as well as the politics of each party is something we've been contending with for years now.
There's been tenny billion of personal tax cuts announced and it doesn't seem to have shifted the dial in the polling in the United Kingdom. What are your reflections on that.
Yeah, it's a good question, and actually I think there's commonalities behind the question that we spoke about earlier with regards to why Biden it's polling better in the US, and I think it's the role of inflation within the general experience of households, because by some metrics, households things look great. We've got almost record low unemployment in the West, pretty very low unemployment by historical standards here also, and
we've had these tax cuts. But I can't think of any of my friends or any of my circles, and certainly not in the wider society that feels they've been an awful lot better off over the last year, because watching your energy bill rise six dayfold was utterly terrifying, and not knowing if food prices were ever going to come down. So I think inflation has been terribly damaging to real incomes across the West, but very much so here, And I just think that has completely dwarfed any tinkering
that we've had on the tax front. Now as we go through the course of the year, change because headline inflation is now coming down quite quickly, those pressures are easy while wage grade is still relatively elevated, so it might be and we're seeing consumer confidence, right, so you might see some of those more feel good effects, and then people start to think, well, actually, with that tax cart, I'm starting to feel a bit better about life, But
I'm not really surprised that so far nobody is feeling particularly perky about their monthly cash flow.
It's funny because I wanted to take things onto inflation because I was conscious. I was smiling to myself when Adrian was suggesting that it was a new thing to have politics so volatile, and of course you, Karen, were advising the Chancellor, just the then Chancellor Philip Hammond in the wake of the Brexit result, and obviously facing quite a lot of political volatility at that point while you're sitting in the Treasury. But one thing that you weren't
facing then was inflation. And it does feel to me that it's something that economists have underestimated and certainly politicians, I think initially underestimated how much it gets under people's skin.
If you just look at the numbers, the Prime Minister is probably going to go to the polls after prices will have risen by twenty percent over the Parliament and if that's actually all that voters care about, and it's certainly been a big factor in the sort of lowest house rise in real household dispposable income per head, then he's sunk. In theory, it's not his fault at all.
It was all handed over to the Independent Bank of England and we thought that was a great decision, But now actually politicians around the world are potentially carrying the can for the decisions of entirely independent technocrats.
I certainly think the whole community central banks economists had a little bit too much confidence that by merely making central banks independent rulers over the inflation process, that we had necessarily killed inflation. And I think what we've really learned over the last few years is two things. One, we get cost shocks, and they originate from parts of the world that you do not foresee where events are
going to happen. So are clearly Russia invading Ukraine and the energy turmoil that created we had this almighty posh
shock at the economy. But then I think the other degree of complacency is how the labor market would then behave And the fact and the reason I think a lot of the central banking community were perhaps slow to realize the scale of the problem was it was assumed that workers wouldn't ask for more money, they would merely accept the damage to their living standards accepted as a one off piece of bad luck, and carry on and quite understandably, workers didn't behave in that way because carry on.
Being quite high is a problem.
They didn't go down, no, exactly, and workers wanted to reinstate their real purchasing power. And we had very low unemployment, which again was an aspect of supply. It surprise perhaps in how things played out over the last couple of years, and so with that security of work, workers did go and ask for more money, and therefore that's when we
got their second round. Effects is economists like to call it, where you know, workers ask for a bit more pay, that inflation shop broadens out through the economy, And honestly, it's still there, it's still persistent, and we aren't entirely clear whether it's behind us just yet. So yes, I think inflation is a huge part of the story, a huge headwind to politicians, and it's not going to be a meaningful tailwind anytime.
See, Adrian, I just wanted to defend myself slightly by saying that when I was talking about sort of the golden age when economists were in charge, I meant two thousand and eight or up until the referendum, not certainly, But I need to go back to the theme of politics being slightly more important than it was before two thousand and eight or twenty sixteen. It seems that the biggest things that are going on now seem to be
not economics but political events. The invasion of Ukraine, which had no possible sort of economic justification, the possibility of an invasion of Taiwan, which restructuring our whole semiconductor and so again that's something that has no possible economic justification. And just the figure of Trump. If Trump comes in and he could do a number of things, not least some Rapussure wants, some deal with Putin or some crazy actor in the Middle East, which could just completely reconfigure
all of our calculations. Don't We live in a world in which the prognostic power of economists is diminishing.
But it's they may be political events, but they become economical.
No, I mean, where do they come from? They don't They're not driven by economic calculations.
I'm going to defend I'm going to defend us here. Actually, so I'm going to say the economic still really matters. So Russia, with all the benefit of hindsight, we look back now and saw that Russia was getting itself into a situation of economic independence such that it could make a political decision to sever its relationship with the West
in a way that would not decimate its economy. And it had Russia's GDP and Russian activity because it's still reducing oil, it's just sending it to other parts of the world, and it's still producing commodities and sending them to other parts of the world. So I still believe that decision made in Russia was founded a political decision founded in the knowledge that economically it would not be devastating,
and then the ones that you highlight could happen. I still think it's the economics that mean the worst case scenario won't happen. So I think China is.
Just going to say, do you think China could make the same calculation that Russia's made, because it is certainly desevering itself from a lot of the world economy.
It says, no, why not, Karen.
Whether it chooses to get itself into Russia's position over the next twenty years, I don't know. But today the US is still the biggest importer of Chinese goods, and China has a serious domestic demand problem right now, they are resorting back to export demand to fuel their growth. Therefore, they need anyone else in the world to be buying their goods until they can get their domestic engine going.
And while that is still the case, they need to stay friends with their biggest consumers, which are in the West. So right now here in today, with the economics as they are, I think it's a small probability risk.
So the not so dismal science from you, Karen, can you just do some forecasting perhaps, which is people are saying we'll have inflation at two percent possibly then over the summer some people are predicting it could go to one percent. Do you think it starts to come up in the autumn and what are the consequences of that if it does.
Yes, I think it will dip. Oil is edging back up that gas prices, which are a bigger chunk in the CPI basket. They because of gas prices come down in April. That should take us just a little bit sub two. In the summer we should touch a load two number. However, that probably won't last terribly long. And I do think by the end of the year and the bank can also in thereforecast we are back on an up trend as long as it's modest and it's
real wages that matter. So I think part of the reason it's not going to two and through two and back to the low inflation that we knew before is because wage growth is still running somewhere between four and six percent. Of data quality issues at the moment, but it's still in that kind of vicinity. I think we will still be in positive real wage territory through the
remainder of the year. I think the consumer is going to be in pretty decent positive real wage territory, not compensating for the last two years, but at least that pressure feeling better throughout the course of the year.
We cited recently some research, some academic research that finds part of the problem with inflation is even where wages have kept pace, people adamantly to believe that they have not kept pace, and there's a sort of as Karen's
been saying, there's a kind of abiding hit. In fact, if we see wages going faster than inflation, that will potentially be an issue for the Bank of England, might slow the pace of rate cuts and yet still not actually deliver much benefit in terms of how people feel I can certainly say as a form of BBC Economics editor, who used to go to supermarkets on day where you know the price of something had plunged, and you're desperate to find one person who's willing to admit that anything's
got cheaper, because everybody always feels that life's getting more expensive regardless of what the numbers say, And I would very quickly give up trying to find someone who would back up what the data appear to be saying. But I think that's particularly true when it comes to real wages. People don't necessarily feel better off.
It's sort of it's the inflation of fun and the inflation of not fun, the inflation of everything that's not fun, energy and food and all of the stuff that we have to buy and not because we want to buy because it's fun. That is what's risen so much. It's eating into our income, so that eases our it still doesn't feel fun, because it's.
A very good point, the amount that we're willing to spend on tailor swift tickets or god knows what it is. We know all non complains as much about soaring concert tickets because they're a bit more fun that is a very good way of looking at.
So we'll end on. Taylor Swift, thank you very much for joining us.
Karen Ward, thank you for having me.
So thanks for listening to this week's Vota Nomics from Bloomberg. This episode was hosted by me Alecra Stratton, Adrian Wildridge, and Stephanie Flanders in Dubai. It was produced by Samasadi with help from Sarah Livesey, Chris Martlou and Julia Mann's. Editorial direction from Victoria Wakeley. Sound designed by Blake Maples. Brendan Francis Newmanham is our executive producer, Sage Bauman, Head of Podcasts, and special thanks to our guest Karen Ward.
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