# Stocks Drop as Iran Concerns Linger, RBA on Inflation

An episode of [Bloomberg Daybreak: Asia Edition](https://invisiblenetwork.ai/podcast/1663863437), 19 May 2026, 19 min.

Audio: https://podtrac.com/pts/redirect.mp3/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/58e85be7-dbb5-4043-afed-af80014dc0b3/c9f06eed-f51a-4238-8474-b44f0029dacd/audio.mp3?utm_source=Podcast&in_playlist=27143354-63aa-4ac5-965d-af80014dc0d3

Equities declined as concerns around Iran lingered even after President Donald Trump said he was holding off on fresh strikes on the Middle East country. Oil fell. Brent crude slipped 2% to about $110 a barrel, after earlier falling 2.8%. Trump said plans for a strike on Iran were called off following appeals from Persian Gulf allies, adding that "serious negotiations are now taking place." We spoke to Mark Cranfield, Bloomberg MLIV Strategist. And - Australian policy makers are increasingly concerned about inflation expectations becoming unanchored, a senior Reserve Bank official said, as the latest oil-price shock from the Iran war hits at a time when underlying price pressures from the previous inflation surge have yet to fully subside. Reserve Bank Assistant Governor Sarah Hunter highlighted the danger of rising inflation expectations in a speech to a Bloomberg Forum for Investment Managers on Tuesday, focusing on persistent price pressures in the economy both before and after the energy shock triggered by the war in Iran. Hunter spoke to Bloomberg TV Host Haidi Stroud-Watts. See omnystudio.com/listener for privacy information.

## Transcript

[0:00] Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
[0:12] Speaker 2: Welcome to the Daybreak Asia podcast. I'm Doug Krisner. Crude
[0:15] Speaker 2: oil prices were sharply higher through much of the New
[0:18] Speaker 2: York session. That was after Washington and Tehran rejected fresh
[0:22] Speaker 2: proposals aimed at opening the Straight of Hoorn moves. In
[0:25] Speaker 2: the regular session, WTI was up more than three percent,
[0:29] Speaker 2: but then after the close of trading a New York
[0:31] Speaker 2: President Trump said the US will not conduct a scheduled
[0:34] Speaker 2: attack on Iran tomorrow because serious negotiations are now taking
[0:39] Speaker 2: place on reaching an agreement. And with those remarks, oil
[0:43] Speaker 2: price's reversed course. WTI right now in the electronic session
[0:47] Speaker 2: is down about one point three percent. For a look
[0:49] Speaker 2: at the price section, I'm joined by Bloomberg strategist Mark Cranfield.
[0:53] Speaker 2: Mark joins from our studios in Singapore. Thank you for
[0:57] Speaker 2: being here. What do you make of the volatility that
[0:59] Speaker 2: we're seeing in the oil market right now? It just
[1:02] Speaker 2: seems so excessive.
[1:05] Speaker 3: It's become everybody's trade. I think that the issue for
[1:08] Speaker 3: the oil market as much as anything, is that you've
[1:11] Speaker 3: got what some people like to call macro tourists are
[1:14] Speaker 3: now taking part in the market. So you have a
[1:17] Speaker 3: lot of participants who are not your regular commodity traders.
[1:21] Speaker 3: They're being forced to take hedging positions through the oil
[1:25] Speaker 3: curve because they have exposure in bonds, in currencies in
[1:29] Speaker 3: other parts of equity market to some degree. So since
[1:33] Speaker 3: the aram war started, suddenly everybody has to have an
[1:36] Speaker 3: opinion on the direction of the oil price. They probably
[1:39] Speaker 3: need to create some hedges for their portfolios, and so
[1:42] Speaker 3: you've got a lot of amateur people playing in the
[1:45] Speaker 3: in the market, which I'm sure the regular oil traders
[1:48] Speaker 3: will be very happy when it gets back to some
[1:51] Speaker 3: kind of normality when they can go back to their
[1:53] Speaker 3: regular spread trades and the things that really drive the
[1:57] Speaker 3: underlying process of the oil market.
[1:59] Speaker 2: So we have seen obviously with higher oil a lot
[2:02] Speaker 2: of worry about sustained inflation over the long term. One
[2:06] Speaker 2: of the reasons I think that we've had a lot
[2:07] Speaker 2: of difficulty if your long bonds, particularly at the long
[2:11] Speaker 2: end of sovereign curves. Right now we're at multi year highs.
[2:14] Speaker 2: It doesn't seem like we're coming to the end of this.
[2:18] Speaker 2: In fact, maybe we're stubbornly going to push higher. Still,
[2:22] Speaker 2: what do you.
[2:22] Speaker 3: Think We have a very good reminder today the Japanese
[2:26] Speaker 3: GDP data came out for the first quarter. Headline GDP
[2:31] Speaker 3: itself was about one point seven percent, but the GDP deflator,
[2:36] Speaker 3: which tells you what people think about inflation, was three
[2:38] Speaker 3: point four percent. So we have that scenario where expectations
[2:43] Speaker 3: for inflation are still so high they're even running above
[2:46] Speaker 3: where people expect the economy to be. And that's not
[2:48] Speaker 3: just for Japan, that's in other parts of the world also,
[2:51] Speaker 3: So you can see that people are not willing to
[2:54] Speaker 3: readjust their outlook for inflation. Because oil prices have stayed
[2:58] Speaker 3: higher for a long time, disruptions to supply in oil
[3:02] Speaker 3: products across the world. Nobody sees it being resolved quickly
[3:07] Speaker 3: enough to be able to bring inflation down slowly. And
[3:09] Speaker 3: at the same time, you've got central banks who probably
[3:12] Speaker 3: been a little bit slow. Apart from Australia their way ahead.
[3:15] Speaker 3: Australia have been pre empting this with their rate hikes,
[3:18] Speaker 3: but in general central banks have been willing to give
[3:21] Speaker 3: you a bit more time. They want to see how
[3:23] Speaker 3: it's really going to feed in. By the time they
[3:25] Speaker 3: get round to it, the risk is that we get
[3:28] Speaker 3: a mini repeat of what we saw in twenty twenty
[3:32] Speaker 3: two when inflation outpaced the central banks and they had
[3:36] Speaker 3: to play catch up. That is a risk which is
[3:38] Speaker 3: beginning to be fed into markets again.
[3:40] Speaker 2: Now does it strike you being a little strange here
[3:44] Speaker 2: that higher oil really doesn't has not done much to
[3:47] Speaker 2: restrain economic growth.
[3:50] Speaker 3: It is a factor which people are working around, and obviously,
[3:55] Speaker 3: on the flip side of that, you've got some of
[3:57] Speaker 3: the economic growth is being delivered by these massive investments
[4:01] Speaker 3: in things like data centers, which people to some degree
[4:05] Speaker 3: see as being immune to short term fluctuations in energy prices.
[4:10] Speaker 3: They think that the long term demand for data related
[4:13] Speaker 3: to the AI story is so fantastic that they will
[4:17] Speaker 3: keep on building those regardless. That will boost growth, jobs,
[4:20] Speaker 3: boost that sector of the economy. So you have parts
[4:24] Speaker 3: of the economy which seem to be quite well insulated
[4:27] Speaker 3: from what's happening in the energy space, although some doubts
[4:31] Speaker 3: are already being thrown on that. Last night we had
[4:34] Speaker 3: some companies that's why the Socks index dropped a couple
[4:36] Speaker 3: of percent last night, because people are beginning to say
[4:38] Speaker 3: that it's taking too long to build these data centers,
[4:41] Speaker 3: and by the time they're on stream, will the demand
[4:45] Speaker 3: still be there as being projected today?
[4:47] Speaker 2: It seems to be one of the reasons that we're
[4:50] Speaker 2: seeing weakness in the South Korean equity market today, right.
[4:53] Speaker 3: Yeah, exactly, that's the pullback from that very thing. I mean,
[4:57] Speaker 3: there's so much is built in to the Korean stocks
[5:00] Speaker 3: on the premise that people like Samsung, Eskhiinix will keep
[5:04] Speaker 3: on delivering this insatiable demand for chips, which is going
[5:08] Speaker 3: to be there indefinitely. But clearly some people are begin
[5:12] Speaker 3: to say, well, it's not going to be sustainable at
[5:15] Speaker 3: the pace that we've seen, and how close are we
[5:18] Speaker 3: getting to the tipping point when it is no longer
[5:22] Speaker 3: the benefits are no longer going to be seen in
[5:24] Speaker 3: earnings this beginning, it's going to become a little bit
[5:26] Speaker 3: of a drag on future earnings.
[5:28] Speaker 2: So I mentioned to the fact that in the US,
[5:30] Speaker 2: for example, we have long term yields at multi year highs.
[5:34] Speaker 2: Does that necessarily mean that the dollars supremacy right now
[5:39] Speaker 2: at least if you look at some of the most
[5:41] Speaker 2: recent price action in the foreign exchange will remain that
[5:44] Speaker 2: there will not be a challenger to the greenback at
[5:47] Speaker 2: least at this point. Given higher US heals.
[5:50] Speaker 3: Higher yields in themselves, they're certainly part of the story,
[5:54] Speaker 3: but they're not the only factor. So you have the
[5:59] Speaker 3: important fact. The important confluence here is between the confidence
[6:04] Speaker 3: in the fiscal outlook and the monetary policy part. Now,
[6:07] Speaker 3: there comes a point where global investors think that if
[6:12] Speaker 3: you're allowing your deficit to run ahead too quickly, that
[6:16] Speaker 3: that undermines the long end of the bond market. Central
[6:18] Speaker 3: banks lose control of that part of the curve, and
[6:22] Speaker 3: then it feeds back into your currency. We're seeing that
[6:24] Speaker 3: in the emerging market space. There are a few currencies Indonesia,
[6:28] Speaker 3: India to some extent, those currencies are being hit quite
[6:31] Speaker 3: hard because investors are losing confidence in the mismatch between
[6:35] Speaker 3: fiscal and monetary policy. It hasn't fully fed into the
[6:39] Speaker 3: United States yet, but there is clearly a risk that
[6:42] Speaker 3: if the US Treasury continues to outspend the way it
[6:45] Speaker 3: is and the central bank is disconnected from that path,
[6:48] Speaker 3: it will be reflected in even higher long term years,
[6:51] Speaker 3: which will end up being a negative for the US dollar,
[6:54] Speaker 3: not a positive.
[6:55] Speaker 2: Okay, Mark, good stuff, We'll leave it there, Thank you
[6:57] Speaker 2: so very much. Bloomberg strategist to Mark krant F, joining
[7:00] Speaker 2: from Singapore here on the Daybreak Asia podcast. Welcome back
[7:11] Speaker 2: to the Daybreak Asia Podcast. I'm Doug Chrisner. Policymakers at
[7:14] Speaker 2: the Reserve Bank of Australia are increasingly concerned about inflation
[7:19] Speaker 2: expectations becoming unanchored, due primarily to the oil price shock
[7:23] Speaker 2: from the war in Iran, and that's where we begin
[7:26] Speaker 2: our conversation with Sarah Hunter. Sarah is Assistant Governor and
[7:30] Speaker 2: chief economist at the RBA. She spoke with Bloomberg's Heidi
[7:34] Speaker 2: Stroud Watts.
[7:35] Speaker 4: You know your job is.
[7:36] Speaker 5: To worry, right, but how much more worrying are you
[7:39] Speaker 5: doing these days given the broad environment.
[7:41] Speaker 4: Yeah. Absolutely, it is our job to worry. So we
[7:44] Speaker 4: do always pay attention to things like expectations and other
[7:48] Speaker 4: things that might knock the economy on a short term basis.
[7:51] Speaker 4: But as we were discussing, I think it's because we've
[7:55] Speaker 4: had a sequence of shocks over the last five six
[7:58] Speaker 4: years really since COVID, and it's you know, we're facing
[8:01] Speaker 4: into another one and so that is part of what
[8:04] Speaker 4: we're thinking about. It's another inflationary shot coming through the economy.
[8:07] Speaker 4: We know that in particular, when households see movements in
[8:11] Speaker 4: fuel prices, so when you drive past the petrol station
[8:14] Speaker 4: every day you see the cost of diesel that's higher
[8:16] Speaker 4: than it was pre conflict. We know these are particularly
[8:19] Speaker 4: salient that they can have an impact on expectations. So
[8:22] Speaker 4: what we're seeing at the moment is that short term expectations,
[8:25] Speaker 4: that's what people think is going to happen to inflation
[8:27] Speaker 4: over the next year or so, that they're elevated, not
[8:29] Speaker 4: surprising given what's happening. We're paying particularly close attention to
[8:34] Speaker 4: medium and long term expectations because that's those are the
[8:37] Speaker 4: kind of movements where that would suggest a bit more
[8:39] Speaker 4: persistence and that risk materializing. We're not seeing anything too
[8:43] Speaker 4: worrying yet in that data, but we're just conscious that, yeah,
[8:46] Speaker 4: it's a heightened environment, and so what we want to
[8:50] Speaker 4: make sure, obviously in terms of our policy lever and
[8:52] Speaker 4: now we set policy that we don't have that elevation
[8:55] Speaker 4: from short term getting into medium and long term.
[8:58] Speaker 5: And that's what we're all conscious, all right, because even
[9:00] Speaker 5: two weeks ago you were assessing, okay, second half or
[9:04] Speaker 5: second second quarter, I should say, twenty twenty six, we
[9:06] Speaker 5: would see maybe hundred dollars US dollars a barrel for
[9:09] Speaker 5: oil would start coming back down, reopening of the straight
[9:13] Speaker 5: nothing's really materialized since then. Are you having to readjust
[9:16] Speaker 5: those expectations, oh, in.
[9:17] Speaker 4: Terms of what's happening in the Middle East? Yes, so
[9:20] Speaker 4: we and we're not the experts on this. We don't
[9:23] Speaker 4: have a crystal ball, and we're certainly not geopolitical sort
[9:27] Speaker 4: of a commendation or analysts or anything like that. We
[9:30] Speaker 4: use information we get from outside the bank and financial
[9:33] Speaker 4: market pricing all future curves effectively, for.
[9:36] Speaker 5: The inputs are kind of changing all the time.
[9:38] Speaker 4: The inputs are changing all the time exactly. So yes,
[9:40] Speaker 4: we're having to monitor it every day. And I'm sure
[9:43] Speaker 4: like others, I wake up in the morning and I
[9:45] Speaker 4: check my phone and wonder if something's happened overnight. Yes,
[9:48] Speaker 4: it's still a very uncertain environment. We're still finding out
[9:52] Speaker 4: how it's going to play out. But yeah, the longer
[9:55] Speaker 4: it goes on, obviously, the longer prices remained elevated for
[9:59] Speaker 4: oil other products, the more that will come through into
[10:01] Speaker 4: the local economy and we'll make that inflation outcome worse.
[10:05] Speaker 4: So I think, like everybody, we would love to see
[10:07] Speaker 4: some resolution in the not too distant future, but in
[10:10] Speaker 4: the meantime, yep, we keep watching and waiting.
[10:12] Speaker 5: We know that inflation has been above what the MBA
[10:15] Speaker 5: would be comfortable with even prior to this latest conflict,
[10:20] Speaker 5: But are we closer now to that real fear that
[10:23] Speaker 5: inflationary the mindset, inflationary mindset is becoming more entrenched.
[10:27] Speaker 4: Well, that's another way of talking about expectations drifting up
[10:31] Speaker 4: and staying persistently high, and that's certainly something that we're
[10:35] Speaker 4: conscious of and looking at. I think also, though you know,
[10:39] Speaker 4: higher inflation or higher inflation in and of itself is
[10:42] Speaker 4: just not a good outcome for the economy. We know
[10:45] Speaker 4: from you know, empirically, if you look around the world,
[10:47] Speaker 4: higher inflation economies, businesses find it harder to invest, to
[10:51] Speaker 4: take those types of decisions. For households, it's really hard
[10:53] Speaker 4: to budget, and that's particularly true for those on the
[10:56] Speaker 4: lowest incomes, the most vulnerable in our community. So I think,
[10:59] Speaker 4: you know, getting in for back down to target is
[11:01] Speaker 4: a good outcome anyway anyway, and part of that is
[11:04] Speaker 4: making sure those inflation expectations remain anchored, and so that
[11:07] Speaker 4: I think is the real sort of grounding point for
[11:10] Speaker 4: the balls decision last week, and that the Governor talked
[11:12] Speaker 4: about at the press conference as well.
[11:14] Speaker 5: Trimmed mean hasn't been around two and a half percent
[11:18] Speaker 5: or even around that for almost five years now, right,
[11:22] Speaker 5: What do you think is driving that? We know that
[11:24] Speaker 5: last five years have been pretty crazy in terms of
[11:26] Speaker 5: macro bends, but do you think there's still grace for
[11:28] Speaker 5: the RBA to try and meet that Well?
[11:31] Speaker 4: I very much hope. So we're very committed to getting
[11:34] Speaker 4: our inflation back down. We focus on underlying inflation because
[11:37] Speaker 4: it gives us the best steer for what will happen
[11:39] Speaker 4: to headline, but obviously ultimately we want to get headline
[11:41] Speaker 4: back down. I very much hope. So. I mean, it's
[11:45] Speaker 4: been interesting looking at the economy over the last I
[11:48] Speaker 4: guess eighteen months or so, because trimming and inflation. Underlying
[11:51] Speaker 4: inflation was moderating through to the middle of last year
[11:55] Speaker 4: more or less, and then it came through more strongly
[11:57] Speaker 4: than we're anticipating in the second half of last year.
[12:00] Speaker 4: We think part of that story is capacity constraints re emerging.
[12:04] Speaker 4: We've got a stronger pickup in domestic demand than we're expecting.
[12:07] Speaker 4: Some of the fallout from tariffs that we were discussing
[12:11] Speaker 4: a year ago perhaps wasn't as severe as many people
[12:15] Speaker 4: were expecting. So I think there's quite a few factors
[12:18] Speaker 4: that have lifted that underlying inflation in the months immediately
[12:22] Speaker 4: prior to the conflict, and now we have this shot
[12:24] Speaker 4: coming through that we'll add to it again as I
[12:26] Speaker 4: was talking about earlier on. So I think you've summed up.
[12:29] Speaker 4: While the ball also committed to getting inflation back down,
[12:32] Speaker 4: you're taking the actions they feel are necessary to achieve
[12:35] Speaker 4: that because we do have to do that. That's the job,
[12:38] Speaker 4: and we have to keep hold of that as our
[12:40] Speaker 4: north star. We think we can do it. Absolutely, we
[12:44] Speaker 4: have a lever to do it, and let's hope that
[12:47] Speaker 4: conditions become perhaps a little bit more stable and we
[12:49] Speaker 4: can get there over the next couple of years.
[12:52] Speaker 5: What do you see in terms of the risk of
[12:53] Speaker 5: a lower potential growth rate and how that's feeding into
[12:56] Speaker 5: I guess the difficulty in being able of anion prisis too.
[12:59] Speaker 4: So we revised our forecast for productivity growth back in
[13:05] Speaker 4: August last year, and we think at the moment, and
[13:07] Speaker 4: this is sort of thinking over a two or so
[13:10] Speaker 4: year horizon, so quite short term. Really in the productivity world,
[13:13] Speaker 4: we think that they were productivity growth are the most
[13:16] Speaker 4: probably around a zero point seven percent year on year.
[13:19] Speaker 4: That's lower than it has been historically. I mean for us,
[13:21] Speaker 4: what that means is just when we're looking at the
[13:23] Speaker 4: pace of growth in GDP, it just gives us a
[13:27] Speaker 4: lower number. If you like that. We think about as
[13:30] Speaker 4: what's sustainable for the economy, and what we say sustainable,
[13:32] Speaker 4: we mean that's consistent with inflation remaining around our target.
[13:37] Speaker 4: If that's if we could see that productivity pace pick
[13:41] Speaker 4: up a bit and that that didn't come through in
[13:44] Speaker 4: inflationary pressures, that would be great. That would be a
[13:46] Speaker 4: great outcome for the economy. It's not a policy and
[13:49] Speaker 4: that we have really any control over. We don't have
[13:50] Speaker 4: the right levers. But if we could achieve that, that's
[13:53] Speaker 4: a good outcome for the country, and we'd be very
[13:55] Speaker 4: happy to see that. But we do have to be
[13:56] Speaker 4: mindful of where we are today in that sort of
[13:58] Speaker 4: very short term two year horizon, and that's our focus.
[14:01] Speaker 5: Treasury treasure Jim Travels was upstairs with you again defending
[14:06] Speaker 5: the government's budget that was delivered last week in terms
[14:08] Speaker 5: of the implications for the RBA and for your mandate,
[14:11] Speaker 5: what do you see those as being. And you know,
[14:14] Speaker 5: as we were talking about earlier, you're also kind of
[14:16] Speaker 5: trying to work around the modeling and forecasting around it
[14:18] Speaker 5: as well.
[14:19] Speaker 4: Yeah. Absolutely, and forecasting is always a challenge because there's
[14:23] Speaker 4: always things changing, I think in terms of the budget.
[14:26] Speaker 4: So we only got it on Tuesday when everyone else did,
[14:29] Speaker 4: so we don't get advanced site, so we're still working
[14:31] Speaker 4: our way through what it all looks like and means.
[14:33] Speaker 4: And we're also for us, we're very conscious of and
[14:36] Speaker 4: taken to consideration all of the state budgets as well,
[14:39] Speaker 4: and we've had some of those already, but we've got
[14:41] Speaker 4: some still to come before our next forecasts are released
[14:44] Speaker 4: in August, so we're going to be putting all of
[14:47] Speaker 4: that together to see what that looks like in terms
[14:49] Speaker 4: of what's happening to government demand and also thinking about
[14:53] Speaker 4: the tax side and how that might be changing to
[14:56] Speaker 4: give us that part of that picture for aggregate demand
[14:59] Speaker 4: overall in the economy and how that stacks up against
[15:01] Speaker 4: our supply capacity. So it's very much looking through that
[15:04] Speaker 4: aggregate lens and taking it into account. The states as
[15:07] Speaker 4: well as the federal The states actually responsible for around
[15:10] Speaker 4: about half of total spending in the economy, for example,
[15:12] Speaker 4: so we can't ignore them, even if they perhaps don't
[15:16] Speaker 4: get quite as much attention across the country.
[15:19] Speaker 5: Everyone's obviously trying to work out the implications of the
[15:22] Speaker 5: tax changes pertaining to the property market. To be their
[15:25] Speaker 5: sentiment at least had begun to call even before this
[15:29] Speaker 5: on account of the rate highth circle, Are you worried
[15:33] Speaker 5: about the risk of calling the market too much?
[15:36] Speaker 4: Look, so we know that the housing market is what
[15:39] Speaker 4: happens in the housing market, and to dwell in construction
[15:41] Speaker 4: is actually one of the most responsive parts of the
[15:44] Speaker 4: economy to monetary policy changes. So we know you when
[15:47] Speaker 4: you increase the cash rat as we have just over
[15:50] Speaker 4: the last few meetings, that that will dampen down activity
[15:53] Speaker 4: in that market. So we're not surprised to see that response.
[15:56] Speaker 4: And then, as you say, we've also got tax changes
[15:57] Speaker 4: coming through as well. That's always a risk, and if
[16:01] Speaker 4: we see that outcome start to play out, then obviously
[16:04] Speaker 4: the board will take that into consideration and be thinking
[16:06] Speaker 4: about that in the context of future policy decisions. But
[16:10] Speaker 4: as you can see in our latest forecast, we are
[16:12] Speaker 4: expecting the pace of growth and dwelling construction activity to
[16:15] Speaker 4: slow over the forecast horizon, and that really is consistent
[16:18] Speaker 4: with that sort of those increases in the cache rate
[16:21] Speaker 4: that have come through already. So it's not a surprise,
[16:25] Speaker 4: but it's something that we'll be watching for sure.
[16:27] Speaker 5: The economy is accepted to slow in the second half
[16:30] Speaker 5: of the year. We haven't had a technical recession since
[16:32] Speaker 5: the pandemic. Are you confident that we can avoid that?
[16:35] Speaker 2: Oh?
[16:35] Speaker 4: The forecasting stuff? And I'd never say I'm confident on
[16:39] Speaker 4: any particular outcome, but I think that what we're seeing
[16:43] Speaker 4: in terms of the lead indicators for our activity and
[16:46] Speaker 4: how we're looking at the impact of the increase in
[16:49] Speaker 4: our price and how it flows through, we see our
[16:51] Speaker 4: baseline forecast doesn't have that outcome built into it, and
[16:54] Speaker 4: it wasn't an outcome that we saw in the two
[16:57] Speaker 4: alternative scenarios that we presented in the essay as well,
[17:00] Speaker 4: So we know things could play out differently or rather
[17:02] Speaker 4: obviously in terms of how things play out in the
[17:04] Speaker 4: Middle East. So we have been running snarios to consider alternatives,
[17:08] Speaker 4: and in those two that we published, we don't get
[17:10] Speaker 4: that outcome either, but we are very alive that there
[17:14] Speaker 4: are risks on all sides of the spectrum right now.
[17:16] Speaker 4: Is particularly challenging for central banks. These kind of supply
[17:20] Speaker 4: shocks are really hard for us to navigate in terms
[17:22] Speaker 4: of achieving our mandate, and so we're focusing on what
[17:25] Speaker 4: that means and then giving our best advice to the
[17:28] Speaker 4: board so they can make their decisions.
[17:29] Speaker 5: Wage you growth at around three percent, does that look reasonable?
[17:32] Speaker 5: So I think you look a bit disconnected versus the
[17:34] Speaker 5: other data points.
[17:35] Speaker 4: So we weren't surprised via the WPI print that we
[17:39] Speaker 4: got last week. It was more or less in line
[17:41] Speaker 4: with what we were expecting. There's always sort of ons
[17:43] Speaker 4: andos underneath the surface. You can see in the forecast.
[17:47] Speaker 4: We do expect that WPI growth will remain around that
[17:50] Speaker 4: sort of low threes, around three percent through the forecast horizon,
[17:52] Speaker 4: and we'll see what plays through. That's really connected to
[17:57] Speaker 4: what we think is going to happen to the labor
[17:58] Speaker 4: market of the forecast, and we do think that conditions
[18:03] Speaker 4: will become a bit less tight in that market, and
[18:05] Speaker 4: again you can see that in the forecast, and it's
[18:07] Speaker 4: all connected with what we have happening to GDP growth,
[18:11] Speaker 4: and we think that that's going to be a the
[18:12] Speaker 4: below trend over the next couple of years, but again
[18:15] Speaker 4: we'll just have to wait and see. The baseline forecast
[18:18] Speaker 4: has inflation getting back to two and a half percent
[18:20] Speaker 4: at the end, but it's built on the number of
[18:21] Speaker 4: assumptions and judgments, and the one thing we're always pretty
[18:25] Speaker 4: confident of actually is that at least one of those
[18:27] Speaker 4: assumptions or judgments won't actually come true. So it is
[18:31] Speaker 4: a constant sort of job of reevaluating and reassessing as
[18:35] Speaker 4: you move through time.
[18:36] Speaker 2: That was Sarah Hunter, our BA Assistant governor, speaking to
[18:39] Speaker 2: Bloomberg TV host Heidi Stroud Watts, bringing you their conversation
[18:43] Speaker 2: here on the Daybreak Asia Podcast. Thanks for listening to
[18:50] Speaker 2: today's episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday,
[18:55] Speaker 2: we look at the story shaping markets, finance, and geopolitics
[18:59] Speaker 2: in the Asia pacent You can find us on Apple, Spotify,
[19:02] Speaker 2: the Bloomberg Podcast YouTube channel, or anywhere else you listen.
[19:06] Speaker 2: Join us again tomorrow for insight on the market moves
[19:09] Speaker 2: from Hong Kong to Singapore and Australia. I'm Doug Prisner,
[19:14] Speaker 2: and this is Bloomberg,

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