The ECB Sintra Forum's Policy Panel Talks Inflation, Rate Cuts

Published Jul 1, 2025, 3:00 PM

Bloomberg's Francine Lacqua moderates the Policy Panel at the ECB Sintra Forum. The panel includes:
- Andrew Bailey, BOE Governor
- Christine Lagarde, ECB President
- Jerome Powell, Fed Chair
- Chang Yong Rhee, Bank of Korea Governor 
- Kazuo Ueda, Bank of Japan Governor

Bloomberg Audio Studios, Podcasts, radio News.

Right now, we're going to go to CenTra in Portugal, where the world's top central bankers are gathering together for a discussion with Bloomberg's Francine Lacua.

We had let's listening.

Today this morning. Consumer prices rising some two percent from a year ago, up from AYE one point nine percent, but then the tariffs still loom large. So how do you see that developing?

Well, first of all, I would note that we are at two percent and this is the latest reading. This is also the target that we have had, and this is the projection that our staff is indicating for the medium term, which is exactly what we had anticipated. So I'm not saying mission accomplished, but I say target reached. Okay, And I think we should start by recognizing that we faced massive amount of shocks, compounded shocks occasionally, and we are through this inflationary process that we have conducted over the last two years. And yes, we are facing a lot of uncertainty. Yes we are facing the risk of fragmentation increasing, and yes we are facing political developments that are worrying generally, but that also are causing two side risk to inflation, So we have to continue to be extremely vigilant. We have to continue to be committed to delivering on our target, and I think we are at this point in time in a very good position to do that. So we are well equipped to navigate the tormented waters that we should anticipate.

Chair Powel. Tariffs are not yet showing up in inflation. Is this forcing you or your staff to actually rethink what the models say about how much the tariffs will ultimately through some of the final prices.

So thank you Frantz and Christine. Thank you to you and your colleagues for putting on another great conference here today.

It's been a pleasure. I guess I.

Would start, if I may, by saying that the US economy is in a pretty good position. Inflation has come down close to two percent, we're two point three headline, two point seven core. The unemployment rate is at four point two percent, so we're healthy overall. The if you look ignore the tariffs for a second, inflation is behaving pretty much exactly as we as we have expected and hoped that it would. We haven't seen effects much yet from tariffs, and we didn't expect too by now we've always said that the timing, amount and persistence of the inflation would be highly uncertain, and it's certainly improved that.

So we're watching. We expect to.

See over the summer some readings higher readings, but we're prepared to learn that it can be higher or lower, or later or sooner than we'd expect it.

But a chair with the fen have cut more by now if it weren't for the tariffs.

So I do think that I think that's right.

Where in effect we went on hold when we saw the size of the tariffs and where and essentially all inflation forecasts for the United States went up materially as a consequence of the tariffs. So we didn't overreact. In fact, we didn't react at all. We're simply taking some time. As long as the US economy is in solid shape, we think the prudent thing to do is to wait and learn more and see what those effects might be. And again they haven't really shown up, and you know, so we're for now, we're.

Waiting, Governor, I mean South Korea's economies of course, Highland reliant on trade, putting aside the deals that each government could do can strike with the Trump administration, what can central banks in your position do to shield economies from the impact of trade tariffs?

Actually about the tariff's impact on infreation. How current infreation is well stabilized around two percent, and we believe tariff tends to be defractionally rather than infretionary full reasons One, it is created not likely to use retalitary tariff. Second, we import twenty two percent of our import from China and recently export price of China has been falling at five percent a year for several years, and we believe that it will continue to do so. And at this moment, our growth rate is zero point eight percent, which is well below our potential growth rate, so aggregate demand pressure is much lower. So our problem is not the infration itself, but the gross impact of tariff.

So what does that mean you'll do going forward?

Actually we are we have been an easying cycle and we cut our interest rate one hundred pp from last October, and we will continue to be in an easying cycle given our growth rate. But recently financial stability risk has been rising, especially housing price in the metropolitan area is increasing very fast. So we are keeping eye on this financial stability risk. Deciding the pace in the timing of the photocots.

Governor Billy, you've taken the view that the latest rises inflation in the UK will be transitory. Why are you so confident that that inflation will fall back?

Actually you've detected. I've tried to avoid using the translatory work because oddly enough it has a bit of a history. But to be serious, obviously, any increase in inflation is an increase in inflation. Sorry to state the obvious. The reasons it's gone up is really entirely due to so called administered prices. Now that's say, that's an increasing prices, don't get me wrong, But it's not telling us much or anything about the context of the economy. In other words, it's not telling us anything really much about the balance of supply and demand in the economy. So I think the key judgment for us is are we going to get second round effects from this this pickup? And of course it's nothing like the pickup with a few years ago, just just to be clear, and my judgment is at the moment is that the context is different. That we do see evidence and I see some signs of softening and the economy see signs of softening and the labor market. We are going to have to see those come through, though, I mean come through into into prices. I think we've still got to see the evidence and prices. But that background context allows certainly me to say, look, I think the direction continues of interest rates continues to be downwards.

When you look at all of the uncertainty. Again, is it it's a bold call given what happened to oil prices and trade negotiations.

It is. I mean I would say two things on that.

One.

I think, as others have said, it's probably Jay was saying, I think it's a bit too soon, I think really to see the price effects coming through from from from the trade and tariff's action. We've made a point of saying also that I think, as Christine was saying, that these are two sided. They could go either way. Could be weaker demand, we could see some supply chain disruption. And the second thing, of course, is that you know some of these effects if you take the oil price story for I mean, you know it's gone up, it's come down all since our last meeting, effectively, so you know, we always reach for the lexicon at this point. I mean, we've added unpredictability to uncertainty. I was slightly amused at the introductory film this morning with Christine saying all these words, because it's true, because not only are we getting uncertainty in the sense, you know, the range of outcomes, but unpredictable in the sense that if you get things like the tarifaction. History really isn't a particularly good guide to that. Actually, you can't really draw much from the past on that.

Now, Governor Uta, you're in a slightly different situation right Japan. CPI has stayed above two percent for three years. Now, what do you see as a fundamental changes in your economy that make inslation more persistent?

So let me say to put it simply, as you say, headlining in version has been above two percent for almost three years, while what we call underlying inversion, who is still somewhat be a little two percent. That's the situation we are in.

But if I could.

Decomposite father, there's probably about three components to it. First, there's underlying inflation dictated by wage price dynamics, whereby increases in prices affect wages, which further affect prices. Helped by a resilient domestic demand this component is has been going up slowly, but as I said, it's you're somewhat be able to present. Then there's going to be perhaps a second component, which will be the expected negative effects of possible types on uh the economy and prices. We are expecting this to take place, but we haven't seen that yet. There's a third component, which is domestics of partial generated by increases in food prices. This component accounts for about fifty percent of the headline inflation we've got at the moment. So letting these three, we think the first component and the second component will produce a slow increase in underlying inflation towards two percent by and twenty six or twenty seven. The third component food inflation is going to subside toward the year end. So but we will be closely monitoring interplace between these three forces.

But Governor, how do you trade concerns the day after President Trump threatened Japan with more terrorifts.

Well, it's it's being negotiated by our minister in charge. So I'm trying to avoid making any specific.

Comments on this.

So let me just ask you what will be the key trigger for Japan for deciding for the rate hikes.

Okay, as I said, it will depend on the route if strength of the three eye infashion dynamics I was describing, and we need some more information to determine determined.

Land, President Gard, When you look at rate cuts, I mean, are we gonna where do you see actually the ECV going? You're in a pretty comfortable position right now out of all the Central Banks.

Data, I will tell, so I think we are we are.

We are determined to continue to be data dependent, to decide meeting by meeting, and to not commit to any particular rate path. That's the that the docs are. And we're very lucky because we have just completed our strategy assessment, which really gives us a good framework and good good strategy lines within which to operate. But that those three aspects that I have mentioned, data dependent, meeting by meeting, no commitment to any particular rate path are constant in that ongoing strategy based on what we have concluded actually yesterday Chapel.

So from our standpoint, as you will have seen, a solid majority of f HOMC participants do expect that it will become appropriate later this year to begin to reduce rates again.

And so.

And that will depend though, as Christine just mentioned, on the incoming data, will be monitoring particularly what does show up in terms of inflation or what does not show up, and also carefully watching the labor market. You know, we watch very carefully for signs of unexpected weakness. We see a gradual calling, but we don't really see that yet. So those are the things will be watching. But as I have mentioned, a majority of us do feel it will be appropriate in the remaining four meetings of the year to begin to reduce rates again.

Madame Laguarde, the euro has also served about twelve percent against the dollar so far this year. Are concerned that its strength runs counter to your efforts to also loose in financial conditions.

You know, I'm not going to comment on the exchange rate. We take it into account for purposes of our projections. Obviously it as an impact, but it's a reflection of the market conditions and assessment.

It's also a reflection of the strength of our economy.

But there has been a clear appreciation relative to the dollar. Depending on how you look at it, it's eye the depreciation of the dollar and appreciation of the euros, and there might be a bit of both in that particular case. We're also looking at the movement the flow of capitals and the attractiveness of Euro denominated assets, which is also an interesting phenomena that we've observed lately.

Trip, I mean, is it fair to say, I know, you know, nothing is guaranteed. Number one, we all know this barring a real surprise. Is July just too soon, too seriously even considerably?

Yeah, I really can't say.

It's going to depend on the data, and we are going meeting by meeting. I mentioned you know how I'm thinking about that, but I wouldn't take any meeting off the table or put it directly on the table. It's going to depend on how the data evolved.

Governory, what's the biggest risk stemming from protectionist trade policy? Actually for the global economy and for South Koreas, can you see the biggest risk stemming from trades and protectionist measures?

You know, the career has quite an export driven economy, so whatever, the global fragmentation is a serious impact, not only direct impacts through the US tariff, but also in direct impacts through China, Mexico and Canada, and we usually can it really depends on what's going to happen to July nine. We are actually waiting for the research, but we don't know what was going to happen. But for example, like if the tariff goes back to twenty six percent Italier tariff that was announced in April second and then also with a lot of sexual tarifficial effect our economy, aluminium steal and cars, you can easily say that it has impacted larger than cost one percent. You our GDP glow straight and depending on how long it last, I think we have to adjust to the new supply chain, so the impact will be larger. But I hope that scenario one come.

What is the most concern for the Bank of Korea. Is it installing South Korea exports slow down and global trade or a downturn in the US economy.

It's all linked, right, It's all linked right, So it's a global it can slow down. And one thing I mentioned some negative sizes only but one pative side I don't know is a path or not. But Korean companies has been preparing for the supply diverscation a long time ago before the tariff US tariffs start to because you have some issues with China, and then also Chinese industry has become very competitive, so we had to relocate our looks insight from China to elsewhere. So relatively speaking, you are well prepared. And second, still good thing is that we have some strong industries such as a semiconductor, which benefit from the AI technology development. So I hope that we can manage it. But on the other end, given the just we'll get the sheer size of the export dependence, we will be significantly.

Affecting govern Really, do do you think interest rates will be closer to three or four percent at the end of the easing cycle given all of the inflation and trade dynamics.

That's a subtle way into the ass star question. Actually, I would detect. So I'm fairly cautious about the whole discussion of the level of our star and therefore sort of where rates are going to reach in the cycle. There is huge uncertainty around it. What I think is important and what we spend our time looking at is how restrictive is policy both now and going forwards, And our staff do a huge amount of work on that front to judge the restrictiveness of policy in the current context, and it's how restrictive it's going to be. Looking forwards. If you project forward with the market curve and the assessment we've got the reader is the policy is, policy remains restrictive. It will continue to be restrictive, although the level of restrictiveness will come down over time, which is what I would expect, and I would expect that level of restrictiveness to come down to a point where it goes more neutral. But it's saying I think you have to judge that in context, you know, just to give you an example of that, in the UK economy, the level of household and corporate debt in the UK economy is actually lower than we would have expected it to be, but based on past experience. So again that feeds through it too, just how restrictive policy is at a given interest rate. It's somewhat less restrictive probably than it would have been historically.

Could I ask all of you actually thoughts on the neutral rates your power.

That that's a the literal rate, So I think you know, there are countless empirical and theoretical ways to derive it. At the end of the day, I think I like to look at the economy and ask whether our policy stances having the effects we expect and want on the economy, and to me, I would say we're somewhere probably modestly restrictive at this level, and by some formulations we're more restrictive in that. But if you look at the economy, growth has been solid, the labor market is solid and still at historically lower levels of unemployment. It's not an economy that feels like it's suffering from very tight monetary policy. But I would say that policy is still restrictive.

President laguard.

I would say that it's a nice concept, it's interesting, and many of the terribly talented and brilliant economists in this room actually are delighted with discussion about the neutral rate. But honestly, as we're getting, you know, closed to target and to where we should be or are where we should be, and I don't want to past judgment on that, I think that discussion becomes less relevant. I think what our staff at the CB measures leads us to believe that it is higher than where it was before the Great Financial Crisis, but it's relative relatively low as well, compared, for instance, with what the US neutral rate is at the moment. But it's in a way, it's a bit of an illusion to discuss that at the moment, because the neutral rate is normally defined in a world where there is no shock, where you have perfect equilibrium.

Now are we in a world with no shocks at the moment? I don't think so.

So it's nice, nice to have as a concept, nice to elaborate on it, nice to do research on it. But to use it at the moment where we are as a guiding principle to where we should be, I don't think is particularly appropriate.

And you bery well, that sort of continues what I was saying earlier. Again, I don't use it as a sort of a guide to where policy should be. But I think this whole concept of restrictiveness is of course critical to our judgment, because that's critical to the transmission mechanism of policy, which we have to judge every time we meet. So that's a judgment that, in a sense, we renew every time every meeting we have. I think I'd rather agree with what Jay was just saying. I think in our case, policy is restrictive at the moment, it's going to become less restrictive based on the curve that we've got in the market. That's what I would expect we will judge it each time.

Governory similar, I have nothing to it. How would you see it? Governor?

You aida, yes.

So we also estimated something like the neutral rate the number of times, but the range of estimate is very wide. So but at least we think we can say, well, the current rate.

Is below neutral.

But other than that, I would refer to what Jay said you're a two a girl in a Jackson Hall conference, which was like, we are guided by our staff, but under cloudy.

Sky, President, can you talk to us about scenario and why this is, you know, because of the sharks and actually the changes that are going very fast, why scenarios make more sense as a template of the economy.

Okay, So this is a topic that we have largely debated as part of the strategy assessment that we conducted in in the last year. And I think, you know, in fairness, the baseline, which is, you know, the essential projection on which we work and we determine our monetary policy stance, holds and is decisive in our consideration. But at the same time, our staff has I wouldn't say forever, but as long as I know myself, has always conducted scenario analysis, sensitivity analysis in order to arrive at the most solid baseline. It is probably the case that we will do more of it more systematically, that we might publish more often than we have. We have published, I think in the last few years, for in four circumstances we have published scenario analysis. The invasion of Ukraine was one, COVID was one, the oil crisis as well, and the tariff threats, so all those were exogenous factors that we're sort of hitting our screens. I think we might do more scenario analysis that will be looking at the longer term trends that will affect our economy and that will inform and strengthen our baseline, enhance it probably in its reliability. So that's what we are debating at the moment. How this is built, what assumptions we make, what choices are decided in terms of publishing, will be determined by the Governing Council.

In good intelligence, we stuff j POW on scenarios.

So for many years we have used scenario analysis internally and I personally find it very useful. I think many of my colleagues do too. You have just many different kinds of scenario with six or seven at every FMC meeting. They're often the topic of discussion among governors, and at the meeting we have not taken a step of a step of using them as a public communications device, and that's a big difference. So that's one of the things we're going to be talking about this fall. We will wrap up the first part of our framework review, which is the big consensus statement our monetary policy framework we expect to by the end of the summer, and then we're going to use the fall meetings to look at communications ideas, and that's one of the ones.

We'll look at.

I will say it has a lot of appeal and a lot of questions, and so my expectation is we know if we're going to do something in that area, it's going to be putting a toe in the water and not just throwing ourselves in, you know, over Niagara falls on it. So I can imagine a situation where we would try that in a particular circumstance. But for us, we're just going to do the work and understand it as many other central banks are doing now.

UH in case, we use the scenario analysis in our risk management section as a as a kind of representing the table risk. But I have to read the EACV report. But if we have to move that section into the more focusing section for public communication, I wonder whether it's going to be easy to get some consensus. It's a scenario we have to do it among our probably members in the monetic policy meeting. So because that scenario and the underine assumption maybe much harder to to communicate to agree among the members. And also it's a specific to us. But how I can differentiate the previous approach of risk management section to the focusing that I have to think about what we have to do.

So I had two things I would add, and it's very much in the same spirit as colleagues. One, we introduced two scenarios, and the May Round and the May Report. For me, they were very useful and they were either on either side. They weren't symmetric, by the way, but they were oither side. For me, they were very useful in terms of my decision making because they helped me to answer the question, given the uncertainty if we're wrong, if I'm wrong in my judgment, how wrong am I going to be? You know, do I think I'm going to be? And what would be the consequences of that, and you know, what would we then have to do to deal with the moon? Is it manageable? And that was helpful, and then I think the question is coming back to know what Day was saying in terms of public communication. I mean, this is the big step, I think, and it is challenging. I tell you why, because I say, it's quite a lot. We make a lot of conditional statements. You might have detected this in all the interview, the many interviews you do, and don't I'm not I'm not making a personal comment now, Francine, but yeah, a lot of those conditional comments get immediately translated as unconditional comments. It's sort of life.

We're quite careful.

But yeah, no, no, it's not personal. You know, this is the general point. And so so the reason I say this is that if we yeah, and that's about that's about the central case. By the way, so if we introduce scenarios, you know, that's a message to us that you're going to have to do this very carefully in that world because to get the point across about you know, there is always a there is always uncertainty, there is always risk. How you calibrate those and how you as Jay was saying, how you communicate those publicly. It's critical but quite pretty challenging, frankly in that in that environment.

Governor you Ina, Yes, we also carry out many simulation exercises about scenarios, but we have not, as far as they know, published them. We do discuss in our quality wards qualitatively what risks we are we have in mind. On top of what I would say in a very rough way, we are carrying out something like a risk management approach to management policy making, which is probably a bit similar to what Christine was talking about yesterday. I can't come up with a good example, but so risk scenarios, thinkings about tail risks sometimes do affect our monitor policy prinking.

Can I ask you all about the dollar? Everyone's favorite subjects, So when you tune out noise right of the past few months, one has really changed about the dollar, Governor, We are we really seeing some sort of paradigm shift in the status as a reserve currency. That means historians will look back on twenty twenty five as some sort of pivotal year.

I don't think so, especially in keys of Korea. Our Korean one has appreciated significantly in the last two months, but I think it's mostly due to the very unique situation that we had, and we had a very unexpected unnecessary martial law declaration in last December, and after that, is this political risk, together with the slow down our economy, really make Korean one depreciate much more than our fundamentals explains. So in some sense the appreciation that we have observed in the last two months in some sense normalization of our.

Our currencies.

And as for the kind of long term shift of the Dalla sentiment, we have discussions, but it looks like people are talking about it, but at this moment they keep the Dallas sets while they're increasing the Hatch ratios. So at this moment, I think the lion's share of the impact VI support showed this one is impact is mostly moving from the unhatchy to the hetchy positions. So we have to see what will happen.

In the future. Governor baby Well, I'd say two things. First of all, I think that it's important to bear in mind what the sort of the definition of a reserve currency is and how it's evolved over many years. So I, like Jenerally, I don't see the being a sort of a major shift at the moment, not least because in this day and age, the definition of a reserve currency has as much to do with the supply of safe assets into the market that can be used for all the purposes of collateral and security, that they are as much about as much as it is about a sort of pure exchange rait. So I think we're a long way off that sort of that change happening. The second thing is going back to Someny Christine was saying earlier. I mean, when we look at financial conditions, I wish we do, of course, but I do think particularly I mean I always believe this, but I think it's even more relevant to the moment to unpack a financial conditions index. And the reason I say that is because we've seen a breakdown in the correlations of the components of a financial conditions index. So you look at sort of bond you're you look at exchange rates, you look at equity risk premium for instance. Those correlations are not the ones that we've tended to see established over time, so you have to look at it much more carefully. There are stories, to my mind about each of the components of that. So when I look at the exchange rates you know, I look at it very much on that basis. I don't think it's sensible to sort of pack it all up as we normally wouldn't say it's all behaving normally because the correlations are.

Not actually governor ueida. I mean, there's also many colleagues at central banks I guess around the world are building up gold reserves. Is that the only real alternative to the dollar?

I think it's up to a certain extent, what areas like you're on or China would do in terms of improving the efficiency or convenience of their currencies, Like the kinds of things we were discussing this morning, capital markets, integration, and these things will change the degree to which the role of the data may decline are.

In the future, I mean the dard.

You know, I think I don't know if twenty twenty five will be a pivotal year. I would tend to think that yes, it might very well be, but for a major change to occur will take a lot of time and will require a lot of effort. And I completely agree with the points made by Andrew about the dichotomy that we're seeing at the moment, and that might be an indication of the fact that investors are looking at options. This is what investors are saying, They ask questions, they seek alternatives, and whether that translates into a general lack of confidence that will be further fueled by more uncertainty, more and predictable.

Did you a bit of a jump.

In the unknown on several fronts, not just monetary policy, not just even the economics, but beyond that in terms of security at large, for instance, I think remains to be seen. It's not going to happen just like that overnight. It never did historically. There's no reason you should know, but there is there is clearly something that has that has been broken, and whether it is fixable or whether it is going to continue to be broken, I think the jury is out on that front.

A trepal. How do you think we'll look back on twenty twenty five?

No one, here's me.

How we're going to look back on twenty twenty five?

Yeah?

How will historians look back on this year? Is it pivotal?

It's clearly an important It's an important year.

There's a there's a lot going on, you know that with trade, and I think my hopeful that will look back on it as a year that were we significant successfully challenged some significant economic changes, and you know our job is to make sure that that.

Is the case.

You get attacked by the president a lot on a personal basis, does it make your job harder?

I'm very focused on just doing my job.

I mean, there are things that the things that matter are using our tools to achieve the goals that commerce has given us maximum employments, price stability, financial stability, and that's what we focus on.

One I'm a dumb laguarde. If you were in the same position as Chair Powell, would you do anything differently?

I think I speak for myself, but I speak for all colleagues on the panel. I think we would do exactly the same thing as our colleague J.

Powell does the same thing.

Yeah right, yes, Governor.

Is the rest of the world decoupling from America but pulling tighter elsewhere. How do you see fragmentation happening?

Well, fragmentation were it to happen, and my view is bad for activity in the world economy, no question about that. I mean, if we reduce the openness of the world economy, that will be bad for activity in the world economy. Now, I temper that in one respect because obviously we have learned a lot about the robust list of supply chains over the last you know, five years, and it is a course appropriate that there will be adjustments to that. But if we see a breakdown of the openness of the world economy sort of beyond that, beyond that sort of resilience that we do see as needed, then that's that's bad for activity, it's bad for the world economy, and that I'm afraid it's something that I think we need. You know, we need to be very clear. I've said a number of times that there are reasons why this has happened. It's not right to just go around saying just you know, this is all the wrong, wrong, wrong, you know, there are no reasons why this is happening. What I think is very important is that we get back to a governance of the world economy where we can address these issues in the appropriate multilateral fora and get to the question of what lies behind these issues, what's at the root of these issues, what exactly are the issues, and what do we do about them? And I can't emphasize this enough that I think it's an obligation for all of us who are obviously very heavily involved in the governance of the world economy. We've all got very big responsibilities to say that is our duty to get back and to the process of saying what's caused this, and what do we do about it? And what do we deduce are the underlying issues and how do we address them, because otherwise, say, fragmenting the bod economy is a bad outcome.

But what kind of fragmentation would it be? Is it again? You know, are you fearful that the world is splintering irrevocably or is there a pool that's.

Just moving well? I think if it was a breakdown of trade in the world economy, obviously exactly how that would manifest itself would remain to be seen, but it would be running against a long period now where we've been building the resilience of trade in the world economy, we've been building openness. But as I said, I want to I want to sort of temper that by saying, look, there are issues. I don't think we should say there are no issues. You know, this is all made up. There are issues and we need to we need to address what they are and work them out. But we need to do that in the context of a commitment to a robust, open world economy.

Governor, as the only governor here representing a non reserve currency country, how concerned are you about fragmentation of the global financial system and the risk at the end of the day that the US may be willing less willing to provide dollar liquidity in a future financial shock.

I think I mentioned that we are quite vulnerable to fragmentation, but in reality, as a small country, it's a pity that we can raise our voice, but in reality we cannot change the course. So we have to probably take it as an environment and to adapt it. What matters is we talk about economic fragmentation, but for country like us, the most serious issues combined with security, and for that issue, let me stop here because I don't want to go further. But as for the dollar equity support, as demonstrated during the global financial crisis and pandemic period, the standing dollar facility sub lines with five international financial centers and the nine a temporary shub lines for the nine non reserve currencies that was crucial in restoring the stability in the global world. And if another global dollar strategy hits, I believe that the US, FAD will extend the lines again, which is very important. And but one other problem for country like US is we know that the US provide air lines as wrong as there is a global but issues, what happened if there is our own problem and then there's no global Our understanding is that FAD cannot extend those subt lines in that case and we have to self defense ourselves. That is why I think they're having a sufficient level of reserves is very important. And listen to you. Thanks to the introduction of the FEMA be for postility by the FAD, actually the reserves become much more effective tool to defend ourselves.

Repower on fragmentation, Well, I.

Guess I'll just agree with what Changan said, which is our point out that our nothing has changed relative to our swap lines. We still have the same authorities and we're still prepared to use them in situations where it's within our legal authorities and where we think it makes sense. So that is and we know, we're aware that that's a a big contribution that we can and and do and will continue to make to the global financial stability.

Goodnu Wada h how much do you think about fragmentation and the impact that's could have on Japan.

See.

On the trade side, I think a lot about what will happen to Asia, even Asia excluding China so UH. This will depend on the relative tari frates imposed on the region relative to to China or relative to other countries.

But there's UH.

Fairly a strong intra regional trade UH taking place UH during the last decade or two. Also there's UH uh new UH countries like India growing at very high speed. So I I hope there's a residly and sufficient resilient domestic demand in the region to keep the.

Energy of the region alive.

On the financial side, I don't have much to add to a lot of other people have said, but it would be important to keep trying a multi layer or the approach to things like swap lines we have chen my initiatives in Asia. Doing something similar or continue to do something similar will be important.

You've often spoken about the role that Europe could take in a fragmented world. How do you see that developing in what kind of timeframe?

Well, I think you know Europe has witnessed in the last four years in particular, well since nineteen twenty sorry, twenty twenty two, in particular, the last three years major challenges to its way of doing business, to the assumptions that it has made about security, about supply, about destination. Whether you look at what the horrible Russian invasion of Ukraine has precipitated and how that has impaired the sentiment of security that we in Europe had and the sentiment that we could forever rely on the protection of others, that has been impaired significantly. When you look at the energy supply on which some of the European countries in particular, but most of us have relied upon, namely access to reasonably cheap oil and gas supply from Russia, that has been impaired significantly, and we had to find the resources to respond to that. And whether you look at the business model of some countries where destination was inevitably China in the main, that has already been challenged as a result of the fragmentation that is not just a risk, but which has happened. If you combine that with the technology risk that we could all be under, either because of political determination or because of of supply, whether it's on the front of microships or rare earth. I think we are in a situation where many of the assumptions have been shaken up and where we collectively are on the cusp of I hope, this is my hope of you know, better taking hold and control of our destiny by making significant structural efforts to you know, be more independent, be more proactive, be more autonomous in all these different dimensions.

Is it going to happen overnight?

Yet again, no, because on some of those fronts, it takes time, It takes investment, it takes political determination, it takes momentum. And you know, from a pure sort of as President of the ECB, what we can do on the monetary front is to deliver on our mandate of providing price stability so that the fluidity of factors that is needed both in terms of capital in terms of labor, can rest assured that price stability will be within our limit under strict commitment to deliver on our target of two percent medium term. But yes, I think it's a Historically, I believe that in a few years time we will look at twenty five of those those latest three years as significant change in the way in which we conduct our life, our business and develop Europe.

And I hope for the better.

Ja Powell. Last year in Cintron you said that the US cannot run these kind of deficits in good economic times for very long, and then you also said, we'll have to do better sooner, something sooner or later, and sooner will be better than later. How's it going?

So, of course I probably preface that by saying that we don't comment on fiscal policy.

That is the one thing that I have said.

In My predecessors have also said in that is, the US federal fiscal path is not a sustainable one. The level of the debt is sustainable, but the path is not, and we need to We need to address that sooner or later. Sooner is better than later. That's what I said last year. There's not a lot more I can say.