CGTN Europe discussed this and other market news with International Economist Vicky Pryce
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00:00Well, Vicky Price is an international economist and a CGTN regular.
00:04It's lovely to have you on the programme again.
00:06Let's start with this Brexit deal with India.
00:08It looks to me like it's all about gin and cosmetics, which can only be good news, right?
00:13Well, it's also, of course, about whisky.
00:16So that's rather important for the UK because tariffs are coming down quite significantly there as well.
00:22Over a period of time, of course.
00:24I mean, the interesting thing is we talk about it as a free trade deal.
00:26Well, it's actually a trade deal, which basically means that, you know,
00:30the number of things that they're focused on, not everything is going to end up zero tariff.
00:36But there is going to be quite a substantial increase in trade between the two countries over a period.
00:40And the benefits of the UK economy and the Indian economy are going to start materialising in the next few years
00:47and reach, you know, a reasonable amount by 2040.
00:50So it's not something that's going to benefit things immediately.
00:53But some companies definitely are going to find that the reduction in tariffs that they are being charged
00:58when they sell to or other importers are being charged when they sell to India are going to be, you know, very beneficial for it.
01:07Well, three years in the making and comes a good time, I suppose, with all of the tariff tensions.
01:11But let's move on to U.S. interest rates, which Trump keeps saying are too high.
01:17Will that play into the Federal Reserve deciding their move or not on Wednesday?
01:21I don't think they're going to look at politics, particularly on what President Trump is asking for,
01:27because basically they will be concerned about the inflationary impact of all the tariffs.
01:32There would have been a very good reason for lowering interest rates today because, of course, inflation has done reasonably well.
01:38If you look what's been going on in the last three months, I mean, in March, inflation fell to 2.4 percent.
01:44I think that's pretty good news, even though it was expected, in fact, to be going up.
01:49It does suggest that the momentum for the economy was such that interest rate reductions were really quite likely.
01:57But now, of course, with the uncertainty, they're not going to be happening.
02:01So the market expectation is no change today.
02:04But there could be a change later on if the economy, in fact, continues to slow down.
02:10We've seen a fall in GDP in the first quarter.
02:12A bit of a concern about what this actually means, whether it's going to translate into even a greater fall in the second quarter.
02:19Probably not, because a lot of it was caused by a huge increase in imports to beat the tariffs in the first quarter.
02:25But nevertheless, I think the Fed is going to be very, very cautious.
02:27I know you've also had an eye on European markets and investors gasped when Friedrich Merz didn't get the parliamentary majority he needed in the first round.
02:36He won the second vote, but stocks are lower.
02:39So what else is weighing on European markets?
02:44Well, I think as far as Germany is concerned, of course, it does mean that the coalition, which they've managed to put together,
02:49is going to be looked at very, very carefully by all the members of the Bundestag when various proposals come through.
02:58So it's not going to be easy to pass those laws and change the direction of Germany, which needs to spend an awful lot more on defense.
03:06And of course, Germany is such an important part of Europe.
03:09And it also has been quite strong about withstanding, if you like, Trump's tariff increases.
03:16And in fact, the EU has just announced that if it is to do reciprocal tariffs, it may be on something like 100 billion worth of U.S. imports coming into the EU.
03:27So Germany is very, very important in this respect.
03:30But the fact that we may have a coalition which may perhaps prove not to be particularly solid is certainly worrying the markets in Europe.
03:39Vicky Price, always a pleasure talking to you.
03:41Thank you very much.
03:41That's Vicky Price, international economist.