tv Street Signs CNBC September 28, 2017 4:00am-5:00am EDT
. hello. welcome to "street signs." i'm carolin roth these are your headlines president trump hales his once in a generation tax reform plan despite criticism it lacks detail and could benefit the wealthy. >> what is good for me, not only as president and legacy, what is good for me is if everything takes off like a rocket ship, like it should have for 20 years. that's good for me that's good for everyone red is the new black shares in h&m drop as profits fall 20% the swedish fashion group says it had to slash prices to sell
off consumer stock britain's civil aviation authority says it will take action against ryanair for misleading passengers as the airline extends flight cancellations into next year it says it will also meet with regulators good morning global markets are buzzing around that trump tax plan we have seen optimism in stocks. this morning stoxx 600 is off a bit. we are just hovering around break even there was the expectation of a steeper yield curve. this morning the ftse 100 off by 0.3% the xetra dax up 0.2
the cac 40 holding on to the flat line. when it comes to the sectors, you have banks still outperforming. this is the trumpflation reflation trade i was talking about. technology, construction material doing well. retail is the key underperformer off by 1% given the bad news from h&m, slowing sales, they had to cut prices as they had to sell off the summer stock. you can see those shares slumping in swedish trade. let's get back to our top story, the republican party unveiled plans for an overhaul of the u.s. tax system the framework calls for lower corporate and personal tax rates. democrats say it mostly helps the wealthy. peter alexander has more. >> reporter: fresh off another defeat for his push to get through obamacare, president
trump turning to taxes >> middle class miracle. it's called a middle class miracle. >> reporter: taking his pitch to mike pence's home state, indiana, part of what he calls a once-in-a-generation opportunity. >> this is a revolutionary change, and the biggest winners will be the everyday american workers as jobs start pouring into our country >> reporter: the sweeping overhaul still just a blueprint simplifying and cutting individual income tax rates, slashing corporate taxes to 20% and expanding the chilx credit that's crucial to the borees family in indiana >> it's important to us to get those tax breaks, and we count on them as part of our income. >> reporter: still, the long-awaited rollout is lacking key details, leaving many questions unanswered experts warn it could cost the country more than $2 trillion over a decade. >> without all the details we're still figuring it out, but the winners are today's taxpayers because we're going to have a big tax cut where the bill is added to the debt and the losers are our kids who are going to have to pay for that >> reporter: tonight, the president also saying his plan won't benefit wealthy people like himself
>> i'm doing the right thing, and it's not good for me, believe me >> reporter: democrats not buying it. >> he ain't walking the walk this is aimed at the wealthiest people in america. they do far and away the best. >> reporter: this tax fight critical to a president, who eight months in still badly needs a legislative win. promising he'll revisit healthcare next year after reaching across the aisle. >> i'm also going to meet with democrats and i'll see if i can get a healthcare plan that's even better. >> that was peter alexander. let's have a quick look at the market reaction across the board. starting offer with the fx markets and the dollar index touching a one-month high. we also saw that strong durable goods data out of the u.s. that helped the greenback it is the rise in euro/dollar. when we look at the other
currency pairs that have not fared well, it's the emerging markets and we're seeing pressure here for the likes of the south african dollar and the lira as well much of the action happening in the bond markets where we saw that spike in yields ten-year u.s. yield, 2.34% yesterday. 2.3425 is the current print. the highest level since mid-july that selloff in bonds is also visible when it comes to the european bond markets. seeing bunds trading back just above the 50 basis point level that is an eight-week high let's talk more about the grand tax plans with the chief investment officer at tatan investment you're actually a fan. not of donald trump, i would say, but of the tax plan >> i would say this is the best we've seen and heard from him. i have to concede it is a little bit unrealistic at the moment. the markets giving it a 30%
chance of succeeding there's a couple elements i find encouraging. there's no mention of a border adjustment tax, big deal the initiative to change the corporate taxation system from worldwide to territorial big deal that would eradicate a lot of problems in the past. and if he was able to succeed with this tax cut, then actually yes you would probably have to pre-finance it a while from the budget, but i wouldn't be surprised if you get a similar effect to the reagan era tax cuts, where business comes back big time with investments that are overdue, a lot of spending, and that will raise the tax base >> the issue is is he going to be able to succeed with this we saw the healthcare overall, which was widely expected, fell flat in the senate it's not going to happen a lot of people say, yes, there's going to be more agreement when it comes to the tax reform plans do you think it will go through? >> i take my hints from the
markets. the markets are seemingly more optimistic about this, otherwise we would not have seen the move in yields and currency the reason for that is he's left it relatively vague in certain areas, so these tax cuts, for example, the reduction in from seven tax bands to three for the income tax, he has not spelled out at what levels those tax rates will come in that leaves him negotiations room he could, as he's done over the last two weeks, all of a sudden side with the democrats, get them on board. and he is a dealmaker. maybe he can get things moving >> sg does that mean this trumpflation trade that we've seen, rebounding the last couple days and weeks, that that's here to stay? is it here for good this time? >> that's the message from the market that the reflation trade is far more substance again than it had over the summer or before the summer you spoke about the rising yields it's not so much the nominal yields, it's the real yields
inflation has fallen back. it's not as much of a problem as it has seen before real yields are rising that makes the dollar a little bit undervalued. that's why we will see upward pressure in the dollar >> is the market just getting back in line with sort of the mean we've been bearish when it comes to all things u.s. assets -- u.s. dollar and u.s. yields specifically, u.s. stocks have done well despite the uncertainty from congress. do you think now the market is just paring back some of the short bets >> the market has not been pricing in a success of fiscal easing from the trump administration that's gone out the window that's now coming back into market valuations. that's causing the movements we've seen >> let's talk about what this means for your investment plans. you were underweight the u.s you're putting this back to neutral. why?
>> we didn't know about the tax reform plan when we discussed and decided this, this comes as an at dis a an additional boost. we weren't to hot on u.s. uk equities until this news about the tax reform plans, it was more a currency play, now i'm more reassured there's more upside in the u.s. equity market even if it looks highly valued or valued at a premium >> we will continue this conversation in a while. for more coverage of the gop's tax reform plan, stay tuned to cnbc throughout the day. house speaker paul ryan joins our colleagues on "squawk box" at 14:30 cet i want to get you back to some corporate news in europe. h&m shares have fallen to the bottom of the stoxx 600 after
the swedish retailer posted a 20% fall in quarterly profits. h&m attributed the poor performance to declining sales in the bricks and mortar stores which were only partially offset by a pick up in online orders. the retailer decided to scale back its plans for new store openings the h&m ceo attempted to reassure investors saying his company should be able to post strong profit growth in 2018 even if sales growth slows however he did sound a kau thcas note on the rest of 2017, saying it is too earl tly to speculate about further profit declines in the fourth quarter. ryanair says it will comply fully with the british civil aviation authority after it expedited action against the low-cost carrier ryanair announced additional flight cancellations that are likely to impact 400,000 customers in the coming weeks.
ryanair dropped its planned bid for air italia as it seeks to focus on resolving its own staffing issues and reaffirmed the full-year profit forecast and says it has a plan in place to prevent further cancellations. e-mail the show. let us know if you've been planning to fly with ryanair or not. the address is email@example.com you can find us on twitter, streetsignseurope@cnbc and tweet me directly @carolincnbc. we are going go for a quick break. we'll be hearing from boe governor mark carney and prime minister theresa may as the central bank celebrates 20 years of independence. that's coming up after the short break. for your heart... your joints... or your digestion... so why wouldn't you take something for the most important part of you... your brain.
with an ingredient originally found in jellyfish, prevagen is now the number one selling brain health supplement in drug stores nationwide. prevagen. the name to remember. whuuuuuat?rtgage offer from the bank today. you never just get one offer. go to lendingtree.com and shop multiple loan offers for free! free? yeah. could save thousands. you should probably buy me dinner. no.
marks 20 years of independence to celebrate the anniversary the bank is holding a two-day event with speeches by theresa may, stanley fischer and christine lagarde. andy haldane says he sees encouraging signs of pay growth. the central bank chief economist said he was part of the mpc majority who said winding down stimulus might be warranted in coming months. haldane said any normalization of rates would be a good news story. willem sat down with the founding member of the boe's monetary policy committee and asked if she thought rising cpi was a sign that britain's economy was strengthening. >> demand stayed more buoyant than some people expected after the referendum vote. the official view coming out of the bank of england is that this increasing inflation is a temporary pass through from the fall in sterling but i think that it's very hard
to disentangle the effect of the fall in the currency from the other demand pressures unemployment is at very low levels in our country now, which is a good thing. but that is generally followed by an increase in wage pressure and an increase in inflation so i think there's a good chance that the bank of england is behind the curve, as it were, at the present time >> what would your suggestion be to members as we see those cpi numbers? >> there's already debate starting in the mpc, some members are voting for a small interest rate rise if i was sitting there, i would be voting with them. i think it's time to signal to the businesses and households at large that the financial crisis is behind us now and we do need to start thinking about more normal rates of interest rates not as a shock, but just beginning to move upwards rather than sitting near zero
>> i'm just looking at some comments coming from the bank of england's mark carney. he says monetary policy cannot prevent weaker real income growth and that is likely to accompany brexit he said monetary policy can influence how the hit to income is distributed between job losses as soon as we get more commentary from him, we'll bring that to you. let's get back to our chief investment officer from tattan investment management. you still have an underweight when it comes to uk investment equities why would you become more its frght with uncertaintygiven around brexit and the next tightening cycle >> that's quite a bit down the line we know it's not just two years down the line, it's potentially four years down the line that's a long time and a lot can happen in between and a lot is happening in between
we've had quite a significant devaluation of sterling. that has not really yet caused any sort of significant export boost, which you would have expected with the eurozone really at the moment going from strength to strength but we are starting to see early signs of that coming through the current account deficit at the moment is not expanding further. that made us slightly more positive on sterling that's now already coming through. the beng ex the bank of england expedited that through their tone. all of that tells us it may not be the consumer in the uk but industry manufacturer and the services should be stronger in the second half of this year >> what about the rest of europe september after a less than usual calm that we saw in august, because we saw all this back and forth between north korea and the u.s., september is usually the month where we saw a whole lot of volatility. we did see a bit of that picking
up how do you trade equity markets, especially europe going into the fourth quarter now >> i think this year it has become, as we thought, a very much a question of currencies. so europe was really so far more of a currency play than an equity market play evaluations are way behind what we have in the u.s but that may well be changing now that the euro is softening a bit, those concerns for european corporates, what may be ahead should recede and therefore i'm expecting more upside for european equities, where the economy is really quite strong at the moment. and that's everywhere. >> is that pretty much going to be also driven by the u.s. tax reform the big reflation trade? which might or might not engulf the entire world is it really idiosyncratic factors that will be driving europe >> the tax reform is a slightly longer shot. that will not come through this year the excitement in the capital markets, yes, maybe. but for the corporates to
benefit from it, that will take well into next year and needs to be implemented first >> all right we'll see whether that goes through congress thank you very much for that now, still coming up on the show, french president emanuel macron unveils his first budget. we'll look at the details after this short break can ♪ ♪ can i kick it? ♪ yes you can ♪ well i'm gone
now, bank of england mark carney is set to deliver a speech on the 20th anniversary of the central bank's independence he will take the stage in a moment i can tell you that we've had a look at the speech, so have the wires. i can tell you roughly what he is about to say. he will say that monetary policy cannot prevent real income growth that monetary policy can influence how the income is distributed between job losses and inflation and prosperity of the uk will reflect the final brexit arrangements and the government's fiscal and structural policies. as soon as we get more commentary, we'll bring that to you. a quick look at the markets. sterling/dollar, largely
unchanged just a touch lower off by 0.1%. a lot of dollar strength coming through in light of the durable goods numbers, and president trump's speech when it came to the tax reform and that led to a surge in yields. we have the ten-year yield at 2.34%. the highest since mid-july the fact that we have seen that selloff in bonds, that leaves many to believe that this reflation trade is back on including wednesday's move, the u.s. ten-year yield has risen more than 11 basis points. the u.s. yield curve or the ten-year yield, it is on track for its biggest two-day rise in nearly seven months. there you go the ten-year treasury yield at 2.3371%. i guess the climb today is a little less pronounced than we saw in yesterday's trading session. also want to show you what's
happening with u.s. futures after we saw a pretty good day yesterday. the dow breaking a four-day losing streak. banking stocks jumping on the prospect of higher yields. we saw that markets by in large were pretty much encouraged by this tax plan. a quick look at those futures and how they're shaping up ahead of today's trade those will be with us in a second i can tell thought dyou the dowa quarter of a percent the nasdaq recovering from some of the tech weakness that was up by 1.2%. i guess we don't have those u.s. futures. we'll give you the european market stoxx 600 a bit mixed. not a whole lot of conviction. yesterday we saw the market rising to the tune of 0.4%, to the highest level in ten weeks that was driven by the weaker euro, rising dollar, the hopes for the reflation trade coming back what we're seeing today is
weakness in the retail space h&m, give than it's facing slowing sales, they talked about price cuts, pressure in margins, that's keeping a lid on that stock today. last but not least, let's talk about the fx markets the dollar is a bit weaker against the euro this morning. but still clinging on to those one month highs. 1.1759 is the print for the euro/dollar. the dollar a touch weaker against the yen. so that maybe puts some question marks around how sustainable that dollar run really is that we've seen over the past couple of trading days. wolfgang schauble will step down as germany's finance men center minister to become speaker of the bundestag. in eight years in the post, schauble was a leading voice for
austerity through the euro crisis french president emanuel macron has unveiled his government's first budget. his plans look to strengthen france's influence within the eu by shrinking the size of the state and freeing up a sluggish french economy for growth. the 2018 budget cut spending to programs protected by the state including housing and government sponsored jobs plans wealth and capital taxes have also been cut as macron looks to ease the tax burden of workers and businesses coming back to one of our top stories, donald trump attracted widespread criticism for politicians and business leaders for his decision to withdraw from the paris climate agreement, however bob geldof told cnbc that the president's stands could end up bolstering environmental activism >> ignited the issue for the young. they weren't really captured by the existential threat by
climate change maybe, maybe not, even though al gore's film was a big spur but the reality of an oppositional position to the president that they didn't want that excited them. so you have a lot of activism now. bizarrely the very link ththingt trump was denying was immediately accepted because he was denying it so you have radical action in the u.s. detroit will change to electric cars california will say enough >> annette spoke about returns from sustainable investing >> every investor expects from asset management or asset manager that you follow the investment guidelines when it comes to esg what we see, for example, is when it comes to the government's part, is that all the investors expect from us that we will actually do that for them it's a huge trend. when you look to the
performances, one of the most important criterias, investing responsibility doesn't mean that you lose performance so we have done a study with the university of hamburg, where we had to look to more than 2,300 different studies on the performance on the portfolios. we can see esg investing either gives you the same performance like normal investing or gives you a better performance the bank of england today marking 20 years of independence to celebrate the anniversary, the central bank is holding a two-day event featuring speeches from theresa may and stanley fischer and christine lagarde. we're waiting for the governor of the boe to take to the podium but i guess he is a fashionably late person this morning speaking of the boe, willem sat down with a founding member of the boe monetary policy committee and asked her how brexit impacted the uk
>> been as much clarity as one should give at this stage in negotiations you don't show your whole hand on day one but i think the structure of the negotiations is actually stacked against a successful outcome on the one hand, theresa may has to keep her party intact on the other hand barnier has no mandate to go beyond what's already been agreed with the 27 countries behind him he cannot be flexible without going through a long political process. she can't be too flexible or specific about what's needed, she has to balance these different votes -- competing interests behind her having the preconditions of the three areas that the eu said needed to be sorted before we get on to the interesting parts about trade, means that these preconditions, the negotiations could fall apart at any time because some of them are win/lose, not win-win.
that's not how you get a successful negotiation >> one final question on brexit and the economy of the uk. when luke at tyou look at the of staying in the union or exiting it, do you think the british economy, british economic interests will be better served by staying inside the european customs union without being able to make trade terms, or in the long term falling back would be the better option. >> i think we don't know what we need do is plan for both we don't know how these negotiations are going to work out. one never does when you're negotiati negotiating. it does worry me that it seems as though some of the politicians have bought into the idea that it would be a disaster to crash out of the customs union and the single market. it's only a disaster if we haven't prepared in advance.
>> as touched on before, french president emanuel macron unveiled his government's first budget his plans look to strengthen france's influence within the eu by shrinking the size of the state and freeing up a sluggish french economy for growth. let's talk this with len en ene baudchon are these targets r s realistic? if you were plaque kromacron --, mark carney just started speaking let's just listen in >> welcome to 20 years of independence policymakers in the united states. we're hear today because experience has shown price stability is the best --
[ inaudible ] high inflation hurts the least well off the most it distorts price signals, it inhibits investment and ultimately it damages the productive capacity of our economy. equally deflation imperils growth and employment and in the extreme can lead to financial ruin and economic collapse the happy medium is low stable and predictable inflation. a little inflation greases the wheels we could use some grease there a little inflation greases the wheels of the economy and it gives monetary policy the space it needs to respond to shocks and to deliver better outcomes for jobs and growth. now, recognizing the value to society of price stability is one thing. delivering it is quite another prices were anything but stable
in the 1970s and '80s with the collapse of the bretton woods simin 1971, uk monetary policy lost its anchor. there followed a series of botched experiments with targets for incomes, monetary aggregates and the exchange rate. the cost of such failures were enormous prices rose by over 750% in the 25 years to 1992 that's more than they did over the previous 250 years unemployment was high. growth was volatile. the inflation target that rose from the ashes of the debacle years ago th month marked the point when price stability became the unambiguous objective of monetary policy the new framework was a success, but it wasn't a total success. that's because with interest rate decisions still made by the chancellor, it wasn't fully
credible experience teaches that political control of monetary policy decisions suffers from a time inconsistency in which policymakers promise low inflation, then go for faster growth, and end up delivering neither. conversely welfare can be improved if governments first choose the preferred rate of inflation and delegate to the central bank the responsibility, the operational responsibility for achieving it so that was the case in 1997 when gordon brown boldly gave the bank of england operational control for setting monetary policy the bank of england act of 1988 clarified for the first time in three centuries for the only time in three centuries i should say the bank's responsibilities. it gave a new independent body of the bank, the mpc, a clear agreement to achieve the inflation target over the medium
term we care as much about inflation above target as below target and it applies at all time subject to achieving the target, the mpc is required to support the government's economic policy which is currently to achieve strong, sustainable and balanced growth so under this system, what mervin king termed constrained discretion, the bank takes its orders from the remit and is accountable to parliament and the people for performance the expectations of parliament and people have certainly changed since the days that montague norman justified his decisions to a compliant predecessor, the treasury select committee, by appealing opaquely to his instincts that's not a response i've dared to mention during my 30-odd parliamentary testimonies. you will know i'm in trouble when i do. the need for the bank to be open and accountable is greater than
ever not least because of a growing distrust of institutions and experts who reside withinthem. but also because better public understanding makes our policies more effective that's why the bank of england has dramatically increased the sale and i'd argue the quality of our outreach. we publish all the relevant information for our decisions on the day that that decision is released we disclose all key judgments underlying our forecast and account for differences with those forecasts when they occur. we leverage our network of 12 regional agencies by meeting with thousands of businesses every year across the country discussing with tens of thousands of people who attend our town halls and public forums and we engage with hundreds of thousands of more over
media. turning to performance, the gains from independence have been enormous. in the two decades that followed inflation averaged just over 2% compared with over 6% in the two decades preceding independence inflation has also been one-fifth as volatile. crucially independence and the credibility that came with it allowed monetary policy to respond boldly and effectively to the biggest financial crisis in a century it leaves the bank of england well placed to address a range of developments around brexit. now in the past 20 years we've also learned a few lessons i will highlight three before closing. the first is that the financial crisis exposed how a healthy focus on price stability could become a dangerous distraction central banks won the war against inflation during the great moderation, only to lose the peace as vulnerabilities
built. now, monetary policy is not best placed to address the risk to financial stability. but the challenges that the necessary financial policy decisions are also subject to time inconsistency financial lobbies are strong, and the temptations for the dash for froth powgrowth powerful. there are no obvious awards to take tough decisions to avoid a future crisis. in the world of financial stability success is an orphan that's why when the bank of england was fundamentally reformed after the crisis, the procedures and structures of the mpc were largely replicated in the fpc and the prc. crucially all of the bank committees have access to all of the bank's information and analysis, they're all well informed about each other's
reaction functions, and they can all coordinate policies if it's appropriate. the bank of england's committees are independent but not isolated the second lesson of the past two decades has been the importance of flexibility and flexible inflation targeting while the inflation target applies at all times, our remit has always acknowledged that inflation may deviate tempora temporarily from target on account of shocks. since 2013 the remit has explicitly recognized that in exceptional circumstances bringing inflation back to target too rapidly could cause undesirable volatility in output and employment in exceptional circumstances such as today, when the economy is facing profound structural change, the mpc can extend the horizon over which it returns inflation to target from above in order to balance the effect
on jobs and activity after all, even though monetary policy cannot prevent the weaker real income growth that is likely to come with trading arrangements with the eu, it ca influence how this hit affects job losses this bears emphasizing in recent years a host of issues have been laid at the door of the bank of england from housing affordability to poor productivity calls for the bank to solve these challenges ignore our carefully defined objectives, and they confuse independents with omnipotence
monetary and financial stability are foundational they're necessary for prosperity, but they are not sufficient to deliver it the biggest determinants of the uk's medium term prosperity will be the new relationship with the eu and the series of reforms that that relationship cattlizes. most of the necessary adjustments are real in nature and not in the gift of monetary policymakers the bank will do everything it can do support the adjustment consistent with its statutory obligations. we'll continue to assess and express our independent assessment of the risks associated with brexit we'll use all our powers consistent with our remits to mitigate those risks and to smooth the adjustment to new opportunities. monetary policy will continue to be set to achieve the inflation target in a way that helps smooth real adjustment and supports jobs in the wake of
very large external forces we'll make sure that banks are capitalized so they can withstand any severe shock, however unlikely, any severe shock that could be associated with brexit and still be able to meet the demands of households and businesses for credit. the financial system as a whole will have the capacity to finance the transition and to seize the opportunities that come beyond. these are the best contributions that the bank of england can make to the good of the people of the united kingdom. so ultimately the prosperity of the uk will reflect not just the financial brexit arrangements, but also the government's broader fiscal and structural policies the first speaker at this conference is best placed to address these topics now, it could have been very different. as some of you know, the prime minister began her career as a new graduate at the bank of england before leaving after six years to pursue other interests,
ultimately politics. whilst at the bank, the prime minister worked in our economic intelligence department, the cutting edge then of our activities and during her time she accomplished many great things and was destined for much more just imagine, prime minister what could have become of your career if you had stayed you could have been here introducing yourself instead you've come here by a road less traveled theresa may was elected mp in 1997 just as the bank was getting to grips with its new-found independence she held a number of positions in shadow cabinets and served as chair of the conservative party. after the formation of the coalition government she would become the longest serving home secretary in over 60 years, during a period where she confronted many of society's biggest challenges for example, introducing
legiation to tackle domestic violence, to eradicate modern slavery and counterterroism. never afraid of a challenge, she stepped into the breach to become prime minister following the referendum the prime minister and her government are committed to making the most of the opportunities that brexit brings and more fundamentally working to build a stronger, fairer and more prosperous country for all. please join me in welcoming the prime minister, theresa may. >> thank you thank you, governor, for that introduction as one who began her professional life at the bank of england 40 years ago it's a great pleasure to address this conference today your reference where i worked in the bank reminded me when i applied to the bank of england as a geography graduate, when the form asked which part of the bank i would like to work n i put international department
so the bank of england chose to put me into economic intelligence when i first started working for the bank back in 1977 it was a very different institution from the one we see today central banking then was a profession shrouded in secrecy i think the spirit of that time is captured in a story which the former governor tells. when lord king first joined the bank of england, he asked paul volcker, the chairman of the federal reserve under c.a.r.t r carter and reagan, what body should represented the bank of england? mystique was the reply many has changed in the years since and for the better you, governor, have contributed to that improvement with the reforms you led. today openness and transparency are defining characteristics of a modern central bank. this conference celebrates an important milestone in the evolution of this institution. the granting of operational
independence the newly elected labor government decided after the 1997 general election that they would do what's successive governors and some conservative chancellors had long talked about, give the bank responsibility for setting the official short-term interest rate as a newly elected mp at that time, i remember those debates well looking back on them now after 20 years in which independent monetary policymaking has become the norm around the world, the disagreements which then divided the house of commons on the issue seemed rather academic the successful adoption of inflation targeting in 1992 had already taken much of the political heat out of rate setting. and fears that the absence of a formal du aal dual mandate have unfounded. i would like to pay tribute to you, to your bread sessipredecel
the members who have served on the monetary policy over the past two decades you have been a dedicated group of public servants, motivated to serve the public interest and discharge the responsibility which parliament has given you to the best of your ability. there is much to be proud of whatever the debates at the time, there was never any real disagreement with about what the central aim should be. from the start of inflation targeting in 1992 and operational independence in 1997, that is what the bank has helped to achieve. as it has in other countries, central bank intense has hech d helped improve credibility, successfully anchored expectations and contributed to low and stable inflation the results have been impressive since independence, uk inflation has been much more stable than
it was in the previous years, when it flux waited frctuated fo 22%. high inflation hurts ordinary people low and stable inflation benefits households and businesses the fact that inflation 2062% sounds outlandish today is a tribute to your success. as we reflect on the undoubted successes over the last 20 years, we cannot do so with complacency. yes, inflation targeting and operational independence contributed to a period of steady growth, low and stable inflation, and general expansion in the ten years after 1997. but problems were developing which would later become apparent during the financial crisis of 2007 and 2008. the great recession that followed - >> that is theresa may speaking at the bank of england 20 years of independence. just imagine what the boe would
look like if she was governor of the boe as mr. carney was hinting at i wonder if leadership would be strong and stable. i'm not so sure. let's get back to the topic we were talking about let's get back to helen helene baudchon. thank you very much for your patientpa patien patience we have deficit targets, how realistic are the numbers? >> good morning again. i would say that these targets are quite realistic. even if this will be no easy task to reach these targets. in fact, the main thing regarding this 2018 budget is that we have three things at the same time, less spending, less taxes, less deficit. this is not totally new.
francois hollande, our previous president had also tried to implement these kinds of mix of measures but today we have the same kind of fit cfic fiscal policy with e sizable changes, with stronger spending savings, higher tax cuts, and despite that, at the end of the day significant reduction in the fiscal deficit. the difference between the situation today and the one with francois hollande is today we have quite stronger growth and we expect the economic outlook to remain positive so these new fiscal targets are quite realistic. that said they remain ambitious,
they're quite credible but remain ambitious especially under spending savings side. because next year the gdp share of public spending is expected to diminish by 0.7%. this is a big decline. knowing how france is working and with public spending this will be a huge task. i would say quite achievable >> wondering whether this exercise of putting forth new targets is not more important from a signaling perspective to the other eurozone leaders just a day after mr. macron's unve unveiled his big reform plan for europe france was one of the worst contenders when it came to breaching those deficit targets, now it needs to restore
credibility to get other leaders on board is it more about that than anything else? >> i would say it's part it's part of the explanation in fact, you have to have a broad look at all what will be implemented during this five-year term emanuel macron has in mind a very broad agenda of reform. the very first part -- the very first reform he implemented and he wanted to implement was the reform of the labonbor code this reform is one part of a more comprehensive reform of our whole social model some we are waiting for more reforms on the system, international training system and unemployment benefit system and the other big piece of this
economic agenda was indeed the 2018 budget and the tragic following four years indeed all these measures do contribute to restore -- well, credibility for france it will help, i think france to get a stronger voice, a stronger position to negotiate and push through reforms to improve the eurozone again, broadly speaking, this budget and also the reform on the labor market go in the right direction. but this will also be very
challenging. >> helene, thank you very much for your insight really appreciate it helen baudchon the republican party has unveiled plans for an overhaul of the u.s. tax system the framework calls for lower corporate and personal tax rates. democrats were quick to attack the plan saying it will mostly help the wealthy and inflate the deficit. we have u.s. future force you. the dow jones seen off by 5 points that's it for today's show i'm carolin roth "worldwide exchange" is up nt.ex ♪ well i'm gone
i just saved thousands in less than a minute, i found out how much home i can afford. i like how you shop for loans the same way you shop for flights online. i didn't realize at lendingtree you can save money on almost any sort of loan. i consolidated my credit card debt with a personal loan. i found a new credit card with 0% interest for 15 months. you just shop, compare, and save. and it's all free. go to lendingtree right now and start saving.
the markets cheer the gop tax blueprint. we'll tell you what reforms could mean for companies and investors. congress demands answers from facebook, twitter, alphabet about russia's role in the 2016 election. and pop culture icon and "playboy" founder hugh hefner has died we will talk about his life and legacy it's thursday, september 28, 2017 "worldwide exchange" begins right now. good morning welcome to "worldwide exchange" on cnbc. i'm sara eisen >> i'm