Global Economy Lives on the Edge as Crisis Veterans Sound Alarms
We heard growing fears this week that a downturn might be brewing from various corners of the global economy, while central bankers find their place in the policy tightening cycle and trade battles rage on.
Here’s our weekly wrap of what’s going on in the world economy.
Global Growth Gossip
Three titans of past financial crises voiced some worry about the U.S. ability to combat the next one, as a Bernanke-Geithner-Paulson show highlighted fresh weak spots since the last downturn a decade ago. The Minneapolis Fed chief said he thinks more interest-rate hikes could trigger a recession, while Chairman Jerome Powell says rates are on the best path “for now.” Cooling in the world’s No. 2 economy spells trouble, but China has many ways of insulating itself. U.K.’s Theresa May had another rough week of Brexit talks, while Trump told her to just sue the EU. Growth outlooks are being downgraded across Southeast Asia for the rest of 2018. And the IMF says markets are too calm about trade-war risk.
It was a week to air grievances over tariffs. Fed chief Powell warned that trade barriers threaten wages and growth even as the economy chugs along, while U.S. businesses are getting loud about not getting protection from the protectionism. Beyond American borders, the European Union warned Trump about how tariff battles can lead to “hot conflicts.” The havoc is bringing Japan and the EU closer, and putting super-trade-reliant Vietnam on the defense. Europe is looking to convince the U.S. to cut car levies, while the U.S. just lodged formal challenges at the World Trade Organization against the EU, China and others for tariff retaliation. Trump’s top economic aide says China’s Xi doesn’t want to make a deal. One thing that hasn’t changed: China’s still America’s biggest banker.
- Slower Japanese Export Growth Offers Warning as Clouds Gather
- JAPAN INSIGHT: ‘Made in China 2025’ - More Business Than Threat
- Citi Says Trump ‘Brutal’ on Trade But Sees Deals by Midterms
- Trump’s Damage to International Trade Will Take Years to Repair
- America’s Top Aluminum Maker is Getting Hit by U.S. Tariffs
Central Bankers’ Scorecard
There was something from everyone in U.K. data this week, with solid jobs numbers seeming to support the case for an August rate hike from the Bank of England, and a subdued inflation reading published the next day enough to convince the doubters of their case. Either way, the BOE pledged to weigh in on whatever Brexit deal materializes. Bank Indonesia held policy after three interest-rate hikes of a combined 100 basis points, seeing some stabilization in the currency after a slump and the Bank of Thailand signaled that steady second-quarter growth could spur a more hawkish stance. South Africa’s central bank warned of price risks, while Angola unexpectedly cut rates for the first time in four years. There’s little reason to expect big news out of the ECB for the rest of 2018, but a significant shakeup in global trade could cause a rethink of policy tightening, Bloomberg Economics argues.
- Draghi Will Just About Raise ECB Interest Rate Before Retiring
- Poland’s Most Vocal Rate Hawk Rues Collateral Damage on Currency
- Eastern European Nations Now Face a Tougher Route to the Euro
- From Intern to Policy Maker; Soto Rejoins Colombian Central Bank
- Trump Fed Bashing Could Backfire by Stiffening Rate-Hike Resolve
- Saudi Economic Shock Therapy Shakes Up Kingdom’s Business World
- A Land of Rabid Whisky Drinkers Is Forced to Put Down the Bottle
- Wealth Matters to Germans Looking for a Spouse, Bundesbank Finds
- Ghosts of Loans Past Coming Back to Haunt India’s States
- A China Borrower’s $11 Billion Debt Pile Comes Crashing Down
- Ghana Plans Revenue-Boosting Policy Measures, Minister Says
- Where the Super-Rich Go to Buy Their Second Passport
Chart of the Week
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