Big Reads on Economics: Central Banks Are Easing But Not Easily
Big Reads on Economics: Central Banks Are Easing But Not Easily
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Central bankers just don’t seem to be getting along.
Federal Reserve officials cut interest rates yet divided by the most since 2016, while a split over stimulus within the European Central Bank became more public.
The discord reflects an opaque outlook for the global economy as it took fresh hits from an oil-supply shock and volatile money markets.
To get a better sense of what’s going on, here is a collection of this week’s analysis and enterprise from Bloomberg Economics:
Federal Reserve Chairman Jerome Powell left markets guessing over where he sees U.S. interest rates heading after he and colleagues cut their benchmark for the second time this year. Central bankers at the New York Fed were especially busy trying to restrain a spike in money market rates.
Divisions were also evident in the ECB. Still, its willingness to go big on radical measures in President Mario Draghi’s era gives some pause to those in Japan, who haven’t seen such a tack yield the desired results. Yuko Takeo took a look at how low inflation, an exchange rate that’s difficult to rein in, and slower growth could be part of Europe’s Japanification in the longer run, despite -- or because of -- aggressive monetary policy. Yuko and Hannah Dormido also looked at the two Japanese economies.
The attack on Saudi Arabia’s oil facilities -- and subsequent record run-up in global oil prices -- had everyone on edge over what the geopolitical shock could do to an already-ailing world economy. The jolt came alongside sour data out of China, including the slowest single month of industrial output growth since 2002, and is a special pain point for emerging economies nursing their current account and fiscal deficits. And it’s no help to a Saudi economy whose oil and gas sector accounts for about half of gross domestic product and that already was on track for a slowdown this year, even if prices have recovered a bit.
Recession fears might have been calmed by Bank for International Settlements chief Agustin Carstens, who told Bloomberg Television that a global recession is “still far from being something sure.” The Organization for Economic Cooperation and Development still warned that global growth is the weakest in a decade. Iain Rogers explains Germany’s aversion to big spending.
The Carlyle Group finds that talk isn’t cheap: Narrative economics can lend clues to how corporate investors could talk the economy into a recession. That’s because their increasing citation of living in a “late-cycle” environment could impact investment decisions that end up self-fulfilling, Craig Torres explains. The group’s study of earnings calls to explore that link is part of a growing subset of economics research, championed by the likes of Nobel prize-winning economist Robert Shiller.
A decade ago this month, the U.K. undertook a massive overhaul of its welfare system, bundling six types of benefits into a single payment called Universal Credit. As David Goodman reports from London, the roll-out started in 2013 but has been log-jammed by delays, IT glitches, and controversies. And an almost decade-long austerity drive has limited the payouts just as Brexit is about to happen.
Having racked up the trade-war wins, Vietnam now is bumping against some limits to its capacity to absorb new business on the sidelines of U.S.-China tensions. While fresh production and investment have made for short-term victories, businesses are finding that the Southeast Asian nation’s infrastructure, labor force, and regulatory atmosphere often aren’t up to snuff.
To contact the reporter on this story: Michelle Jamrisko in Singapore at mjamrisko@bloomberg.net
To contact the editors responsible for this story: Simon Kennedy at skennedy4@bloomberg.net, ;Nasreen Seria at nseria@bloomberg.net, Malcolm Scott
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