Trump, Gloomy Outlook Hit Finance Chiefs in Bali: World Economy This Week

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a large body of water with buildings in the background: Aid Distribution and Recovery Operations in Palu Following Quake and Tsunami© Bloomberg
Aid Distribution and Recovery Operations in Palu Following Quake and Tsunami

(Bloomberg) — Central bankers from around the world jumped to the U.S. Federal Reserve’s defense in Bali after President Donald Trump accused the central bank of going “loco.” But some economists says what’s at risk of getting lost in the focus on the shift by central banks to quantitative tightening is how accommodative they still are.

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Here’s our weekly wrap of what’s going on in the world economy.

Central Bank Pushes

Fed chief Jerome Powell came under pressure from all sides this week as he and his fellow finance chiefs gathered for International Monetary Fund and World Bank meetings in Bali. While he faced warnings to be mindful of the effects of his policies on emerging economies from his Indonesian hosts, the biggest attack came from home, where Trump said that plunging stock markets weren’t because of his trade conflict with China, but “wild” Fed policy. That at least prompted support from Powell’s peers, as they sought to defend central bank independence. Economists say the Fed might stay more accommodative than investors fear and by some measures it still looks loose.

Other factors are also occupying the minds of officials – like how, and how fast, to normalize policy. In China, the central bank cut the amount of cash lenders must hold as reserves for the fourth time this year to shore up the faltering domestic economy amid the worsening trade war.

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Trade Chronicles

As the U.S. and China sought support for their respective cases in Bali, the IMF blamed escalating trade tensions and stresses in emerging markets as it said the world economy is plateauing. It cut its growth forecast for the first time in more than two years, in projections don’t even take into account Trump’s threat to expand the tariffs to effectively all of the more than $500 billion in goods the U.S. bought from China last year. China insists it won’t be forced down by levies, but the European Union says Trump’s aggressive strategy on trade has proven successful. 

Read More:

Trump Tariffs Push Small Firms to Plead for Same Relief as Apple Taiwan’s Record Exports Defy Gloomy Outlook for Asian Trade Mahathir’s New Car Will Be Asean Effort to Weather Trade War U.S. Is Said to Mull Blocking U.K. From Global Procurement Pact Metal Tariffs Haven’t Cost Jobs (Yet)

World Outlook

While the IMF cut its projections, accounts of the European Central Bank’s last meeting showed policy makers held back from raising the alarm about risks to the euro-area outlook even after a debate that noted mounting global threats. Italy’s finance minister was less optimistic, warning of a deceleration for advanced economies. In the U.S., consumer sentiment cooled, especially among women. France’s Treasury raised questions about economic stability for recipient countries of China’s Belt and Road initiative and access for European businesses. U.K. lawmakers were also asking questions, about the Bank of England’s assessment of a possible no-deal Brexit, even as house prices in London took a beating. For the new Nobel Prize in Economics winners, climate and technology are the real issues for the global economy.

Read More:

A Decade After Lehman, Investors Hunt Clues for Next CrisisU.K. Economy Set for Best Quarter Since 2016 Despite Flat AugustMalaysia Contractors Slide as Mahathir Deepens Spending CutsPakistan Devalues Rupee as It Prepares to Seek 13th IMF Bailout

Weekend Reading

New South African Finance Minister Faces Same Old Problems Nobel Winner Vows ‘Zero Tolerance’ for Lazy, Untested Economics MIDDLE EAST INSIGHT: What Matters? Oil, Rates, Reforms, Turkey Indonesian Skills Crunch Cripples Jokowi’s Path to Wider Wealth Why Morgan Stanley Expects 3% U.S. Wage Gains: Eco Research Wrap Negroni-Sipping, Cigar-Smoking Economist Set to Shake Up Banxico Rethinking Currency: Finding a Better Way to Run an EconomyAtlanta Takes Top Income Inequality Spot Among U.S. Cities

Chart of the Week

Want a $21,000 Pay Raise? HSBC Recommends You Move Overseas

–With assistance from Michelle Jamrisko.

To contact the author of this story: Lucy Meakin in London at lmeakin1@bloomberg.net

To contact the editor responsible for this story: Zoe Schneeweiss at zschneeweiss@bloomberg.net

For more articles like this, please visit us at bloomberg.com

©2018 Bloomberg L.P.

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