Many take comfort from the prospect of higher inflation and rising interest rates driven by the fiscal stimulus the President-elect Trump promises to deliver. This will push the dollar up, endowing European exports with increased competitiveness. Yet the currency tailwind expectations might prove short lived as current debt levels curb any significant public deficit-led expansion.
Articles by JP Marin Arrese
About the Author
It is too early to guess what kind of economic policy the Trump administration may deliver. The markets are crossing their fingers and praying the President-elect will ultimately hand over matters to an experienced team.
A real estate tycoon and reality showman will head the world’s most powerful nation, winning an astonishing victory grounded on outright lies and a shallow promise to make America great. His roguish conduct, threats and abuse towards Hillary Clinton, migrants, women, disabled persons and servicemen killed in action, did not deter voters from supporting him.
A Belgian region totalling no more than 3.5 million inhabitants has derailed European Union efforts to conclude a broad trade agreement with Canada. Wallonia’s unexpected rebellion will undoubtedly weigh on any future negotiation involving issues beyond the usual trade in goods, setting a nasty yardstick for the forthcoming Brexit talks.
The Italian banks are struggling for survival. And the prospects for some of the biggest German banks are also gloomy. But the authorities in both countries are reluctant to act quickly on the assumption that time may solve the problems.
Central bankers deserve praise for salvaging the economy when it was navegating rough waters. The massive liquidity glut they provided undoubtedly saved the day. Yet this funding bonanza seems unable to boost growth. We know that money doesn’t necessarily bring happiness. But now we discover, much to our dismay, that neither does it guarantee a full- steam recovery.
Investors do not expect the Fed to move on rates at today’s’ meeting. There is only a slim 20% support for this view, as hopes for a strong recovery were dashed by recent disappointing data. The widely expected hike may have to wait until the Presidential Elections are over.
The recent G 20 Summit saw widespread concern over the backlash against free trade. The crude populism gaining momentum in many developed countries has raised the banner against globalisation, depicted as the main culprit for all woes. Those losing their jobs or facing tougher labour conditions openly blame imports and open market access for their misfortune.
The Spanish right and centre parties have brokered an agreement for breaking the current political deadlock. The caretaker Cabinet has held office for nine agonizing months as two general elections failed to produce an outright winner. Even if the settlement reached between the caretaker Popular Party government and Ciudadanos marks a sizeable step forward, it will still fail to deliver enough parliamentary support for securing a stable government. The Socialist Party continue to firmly hold the key to power.
At Jackson Hole, Janet Yellen dwelt extensively on the challenges raised by low neutral rates, recognizing the need to broaden the unconventional toolkit for compensating for the subdued impact rate cuts might have in future. By hinting the Fed should reinforce its weaponry, just in case there is an unexpected and most unlikely bout of recession, Janet Yellen is sending the wrong message.