The theme of the Federal Reserve’s annual gathering—“Challenges to Monetary Policy”—is a bit of an understatement. Central bankers’ nightmares are proliferating, including more turbulence on the trade front.
Here’s our weekly wrap of what’s going on in the world economy.
With all eyes on Jackson Hole for even scant hints of what’s next for the Fed, some officials watered down dovish expectations as they cited a still-healthy U.S. economy. Fed minutes showed the July rate cut was all about insurance.
Central bankers are mulling how much room they have for more stimulus as the doves get louder in pockets of the globe. Indonesia became the latest Asian institution to deliver a surprise, unexpectedly cutting rates for a second straight month. Germany’s Bundesbank is eyeing recession, and stimulus pressure is rising across the euro area and across the Atlantic.
The other big question—aside from “how much”—is “by what means.” Switzerland has a new way of enforcing the world’s lowest interest rate, Turkey’s rewarding high-lending banks with looser reserve rules, and China has a slew of tools to consider after a fresh announcement on its interest-rate system.
Fiscal Pocket-Opening
Under fire for not doing enough to help their central banks, governments are gradually getting into the stimulus game, too. Chile’s on board. And even traditionally tighter Germany is readying a plan that could amount to as much as $55 billion in a crisis.
Even the healthier economies don’t want to be left out of the conversation: The U.S. is talking stimulus even as President Donald Trump dismisses recession risk. Singapore says it’s not time yet, but the city state will be ready for fiscal support as needed.
Mood Rings
China increasingly flexed its geopolitical muscle, muddying the outlook for any calming in U.S.-China negotiations as a September tariff deadline nears. Holding firm on its Hong Kong position, China pledged retaliation against American companies over a U.S. arms sale to Taiwan.
On the U.S. side, there’s still a bit of a sentiment divide: Trump noted Apple’s worries on tariffs, while also saying the White House isn’t ready for a deal with China. The Commerce chief said it will ease Huawei sanctions for another 90 days.
Data Dump
Thailand’s surprise increase in year-on-year exports did little to brighten the trade data picture, with Japan’s shipments declining again, and South Korea and Taiwan export gauges remaining in contraction. It added up to an even sadder looking dashboard, with the Bloomberg Trade Tracker showing four of 10 gauges in below-normal territory.
