The shift in the direction of global monetary policy in the last six months has been more broad-based across geographies than in any period since 2009, with more than a third of central banks covered in the Bank for International Settlements' (BIS) database having eased policy in the past six months.
Private sector financial surpluses in all of the largest eurozone (EZ) economies limit the risk that weakening external demand will be amplified by sharp downward corrections in domestic demand, says Fitch Ratings' economics team.
U.S. President Donald Trump said on Thursday he would impose 10% tariffs on the remaining $300 billion of imports from China (the U.S. levied a 25% tariff on $200 billion out of around $540 billion of imports in May), beginning on September 1. The new tariffs broaden the goods being levied with additional tariffs and notably include consumer goods.
The Federal Reserve is likely to cut interest rates by less than financial markets expect over the rest of 2019 given robust jobs growth in the US. A 25bp cut now appears probable at either the July or September FOMC meeting but is unlikely to signal the start of a series of interest rate cuts, in contrast to the path currently priced into Fed funds futures markets.
A number of frontier economies have seen interest rate cuts in recent months against a backdrop of more accommodative global monetary policy conditions. These include: Angola, Azerbaijan, Costa Rica, El Salvador, Jamaica, Mozambique, Sri Lanka and Tajikistan, as highlighted in Fitch Ratings' latest 'Frontier Vision' slide pack.
The recent slump in global manufacturing is laid bare in the latest edition of Fitch's '20/20 Vision' economic data chart pack. Manufacturing Purchasing Managers Indices (PMIs) have seen widespread weakening in recent months, while industrial production has slowed in the US, Japan, China, Germany, Australia, Canada, Brazil, India and Mexico.
Most post-war US recessions have been preceded by deteriorating private-sector financial imbalances, but these conditions are not in place currently as shown by Fitch Ratings' economics team's latest Chart of the Month.
The imposition by the US of 25% tariffs on the remaining USD300 billion of imports from China would reduce world economic output by 0.4pp in 2020, Fitch Ratings says. Global GDP growth would slow to 2.7% this year and 2.4% next year, compared with our latest "Global Economic Outlook" baseline forecasts of 2.8% and 2.7% respectively.
Kevin Duignan, Global Head of Financial Institutions, joins Michael S. Piwowar of Milken Institute and Richard Berner of NYU Stern School of Business at Fitch’s Global Banking Conference in New York, for a fireside chat on the banking regulatory environment.
Brian Coulton, Chief Economist, Fitch Ratings, joined Rishaad Salamat and Doug Krizner on Daybreak Asia. He says we are firmly in escalation mode on trade. He goes onto the potential impact for his forecast on China’s growth and how China may respond.
James McCormack, global head of sovereign and supranational ratings, addresses how China’s current stimulus package is gaining traction despite Asia’s mixed economic environment at the 2019 Milken Institute Global Conference.
The U.S. decision to increase tariffs to 25% on an additional USD200 billion of imports from China had been assumed under Fitch Ratings' 2019 base case and does not alter our Chinese or global growth forecasts. However, the decision marks a significant escalation in U.S.-China trade tensions, and highlights the risk of a protracted trade war beyond our current assumptions.
The breadth of the rebound in global equity prices since January has been striking and has occurred despite trade and industrial indicators remaining weak says Fitch Ratings' Economics team in its latest "20/20 Vision" report.