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Jackson Hole Anticipation Gripped the World Economy This Week

Michelle Jamrisko
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Jackson Hole Anticipation Gripped the World Economy This Week

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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.

World’s Firefighters

With all eyes on Jackson Hole for 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 more room they have for stimulus as the doves get louder in pockets of the globe. Indonesia cut rates for a second straight month with a surprise move, and Sri Lanka followed with a cut of its own. Egypt eased more than expected. 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 is 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.

Read More:

PBOC to Pass Up Next Chance to Cut Borrowing Costs, Survey ShowsWhy Central Banks Down Under Are Finally Talking QE: QuickTake

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.

Read More:

Philippines Sets Record 2020 Borrowing Amid Infrastructure PushCHINA INSIGHT: Infrastructure Index Shows Policy Support Up

Mood Rings

China increasingly flexed its geopolitical muscles, 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 the department will ease Huawei sanctions for another 90 days.

Read More:

Modi Ally Calls for Boycott of China Companies on Kashmir, TradeU.S.-Mexico Tomato Trade War Faces Crucial Deadline on MondayChina Touts Common Ground With U.S. Allies Japan, South Korea

Data Dump

Thailand’s surprise increase in year-on-year exports did little to brighten the trade 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.

Weekend Reading

Hong Kong Immigration to Taiwan Surges as Protests Grind OnWorld Bank Says Water Pollution Weighs on Global Economic GrowthFed May Be More Aggressive With Bond Buying Next Time Around Trade Whiplash Hits Israel in Slowdown Worse Than All ForecastsNext U.S. Tariffs to Pull China Expansion Below 6%, Survey Shows

Chart of the Week

GLOBAL INSIGHT: Uncertainty Not Tariffs Main Risk to Global GDP

(Updates with Sri Lanka interest-rate cut in central bank section.)

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, Zoe Schneeweiss, Fergal O'Brien

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