US Executive Podcast – July 2021
Gregory Daco, Chief US Economist, and Kathy Bostjancic, Chief US Financial Economist, discuss the many facets of this economic recovery. Inflation has surged to levels not seen since the early 1990s. Consumers are shying away from goods and splurging on services. And, manufacturing is being pulled forward by strong demand but restrained by capital and labor supply constraints. Fed Chair Powell argued in favor of a dovish policy stance during his semi-annual Congress testimony. He reiterated that the inflation spike was transitory while acknowledging the Fed’s will and ability to react should inflation prove persistent. In line with the view that tightening monetary policy in the face of supply-constrained activity would be misguided, we continue to anticipate QE tapering in early 2022, and a first rate hike only in 2023. While many argue inflation is the most important risk to the US economy, we contend that the health situation should warrant more attention. A rapidly spreading Delta variant could spell trouble for the economy in the fall. Another risk stems from a reduced fiscal impulse in 2022 as policymakers may shy away from additional stimulus in the face of higher inflation.
This Podcast is available to listen to now (on-demand, listen at your convenience) until 20th August 2021.
Is sterling in the midst of a sell-off or a full-blown crisis?
Policy announcements are coming thick and fast in the UK at the moment and have been greeted with the most significant sell-off in UK assets in decades. Is this a case of markets overreacting or have the UK public finances been put on an unsustainable footing? Will the Bank of England react to the fall in sterling or are markets setting themselves up to be disappointed? We will set out our views on all these topics and set out the conditions under which we think this volatility will subside.Find Out More
Pre-emptive debt restructuring: a viable scenario for fragile African sovereigns?
The expiry of Covid-19-related support coupled with a surge in the goods import bill has exacerbated pressure on external trade positions for various African sovereigns. We see headwinds intensifying from 2023 onwards in the form of a deepening drought in East Africa, populist-leaning policies aimed at appeasing voter frustrations, large redemptions of external public debt facilities, and moral hazard. The risk profile is fragmented but a common thread can be found across Africa: sovereigns face an uphill battle in meeting the projected external funding requirements. With the risks of disorderly default on the rise and informed by the Zambian blueprint, we investigate the case for pre-emptive debt restructuring for fiscally fragile nations including Egypt, Ghana, and Kenya.Find Out More