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Commentary

Thu 21 Feb 2019 / Asia Pacific

Financing emerging Asia infrastructure

Despite much discussion and effort, private capital is still not playing the role it can or should in financing infrastructure projects in emerging Asia. Increased geopolitical uncertainty and shifts in terms of sources of infrastructure financing, as well as broader trade and political partnerships, are accentuating market sensitivity in the region. In the light of such uncertainty, multilateral institutions such as the Asian Infrastructure Investment Bank can bolster public investment, given their ability to lend counter-cyclically and take longer-term exposures.

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Wed 20 Feb 2019 / Asia Pacific,North America,Global

Keeping the peace in US-China talks

Ongoing US-China trade talks are a skirmish in what could become a protracted struggle. Not a trade war, but a wider contest – hopefully economic, not military – to realign global economic interests. One way to keep that contest peaceful is to recognise it is a long-term project that could benefit both sides if they keep communication channels open. It seems negotiators will reach some sort of agreement on the discussion of punitive tariffs to defuse that issue in the short term. Leaks about possible concessions are seeping out.

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Tue 19 Feb 2019 / North America

Augmenting US Treasury foreign exchange report

The mid-April deadline for the next US Treasury report on the foreign exchange policies of major trading partners looms. The civil servants do an outstanding job, but can do even better. Since the passage of the 2015 Trade Facilitation and Trade Enforcement Act, the report has focused on whether the top 12 US trading partners have significant bilateral surpluses with the US, material current account surpluses, and engaged in persistent one-sided foreign exchange intervention. The Act does not preclude a more fulsome global economic discussion.

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Thu 14 Feb 2019

Italy headed for 'vicious' debt crisis

After a brief recovery, Italy has succumbed to its third recession in a decade. Its government is unlikely to revive flagging investor confidence. Ahead of the European elections, it will probably not undertake those economic reforms that might jumpstart the moribund economy, writes Desmond Lachman.

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Wed 13 Feb 2019 / North America

Questions over Fed dovishness

The Federal Open Market Committee's decision at the end of January to pause rate increases was long telegraphed and widely expected. But the highly dovish messaging in the Federal Reserve statement and press conference by Chair Jerome Powell surprised markets. The reasoning for the sharp shift in Fed rhetoric between December and January remains elusive. To reconcile an unchanged baseline economic outlook with its dovish messages, the Fed pointed to increased external downside risks.

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Tue 12 Feb 2019 / Latin America Caribbean

Venezuela's death spiral

Under President Nicolás Maduro, Venezuela has fallen ever further into an economic death spiral. Evidence of this comes from Venezuela's inflation rate, which is running at 139,839% per year. At the same time that Washington declared economic war, Caracas announced it was going to devalue the bolívar in an attempt to allow its value to align with that in the black market. The official bolívar-dollar exchange rate plunged and shot past the black market rate. This realignment carries significant implications.

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Thu 7 Feb 2019

Powell pivots to patience

US Federal Reserve Chair Jerome Powell wanted to make sure everyone understood that the Fed has changed its stance and that patience is the new byword. Not gradual rises in interest rates, not balanced risks, but patience. The consensus statement following the Federal Open Market Committee meeting on January 30 included the word 'patient' with regard to any future 'adjustments' in monetary policy, given 'muted inflation pressures'. Other policy-makers made similar remarks in January, so much so that the FOMC began to resemble an echo chamber.

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Wed 6 Feb 2019 / Global

Central banks take on climate change

As 1,500 private jets flew into Davos to discuss climate change, the Central Banks' and Supervisors' Network for Greening the Financial System was meeting in Mexico. The network believes climate change is not only a threat to the environment; it also jeopardises the world's financial system, writes Danae Kyriakopoulou.

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Tue 5 Feb 2019 / Asia Pacific

Election muddies India's outlook

Conditions are becoming murky in the lead up to India's general election in May. Prime Minister Narendra Modi's popularity is falling, and the losses of his Bharatiya Janata Party in state assembly and other by-elections dim his prospects for a clear win. The government's drive to boost growth has shifted economic policies into an expansionary mode. Last October the RBI moved its policy stance to 'calibrated tightening', citing sustained inflation risks. The events since, especially after the resignation of Governor Urjit Patel, shift the bias towards easing.

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Thu 31 Jan 2019 / Europe

PM must push Brexiteers against the wall

Prime Minister Theresa May's Brexit deal has been rejected – again – because she is not in control of her party. In the probable case of no meaningful concessions being agreed with the EU, especially regarding the Irish backstop, May will be left with one option when she goes to parliament on 13 February. She must stand firm on her deal – amended or not – as the only workable outcome and push the hard-core Brexiteers against the wall, shifting responsibility onto them for a possibly catastrophic outcome.

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