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Commentary

Wed 13 Mar 2019

'Superstar firms' fuel price volatility

The rise of 'superstar firms' has caused a shift in structure of product markets. With advances in technology, firms' market power has risen, as has price volatility. This complicates central banks' job and muddles the transmission of inflation policy via prices, writes Pierre Ortlieb.

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Tue 12 Mar 2019

Missing out on monetary normalisation

The European Central Bank's postponement until at least 2020 of its first post-financial crisis interest rate increase could mean it will miss out a cycle of monetary normalisation. This exposes it to pressures which will weigh on the bank's next president, who will take over from Mario Draghi when his term ends in October. The biggest risk is that the ECB will be bereft of monetary ammunition when and if the Federal Reserve starts to ease interest rates in response to a further slowing of the US economy later in 2019 or next year.

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Thu 7 Mar 2019

Fed to rethink inflation expectations

The Federal Reserve is pausing its interest rate increases, and will suspend its balance sheet runoff later this year. It is moving closer to consensus on exceeding its 2% inflation target to make up for the long period of inflation below that target and keep it credible, writes Darrell Delamaide.

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Wed 6 Mar 2019 / Europe

Germany just avoids technical recession

Germany narrowly escaped a technical recession at the end of 2018. Growth came in at zero, from minus 0.2% quarter-on-quarter in September. This performance was the result of too many one-offs, surfacing structural weaknesses and external uncertainties. However, it is not necessarily the end of a long positive cycle. Economic fundamentals remain solid and the chances of a gradual rebound are still much higher than those of another disappointment. The possibility of disquiet in the coalition government, however, raises fresh risks in 2019.

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Tue 5 Mar 2019

Weidmann ECB chances rising again

The rising probability of a comparatively 'soft' British departure from the European Union has added to the chances that Jens Weidmann, Bundesbank president, could after all become head of the European Central Bank when Mario Draghi steps down at end-October. Even if politics – especially the aim of reaching EU-wide balance (following UK departure) in the 2019 distribution of five top posts – are increasing Weidmann's chances, securing his nomination will not be easy.

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Thu 28 Feb 2019

EU and Britain: Pinnacle of paradoxes

Once again, Theresa May's enemies are riding in droves to her rescue. A deal now looks probable for Britain to leave the EU (with a transition period) at the end of March or soon afterwards. The machinations of the opposition Labour party and of myriad adversaries within her own Conservatives have combined to strengthen a prime minister whose greatest defence is her palpable weakness. Britain's most potent bargaining strength has been its apparent irrationality. Yet, in the end, rationality will win the day.

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Wed 27 Feb 2019 / Europe

Italy downturn signals troubled summer

Luigi Di Maio, leader of the Five Star Movement, and Matteo Salvini, head of the League, proclaim the strong partnership between Italy's two governing parties. Not only will they retain power, they say; they will also implement all the expensive social spending policies agreed in their 'government contract'. But recent developments – especially the sharp economic slowdown – raise doubts whether the coalition can agree the 2020 budget. This portends a troubled political summer. May's European elections will be critical.

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Tue 26 Feb 2019

US-China deal raises critical questions

Washington has announced, following persistent pressure, that the US and China have reached an understanding on a stable renminbi as part of a possible US-China trade deal. The conditions for stability are ripe. But an agreement is easier said than done and raises critical questions. First, the parties must determine whether the deal would be hortatory or binding, writes Mark Sobel.

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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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