As we have mentioned before, the global economy is comprised by more countries than the United States of America and while those other countries are keeping a close eye on what’s going on stateside—either for direction or counterpoint—they are also having their own economic experience.
The People’s Bank of China (PBoC) announced a massive stimulus package this week in an attempt get the economy back on track to reach its 5% annual growth target.
The Chinese economic mood has been depressed for a while due to the crash of the property market leading to low consumer sentiment and deflationary pressure.
The anti-depressant injection contained interest rate cuts, lower reserve requirements for Chinese banks, and government funding to prop up the stock market.
Europe has also felt a little blue after the Olympics. The economic sentiment for the EU and the eurozone held more or less steady in September though an improvement had been expected.
The mood dragged largely because of worries for industry/manufacturing. That will most likely put pressure on the European Central Bank (ECB) to lower interest rates further, even though they already cut rates in both June and mid-September.
Across the channel, Bank of England decided not to cut rates because the UK economy seems to be doing OK. Inflation is still on the higher side, and economic activity is surprisingly resilient. Recent talks between the UK and EU also fuels hope of a possible collab.
And in Canada, they clocked their third month of zero growth within the past six. Canada has already snuck back into the 2% range of inflation, and now the focus is on releasing the brakes just enough to not slide into a recession. Bank of Canada is therefore also expected to continue the rate cuts for a bit longer.
That brings us back to the party in the U.S.A. (thank you, Miley!) where last week’s rate-cut-a-palooza was backed up by fresh inflation measures, showing that we’re on track to see more of those in the months to come.
Regitze Ladekarl, FRM, is FRG’s Director of Company Intelligence. She has 25-plus years of experience where finance meets technology.
This article is part of the FRG Risk Report, published weekly on the FRG blog. To read other entries of the Risk Report, visit frgrisk.com/category/risk-report/.