Desmond Lachman on US monetary policy, Danae Kyriakopoulou on Banxico independence and more

OMFIF Update  – Week 5 2019

28 January-1 February 2019 Vol.10 Ed.5

REPORT 

The rise of central bank gold demand
Since the 2008 financial crisis there has been renewed interest in gold’s unique characteristics as a safe haven asset that is nobody’s liability.

This, combined with scepticism over prospects for some of the main reserve currencies, as well as heightened geopolitical risks, has amplified gold’s appeal.

Read more.

COMMENTARY 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, writes Joergen Oerstroem Moeller. In the probable case of no concessions being agreed with the EU, she must stand firm on her deal and push the hard-core Brexiteers in her party against the wall. Read more. PODCAST The breakdown of global free trade Harold James, professor of history and international affairs at Princeton, and Bob Koopman, chief economist at the World Trade Organisation, join OMFIF’s Pierre Ortlieb. They discuss the state of globalisation, including whether it is reversible, how it is shaped by large firms, and how it interacts with technology. Listen. NEWS Nationalism threat to past US efforts In a speech at an OMFIF roundtable in London, Mark Sobel, former deputy assistant secretary for international monetary and financial policy at the US Treasury, highlighted how nationalism and protectionism could threaten global confidence in the US and past diplomatic efforts to promote a strong world economy. Read more. MEETING CCE and normalising monetary policy  Boris Vujčić, governor of the National Bank of Croatia, will discuss central bank preparedness across central and eastern Europe for monetary ‘normalisation’ and a potential slowdown in the global economy. As Croatia moves towards the euro, the governor will assess prospects for further economic integration. Read more. COMMENTARY Powell should ease US monetary policy In 2017, a key mistake of the Federal Reserve under Janet Yellen was to keep monetary policy too loose despite a strong increase in US stock prices. Hopefully Jay Powell does not make that mistake in reverse by keeping policy unnecessarily tight despite a fall in US equities, writes Desmond Lachman. Read more. MEETING Europe’s response to the economic downturn Amid a slowing German economy, Brexit woes, and a global climate of uncertainty with developments in China and the US, Mahmood Pradhan, deputy director of the International Monetary Fund’s European department, will discuss the weak economic outlook and policy constraints for the euro area. Read more. COMMENTARY Banxico independence faces scrutiny Tensions are mounting between Mexican President Andrés López Obrador and the central bank, writes Danae Kyriakopoulou. His decision to cut his salary indirectly affects other top civil servants, including at the Banco de México, as the constitution stipulates no public official can earn more than the president. Read more. NEWS ‘Policy mix wrong for US,’ says Sobel Speaking to CNBC about the Federal Reserve and US economy, Mark Sobel, OMFIF’s US chairman, said now ‘is not the time to add substantial stimulus or increase in the deficit,’ adding that recent decisions have put ‘substantial pressure on financial markets, and I think this is the wrong policy mix for America.’ Watch. MEETING Global currencies in emerging markets As the Federal Reserve raises rates, the global impact of the dollar’s position can be seen to crystalise in emerging economies like Turkey. Steve Hanke, professor of applied economics at Johns Hopkins University, will discuss the effects of US monetary policy on emerging markets and the role of global currencies. Read more.