Warsh Makes Debut on the Global Stage With the Class of 2008
(Bloomberg) — Kevin Warsh and three other veterans of the 2008 global financial crisis will share a stage this week as the danger of renewed turmoil continues to haunt central bankers.
The Federal Reserve chief’s debut public appearance outside the US since taking office in May will be on Wednesday at the European Central Bank’s annual symposium in Portugal, alongside President Christine Lagarde and fellow protagonists of that market emergency.
Aside from hints on interest rates, the policy panel on Wednesday will be scrutinized for any contrast in chemistry with the arrival of Warsh, who just chaired his first monetary decision after being appointed by President Donald Trump.
Last year in Sintra, his predecessor Jerome Powell was given a standing ovation, and then repeatedly heaped with praise for standing firm while enduring attacks by the US president.
Questions over financial stability, not least linked to the artificial-intelligence boom, will be another theme at the symposium that is set to loom ominously in the background.
Just days ago, Bank of Canada Governor Tiff Macklem cautioned that over-investment in the US “is setting the stage for a painful correction.” Last month, the ECB issued similar warnings about risks of market turmoil in its bi-annual assessment.
Each of the four central-bank chiefs on Wednesday’s panel has memories of what can go wrong. In 2008, Macklem was at the finance ministry in Ottawa, attending meetings from the Group of Seven to the Financial Stability Board. Governor Andrew Bailey, as a Bank of England official, engineered bank rescues, while Lagarde was France’s finance minister at the time.
Warsh himself was a Fed governor who played a central role in helping design the government’s massive infusion of capital to the nine largest US banks in the fall of 2008.
What Bloomberg Economics Says:
“With Warsh making his first appearance as Fed chair alongside Lagarde, Bailey and Macklem, the debate is likely to extend well beyond inflation, focusing on how central banks can foster innovation while navigating a new landscape of geopolitical uncertainty and AI-related financial stability risks.”
—Simona Delle Chiaie, chief euro-area economist. For full analysis, click here
Central bankers in Sintra this week may also take a moment to mourn one of their number, following the recent death of another former Fed chair — Alan Greenspan — whose 18-year tenure was overshadowed by the 2008 crisis.
Elsewhere, the Bank for International Settlements annual meeting, US jobs data, inflation readings across Asia and in the euro area and a likely rate hike in Colombia will focus investors.
Click here for what happened last week and below is our wrap of what is coming up in the global economy.
US and Canada
In the US, the main event in a holiday-shortened week will be the monthly jobs report out on Thursday. Economists expect it to show another 115,000 workers were added to payrolls in June, which would mark the best six-month stretch for hiring in almost two years.
Along with an expected uptick in wage growth and ongoing stability in the unemployment rate, the figures will almost certainly reinforce bets in financial markets that the Fed’s next move is more likely to be a rate hike than a cut.
The week’s calendar also features the usual burst of other labor data that opens each month: a government report on job openings Tuesday covering the month of May, followed Wednesday by the private-sector payroll processing firm ADP Research’s monthly count of employment in June and the latest tally on announced job cuts from the outplacement firm Challenger, Gray & Christmas Inc.
Other releases worth watching include the Conference Board’s consumer confidence report on Tuesday and the Institute for Supply Management’s latest survey of purchasing managers on Wednesday, which will likely show manufacturing activity remained solid in June.
Aside from Warsh, there likely won’t be much Fedspeak ahead of the July 4 holiday.
For more, read Bloomberg Economics’ full Week Ahead for the US Canada’s industry-based GDP likely rose 0.4% in April, driven by stronger oil and gas extraction and manufacturing output. A flash estimate for May is also expected to point to continued momentum, supported by a pickup in both the labor market and real estate activity. Altogether, the data should suggest a rebound in the second quarter following two consecutive quarterly contractions.
Trade ministers from Canada, the US and Mexico will meet virtually on July 1 to formally launch the mandated review of their trilateral trade deal, as uncertainty looms over its future.
Asia
It’s PMI week in Asia. June data due Tuesday are expected to show that China’s official manufacturing PMI gauge nudged into expansionary territory after sliding to the boom-or-bust 50 level in May.
The RatingDog gauge a day later may continue to outperform the official index with its emphasis on private-sector activity.
On Wednesday, PMI reports will be published for Indonesia, Malaysia, the Philippines, Thailand, Taiwan, Vietnam and South Korea — where the reading rose to the highest in about five years in May on the back of booming AI activity.
The Bank of Japan releases its quarterly Tankan survey of business sentiment on Wednesday, with economists expecting gauges to hold more or less steady in positive territory.
They also see companies boosting their capital spending forecasts for this fiscal year to 10.9% growth. If the results are in line with estimates, they would keep the BOJ on track for another rate hike in coming months.
Inflation updates are due from Indonesia, South Korea, Pakistan, Sri Lanka and Vietnam. New Zealand releases June sentiment indexes for businesses and consumers, and trade figures are due during the week from Indonesia, Pakistan, Australia, South Korea, Thailand, the Philippines, Vietnam and Sri Lanka.
On the policy front, Reserve Bank of Australia Assistant Governor Christopher Kent, who oversees financial markets, will deliver a speech on Monday morning titled “Additional Monetary Policy Tools: Reflections and a New Framework.”
For more, read Bloomberg Economics’ full Week Ahead for Asia Europe, Middle East, Africa
ECB policymakers spending much of the week in Sintra will have key data releases to chew over throughout the region, with the last euro-area inflation estimate before their July decision scheduled for release on Wednesday.
That headline number is predicted to have slowed for the first time since the outbreak of the Iran war, reflecting weakening throughout much of the region.
Spain’s result on Monday, and those of Germany and France on Tuesday may show similar downticks, while Italy’s the same day is seen holding steady. France and Spain will then release industrial production on Friday.
Inflation comes out in neighboring Switzerland on Thursday. Price growth there remains well within the Swiss National Bank’s 0-2% range, and may even have slowed to 0.5% in June.
One significant pressure containing inflation there is the strength of the franc. Data on Tuesday will reveal how much of the currency the SNB sold in the first quarter, the final month of which featured officials’ increased willingness to make interventions because of haven inflows caused by the Iran war.
In the UK, investors may focus most on emerging details of the likely economic policy of the Andy Burnham, the likely prime minister-in-waiting now that Keir Starmer has resigned.
Data there include mortgages approvals on Monday and a final take of first-quarter gross domestic product the following day, with assessments of the country’s savings ratio due then too.
BOE officials will also be out in force. Aside from Bailey’s Sintra appearance, he’s set to turn up at another major conference on Friday in the southern French city of Aix-en-Provence, where Lagarde and other ECB colleagues will also be present.
South Africa’s Bureau for Economic Research will release second-quarter inflation expectations on Tuesday. The central bank uses the two-year-ahead measure to inform decisions. The survey is anticipated to show expectations drifting away from the 3% target.
In Turkey on Friday, annual inflation is forecast to have resumed its downward trajectory in June after briefly accelerating in the wake of the Iran war. The data will be a key factor in the central bank’s decision next month, after policymakers were forced to interrupt the easing cycle to contain war-driven risks.
It’s a sparse week for central-bank decisions. Ethiopia on Tuesday and Tanzania on Thursday may leave rates on hold at 15% and 5.75%, respectively, as they assess the impact lower oil prices on their inflation forecasts.
For more, read Bloomberg Economics’ full Week Ahead for EMEA Latin America
Fresh off a presidential election won by right-wing candidate Abelardo de la Espriella, Colombia’s central bank is expected to hike rates a half percentage point to 11.75% on Tuesday.
The future of the monetary authority’s independence served as a major focus for investors in the election, especially after policymakers surprisingly halted a series of increases in April amid intense pressure from outgoing leftist leader Gustavo Petro. Now markets are closely monitoring statements from the incoming administration, especially the naming of cabinet ministers.
Colombia will publish May unemployment data earlier that day, with the urban rate expected to tick up to 8.9%. The central bank issues minutes of its rate decision Friday evening.
Elsewhere in the region, Argentina will publish economic activity data for April on Monday, a week after its first quarter GDP reading beat forecasts. Chile is set to release economic activity data for May on Wednesday, a day after publishing retail sales, industrial production and copper production totals for the same month.
Brazil, meanwhile, is set to publish a litany of economic data for May, including primary budget balance figures and formal job creation totals on Tuesday, household credit stats Wednesday and industrial production prints Friday.
Those releases will take place against the backdrop of President Luiz Inacio Lula da Silva’s efforts to stimulate growth ahead of October’s election, and as the central bank keeps a close eye on the economy as it weighs the future of a cautious monetary easing campaign.
Peru will publish June inflation Wednesday, while Uruguay’s central bank will have its rate decision after holding steady at 5.75% at its previous meeting.
For more, read Bloomberg Economics’ full Week Ahead for Latin America –With assistance from Brian Fowler, Laura Dhillon Kane, Monique Vanek, Travis Waldron, Mark Evans, Reade Pickert, Mirette Magdy, Christopher Condon and Matthew Boesler.
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