EcoWeek of 11 January 2019
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    Fed chairman Powell has recently emphasized that the FOMC will be patient given the muted inflation reading and that it is ready to shift the policy stance swiftly if required. He also considers that financial markets are pricing in downside risks well ahead of the data. This means that they are too pessimistic on growth. Professional forecasters' estimates of the probability of entering into recession in the coming quarters do not display the typical pre-recession dynamics either.
    For Germany, 2019 started with a hangover. Most indicators that we follow are below their long-term average and all surprised on the downside. In particular, the export-oriented manufacturing sector has been badly affected.
    EcoWeek of 04 January 2019
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    The big correction of US equity markets since the end of September reflects increased investor concern about the growth outlook. The data for the 4th quarter nevertheless point towards ongoing sustained growth. Data released since the start of the year provide conflicting signals with a big decline in the ISM manufacturing index and a strong increase in non-farm payrolls. Uncertainty about US-Chinese trade remains a key factor weighing on business sentiment.
    The vast majority of the indicators remain above their long term average, with inflation and the core personal consumption expenditures deflator being notorious exceptions. Compared to consensus expectations the picture is mixed.
    EcoWeek of 21 December 2018
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    The new projections of the FOMC show a downward revision to growth in 2019, a slower pace of Fed tightening and a lower cyclical peak level of the federal funds rate. Lower bond yields, a weaker dollar and a global decline in equity markets show that investors are in the grip of a growth scare. This is also echoed in a survey of US CFOs but this is at odds with the outlook for the drivers of economic growth. Growth worries probably reflect a focus on tail risk (rather than on the mean forecast) which may be explained by rising uncertainty.
    After stabilizing between July and September, the credit impulse declined in October, still reflecting an acceleration of loans to the private sector on a year-on-year basis, but less buoyant.

On the Same Theme

The decline of commodity prices: A matter of concern? 12/7/2018
Oil and metals prices are down significantly this year. For oil this seems to be predominantly driven by supply factors. The decline of metal prices probably reflects the softening of global growth. There is a clear negative relationship between oil price changes and subsequent US real GDP growth. US growth is expected to face a number of headwinds in 2019 but the decline of the price of oil should act as a tailwind.
The strange debate about central bank independence 11/23/2018
Is central bank independence under threat? The question may seem strange. After all, central bank independence has been instrumental in bringing down inflation and inflation expectations in the 80s and 90s.
COP24 should preserve the Paris climate deal 11/21/2018
The COP24 (Conference of the Parties) will take place from 3 to 14 December in the Polish city of Katowice. Aim of the meeting is to make progress on the implantation of the Paris climate deal. CO2 emissions have to be cut by about 20% by 2030 from 2010 levels and reach net zero around 2075 in order to limit global warming below 2°C over pre-industrial times. Yet, they are still trending higher. Certainly, they have somewhat declined since 2000 in the OECD, as production has become less CO2 intensive. By contrast, emissions are growing rapidly in the developing world because of industrialisation and the catching up process. In the BRIICS - Brazil, Russia, India, Indonesia, China and South Africa, CO2 emissions per capita have almost doubled since 2000.  Limiting or, a fortiori, reversing this trend requires much efforts and cooperation. The advanced economies should help the developing countries in climate adaptation and mitigation policies. They have already agreed to jointly mobilise USD 100 billion per year by 2020.
An effective upper bound to QE? 11/16/2018
The balance sheet of the Bank of Japan is now equivalent to the country’s GDP, yet inflation remains stubbornly low compared to the official target. Years of quantitative easing have caused distortions in equity markets and weighed on liquidity in the market for JGBs. There is concern that the marginal effect of BoJ purchases will wane, leading to an effective upper bound to QE. If this were to be the case, the relevance would go well beyond Japan and cause doubts about the effectiveness of more QE in case of a new downturn. 
Uncertainty on the rise 11/9/2018
Fluctuations in uncertainty can have a considerable impact on economic growth via their influence on confidence of households and corporates about the future as well as on the cost of financing. Uncertainty is not directly observable so proxies are used.
How market volatility weighs on growth 11/8/2018
Based on historical experience, the recent increase in equity volatility may end up weighing on future growth.
Green Finance: origins and perspectives 11/1/2018
First episode of three dedicated to Green Finance. Since the end of the 70's, we have been talking about the climatic consequences of economic development. How does finance respond to the needs of a more sustainable development? In this first episode, William De Vijlder, the chief economist of BNP Paribas, reviews the definition, origins and perspectives of green finance. Interview conducted with François Doux.
Green Finance: 3 growth scenarios 11/1/2018
Second episode of the series of three dedicated to Green finance. Green finance is a vehicle for financing the investments needed for sustainable economic development. Is climate change an opportunity or a risk for growth?  In this episode, William De Vijlder, discusses three scenarios and talks about the ambitions of economic policy that begins to take into account growth objectives respectful of the environment. Interview conducted with François Doux.
Green Finance: how to influence behaviors? 11/1/2018
Last episode of the series of three podcasts devoted to green finance. Responsible finance gives sense to our investments. How to influence stakeholders (households, businesses, markets finances, public authorities) and adapt our behavior? William De Vijlder reviews possible solutions and recommends a proactive approach in which everyone integrates the reality of climate change into their decisions, including with respect to financial investments. Interview conducted with François Doux.
Softer growth amid increased uncertainty 10/18/2018
Growth has eased during the course of this year with the US being the major exception largely thanks to fiscal stimulus. The ensuing cyclical desynchronization has caused a broad-based appreciation of the US dollar, in particular versus emerging currencies. In some cases (Argentina, Turkey), the depreciation has been considerable due to country-specific developments. Global growth should continue to ease further next year and lead to a certain resynchronization: the impact of the US fiscal boost will wane, Fed tightening should start to have an effect and corporate investment is expected to slow, which in turn should weigh on world trade growth. Even in the absence of additional tariff increases, fears of more tit-for-tat measures could sap business confidence.

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