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The economic prospects of the National Bank of Kuwait (BNK) followed the international economy over the past week. Following the global stock market rally in June, global equities continued to grow steadily in July, driven by US GDP growth in the second quarter of the year, at levels above consensus. Expectations and the continued expectation that major central banks will facilitate monetary policies – something that has already been done for the Federal Reserve.
In addition, benchmark yields generally fell, accelerating sharply in early August after US President Trump unexpectedly imposed additional tariffs on Chinese imports from September.
The Fed then cut interest rates for the first time in 10 years, especially since the global financial crisis, by reducing the target range of federal funds by 25 basis points from 2.00 to 2.25%. There is no doubt that the return of the trade dispute to the front of the stage again paves the way for further reductions in the coming period.
This is a precautionary measure given the risks to the global economy, including a slowdown in world trade and a drop in inflation below the 1.6% target. 39, one year on the other in June, according to the index of basic consumer spending.
Financial markets reacted negatively to interest rate cuts after two FOMC members opposed the move and voted against it. Federal Reserve Chairman Jerome Powell's comments that there was a "mid-cycle adjustment" and not the beginning of a broader cycle of policy easing . Cash
This comes as President Trump continues to pressure the Federal Reserve to take action to boost growth, saying Powell had "dropped" by avoiding higher interest rates in July. . News about the recent US rate hike on China has helped to bolster the downward trend in interest rates and return them to the spotlight, which has impacted prices. Futures markets according to the possibility of applying this measure at the next meeting of the Fed in September to 100%.
In general, GDP growth is expected to stabilize around 2% in the third quarter of 2019, which is slightly below its long-term trajectory. We estimate however that the risk of a severe slowdown is less, which reduces the chances that the Federal Reserve will adopt more aggressive easing policies, but this could increase as a result of the recent announcement. an increase in rates.
Slow growth of the euro economy
"Weak global demand continues to put pressure on the eurozone economy and heighten concerns about growth," the executive said. GDP growth slowed to stand at 0.2% q / q in the second quarter, compared to 0.4% in the first quarter, fearing that the German economy is headed for a recession. The German manufacturing PMI fell to its lowest level in seven years, reaching only 43.1 in July, due to weak export orders.
On the other hand, the eurozone labor market remains strong, with the unemployment rate falling to 7.5% in June, its lowest level in 11 years. However, the pace of the decline is at its lowest since October, indicating that the fallout from weak economic growth is expected to increase.
The ECB kept its monetary policy unchanged in July, as expected, but indicated that further easing measures could be introduced in the future in order to address the economic slowdown and continued weakness in the economy. ;inflation.
The bank said in its comments that interest rates would remain "at current or lower levels" until at least mid-2020, which means that the deposit rate could be reduced from the current level of -0, 4% at the next meeting in September, so come back to the program's badet purchase program.
Secession of the United Kingdom
In the United Kingdom, the former Foreign Minister and Mayor of London, Boris Johnson, was elected as Prime Minister and Prime Minister. This one was committed to separating the UK from the EU at all costs, even if the circumstances require a secession without agreement. The House of Commons rejected the agreement that had resulted in three times in negotiations with former Prime Minister Theresa May.
Johnson has put the removal of the Irish support clause as a precondition for further negotiations, which the EU has so far rejected. Johnson's options remain limited by unstable parliamentary balances due to groups opposed to his own party policy, which could eventually lead to the overthrow of the government and the imposition of general elections. The uncertainty surrounding the secession of the United Kingdom adds to the pressure on the pound sterling, falling 4% against the US dollar in July to its lowest level in more than two years, while GDP growth could remain stable in the second quarter. Year 2019.
In the event of a "no agreement" split, the Bank of England is expected to cut interest rates by 0.75%, while the government's budget introduced in early October could announce a mbadive relaxation of fiscal policies as well as funds already announced for preparation. The secession of the UK from the EU is "without agreement".
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