Edmond de Rothschild – Weekly Economic Insights – 21 October 2019 – Fed China – Focus – Global food demand


Our economic and financial analysis of the week’s events (p.2)

 In China, annual GDP growth slowed from 6.2% to 6.0% in Q3, despite the stimulus plan  This is notably explained, according to our analysis, by the fact that the stimulus measures mainly target the private sector…

 … and in a context of a sharp slowdown in exports and persisting uncertainties linked to the trade war, as well as lacklustre domestic demand, their effectiveness is limited

 As a result, although the ongoing China-US negotiations may, at times, reassure international investors…

 … their very limited progress should be insufficient to spontaneously boost growth

 The stabilising of the Chinese economy and, therefore, of emerging economies, would depend on additional measures implemented by the authorities, according to our analysis

 While the Chinese central bank should continue to be at the manoeuvre, a stronger increase in public investment, notably in infrastructure, would be necessary

 In the United States, as we were expecting, the Fed announced that it was resuming its balance sheet expansion starting from 15 October and through Q2 2020, at least

 To do this, it will purchase Treasury bills, at a monthly pace of USD60 billion

 While the Fed’s objective is to alleviate the upwards pressure on US short-term rates…

 … the monthly amount of its purchases is substantial and should support the acceleration in global liquidity in H2 2019 and, especially, in H1 2020 Focus

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