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“Smart Money: How digital currencies will win the New Cold War - and why the West needs to act now”, the book Brunello Rosa has written with Casey Larsen for Bloomsbury Publishing, will be available in all major bookshops from October 24th, 2024.
This book discusses the fundamental theme of the “geopolitics of central bank digital currencies” in a non-technical manner, and is aimed at the general public. It does not shy away from discussing their most controversial implications, including the risks to privacy, the stability of the banking system as we know it, or the re-organisation of the global financial architecture around these new instruments.
Go to the book's webpage on brunellorosa.com
In their latest podcast Brunello Rosa and Manas Chawla discuss the key takeaways from the latest IMF Meetings.
1 November 2024
In their latest podcast Brunello Rosa and Manas Chawla discuss how the US political polarisation is hitting the digital asset space.
25 October 2024
In their latest podcast Brunello Rosa and Manas Chawla discuss why China still needs to provide more fiscal and monetary stimulus to avert deflation
21 October 2024
In their latest podcast Brunello Rosa and Manas Chawla discuss the “bipolar” behaviour exhibited by markets in the last few weeks.
11 October 2024
In their latest podcast Brunello Rosa and Manas Chawla discuss the two conflicts in Ukraine and the Middle East continue, with no end in sight.
4 October 2024
In their latest podcast Brunello Rosa and Manas Chawla discuss why the election in Brandenburg confirmed the AfD’s rise in East Germany
27 September 2024
In their latest podcast Brunello Rosa and Manas Chawla discuss how the Harris-Trump TV debate has re-opened the race for the White House.
20 September 2024
In their latest podcast Brunello Rosa and Manas Chawla discuss why the Cold War between US and China is intensifying.
13 September 2024
In their latest podcast Brunello Rosa and Manas Chawla discuss the difference between defending the “freedom of speech” and spreading misinformation.
6 September 2024
In their latest podcast Brunello Rosa and Manas Chawla discuss why the Israel-Hezbollah military exchanges re-open the risk of a further extension to the conflict in the Middle East
30 August 2024
In their latest podcast Brunello Rosa and Manas Chawla discuss why the US Presidential race will remain heated until the very last minute.
23 August 2024
In their latest podcast Brunello Rosa and Manas Chawla discuss why the recent market rout masks a healthy repricing of valuations
16 August 2024
In June 2023, Rosa & Roubini Associates has been recognised for the second consecutive year as the best independent macroeconomic research & advisory firm by Corporate Vision Magazine
R&R provides independent research on the global economy
R&R provides independent advice on global issues
by Brunello Rosa
28 October 2024
The IMF-World Bank meetings took place in Washington D.C. last week. As usual, this was an occasion to revisit the outlook for growth and inflation at the global level, and to re-evaluate the policy paths chosen by many countries. The updated forecasts for the global economy are reported in the latest edition of the World Economic Outlook (WEO). As the IMF Chief Economist wrote in his blog, they show that “the global economy remained unusually resilient throughout the disinflationary process. Growth is projected to hold steady at 3.2 percent in 2024 and 2025,” while “some low-income and developing economies have seen sizable downside growth revisions, often tied to intensifying conflicts.”
When looking at specific countries or regions, US GDP growth is expected to remain “strong, at 2.8 percent this year, but will revert toward its potential in 2025.” In the Eurozone, “a modest growth rebound is expected next year, with output approaching potential.” In emerging markets and developing economies, the growth outlook remains positive, “around 4.2 percent this year and next, with continued robust performance from emerging Asia.”
While labour markets have shown remarkable resilience, with unemployment rates at or close to their lowest levels of recent decades, according to the IMF the battle against inflation has been “largely won, even if price pressures persist in some countries”. After peaking at 9.4% in Q3 2022, headline inflation is now expected to fall to 3.5% by the end of 2025; i.e., “slightly below the average during the two decades before the pandemic. In most countries, inflation is now hovering close to central bank targets, paving the way for monetary easing across major central banks.”
This is where the IMF requires countries to make a triple policy pivot. First, with inflation falling, central banks have no reason to continue keeping rates as high as they have been in the last couple of years.
For this reason, the ECB has already cut rates in June, September and even October (which in September seemed not to be a “live meeting”). The Fed too has cut rates once, in September, surprising the market with a 50bps cut, when the market had been expecting a 25bps reduction. Among the largest advanced economies, the BoE also cut rates, in August 2024, and is expected to follow suit in November.
As monetary policy becomes easier, governments should start a process of gradual fiscal consolidation, to reduce the large fiscal deficits and public debts accumulated during the pandemic and the initial phases of Russia’s aggression against Ukraine. It is remarkable how investors are not worried by the increasing fiscal deficit of the US (the third largest in history), and by its public debt, which has reached the astronomical figure of USD 35tn, or 124% of GDP.
As the IMF says, “the third pivot—and the hardest—is toward growth-enhancing reforms,” centred around the common goal of “enhancing productivity, as this is the only way we can address the many challenges we face: rebuilding fiscal buffers; coping with aging and shrinking populations in many parts of the world; tackling the climate transition; increasing resilience, and improving the lives of the most vulnerable, within and across countries.” This would be the time to implement those reforms, as growth is still acceptable, the unemployment rate is low, and inflation is under control. But the political economy of structural reforms remains complicated: it is very hard to find any elected politician willing to impose a sacrifice today, which will bear fruits only many years later, when he or she will no longer be in power.
The IMF has made predictions and policy recommendations ahead of the defining moment of this year, the US election, which was at the centre of every discussion during the meetings. While Harris would guarantee a higher degree of policy continuity, Trump is likely to be severely disruptive again. But we will discuss the effects of a Trump presidency only if this event materialises.
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by Nathan Ali
30 October 2024
by Brunello Rosa and Nato Balavadze
31 October 2024
by Brunello Rosa
22 October 2024
by Nathan Ali
24 October 2024
Week: 28 October - 3 November
The Week Ahead: QoQ GDP To Increase In US, EZ, France And Italy, While Contracting In Germany; Headline Inflation To Rise In EZ
In the US, in Q3, according to the advance estimate, GDP growth rate is seen increasing by 3.0% q-o-q (p: 3.0%). In October, unemployment is likely to remain at 4.1%. NFPs are expected to rise by 140K (p: 254K). In October, S&P Global Manufacturing PMI is seen increasing to 47.8 (p: 47.3).
In the EZ, in Q3, according to the flash estimates, the economy is likely to advance by 0.2% q-o-q (p: 0.2%) and 0.8% y-o-y (p: 0.6%). In October, consumer confidence is seen rising slightly to 96.4 (p: 96.2). In October, headline inflation is seen rising to 1.9% y-o-y (p: 1.7%), whereas core inflation is expected to remain at 2.7% y-o-y. In September, the unemployment rate is likely to stay unchanged at 6.4%.
Among the largest EZ economies, in Q3, the GDP growth rate is expected to: i) increase by 0.4% q-o-q (p: 0.2%) in France; ii) contract by 0.1% q-o-q (p: -0.1%) and 0.3% y-o-y (p: 0.0%) in Germany; and iii) advance by 0.3% q-o-q (p: 0.2%) and 0.7% y-o-y (p: 0.9%) in Italy. In October, headline inflation rate is likely to: i) rise by 1.8% y-o-y (p: 1.6%) in Germany; ii) ease off too 1.0% y-o-y (p: 1.1%) in France.
In the UK, in October, S&P Global Manufacturing PMI is seen declining to 50.3 (p: 51.5).
The Quarter Ahead: Trump's Proposal To Replace Income Taxes With Tariffs; Iran-Israel Military Exchange
Trump reaffirmed his proposal to replace income taxes with tariffs. In an interview with Joe Rogan, Trump also suggested scrapping income taxes on tips, overtime pay, and Social Security benefits, alongside implementing a sweeping universal tariff on all imports. However, tax experts and economists doubt that tariffs alone could offset the trillions in revenue lost from eliminating income taxes.
Iran-Israel Israel launched strikes on Iran, targeting military sites in response to recent missile attacks. Iran reported four casualties and limited damage, while affirming its right to self-defense. Biden urged Israel to avoid escalation, as global leaders push for restraint. In Gaza, Israel detained staff at Kamal Adwan Hospital, drawing UN criticism for actions against civilians.
Real Economy: PMIs Decreased In UK, While Increased In EZ And US; Consumer Sentiment Increased In US
In the US, in October, S&P Global Manufacturing and Services PMIs increased to 47.8 (c: 47.5; p: 47.3) and 55.3 (c: 55; p: 55.2). Composite PMI edged up to 54.3 (p: 54.0). In October, Michigan consumer sentiment rose to 70.5 (c: 69.0; p: 70.1).
In the EZ, in October, HCOB Manufacturing PMI rose to 45.9 (c: 45.3; p: 45.0), whereas Services PMI declined to 51.2 (c: 51.5; p: 51.4). Composite PMI increased slightly to 49.7 (c: 49.8; p: 49.6). In October, consumer confidence rose to -12.5 (c: -12.5; p: -12.9).
In the UK, in October, S&P Global Manufacturing and Services PMIs decreased to 50.3 (c: 51.4; p: 51.5) and 51.8 (c: 52.4; p: 52.4). Composite PMI edged down to 51.7 (c: 52.6; p: 52.6). In October Gfk Consumer Confidence fell to -21 (c: -21; p: -20).
Financial Markets: Stock Prices Decreased; UST Yields Edged Up; Dollar, Oil And Gold Prices Increased
Market Drivers: Stocks pulled back from record highs after six weeks of gains, as rising Treasury yields and high valuations kept investors cautious ahead of major earnings reports. Key reasons for UST yields rise include Fed caution and uncertainty around the US presidential elections. Major European stock indexes also down amid expectations of slower Fed rate cuts.
Global Equities: Decreased w-o-w (MSCI ACWI, -1.3%, to 845.49). The US S&P 500 index declined (-0.9% w-o-w, to 5,808.12). In the EZ, share prices decreased (Eurostoxx 50, -0.9% w-o-w, to 4,942.65). In EMs, equity decreased (MSCI EMs, -1.8%, to 1,134.88). Volatility decreased rose to 19.90 (VIX S&P 500, 52w avg.: 15.6; 10y avg.: 18.8).
Fixed Income: w-o-w, the 10-year US Treasury yields rose (+15 bps to 4.23%). The 2-year US Treasury yields increased (+16 bps to 4.11%). The German 10-year bund yields edged up (+11 bps to 2.29%).
FX: w-o-w, the US Dollar Index increased (DXY, +0.8%, to 104.26;EUR/USD -0.7%, to 1.08). In EMs, currencies declined (MSCI EM Currency Index, -0.2% w-o-w, to 1,762.80).
Commodities: w-o-w, oil prices increased (Brent, +4.1% to 76.05 USD/b). Gold prices increased w-o-w (+0.9% to 2,754.60 USD/Oz).
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