Internationally: June 12 - 16, 2017
Moody’s Investors Service warned this week that the minority government resulting from the UK’s recent snap election further complicates Brexit negotiations with the EU. The latest political developments are a credit negative, and the government will likely be forced to put fiscal deficit cuts on hold, the agency said. Meanwhile, inflation remains a major concern for Bank of England policymakers after consumer prices rose 2.9% versus a year ago, the fastest pace in nearly four years. Markets were caught by surprise as three of the eight-members on the Monetary Policy Committee voted to raise interest rates this week in order to rein in inflation. London’s financial community had expected to hear from Chancellor of the Exchequer Phillip Hammond and Bank of England governor Mark Carney late in the week, but both cancelled scheduled speeches out of respect for those killed and injured in the Grenfell Tower apartment building fire. Hammond was expected to make the case for a Brexit that suits the needs of British business. Prime Minister Theresa May remains in the political hot seat after losing her party’s majority in last week’s general election, telling members of her Conservative Party that she got them into this mess and that she will get them out.
French president Emmanuel Macron’s Republic on the Move party won a significant majority in the National Assembly (France’s lower house) potentially giving him the ability to push through needed, but previously unpopular, reforms.
Greece’s creditors reached another deal to release a further round of funding to keep the country afloat. The lifeline did not include an agreement to cut Greece’s debt load, as had been hoped, postponing discussions on that matter until August 2018. Under the terms of the deal, Greece will be granted access to an additional €8.5 billion, though its debt remains excluded from the ECB’s asset purchase program. Greek unemployment stands at 23%, and the Greek economy has shrunk 27% since 2008, according to the Organization for Economic Cooperation and Development.
The IMF (International Monetary Fund) raised its GDP forecast for China to 6.7% in 2017, up from its prior 6.6% projection. This is the fund’s second increased outlook. China should embrace reform while growth is strong, the IMF said, since buffers are sufficient to ease the transition and to avoid sharp adjustments down the road.
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