Overview
What We’re Watching Today is 1,562 words and a 10-minute read.
Global: Central bankers gather in Jackson Hole; charting the next stage in post-pandemic economic growth
Central bankers from the US and key economies are gathering for a week of meetings at the economic symposium, with expectations that the Fed will announce a rate cut.
Our Take: An announcement that the US Federal Reserve will back a rate cut has been highly anticipated, with economic indicators showing that inflation has been tamed and the economy is now on the pathway to more stable growth. Central bankers from around the world are looking for indicators on what Fed Chair Jerome Powell plans next. While the US is moving forward, many key economies are still in the doldrums, with sluggish growth, inflation better, but not yet below target levels and unemployment levels too high. Global markets are jittery, demonstrated by the August 5 sell off, following a disappointing jobs report that spurred investor fears that interest rates would not be cut and the US’s economy was headed toward a recession. Powell’s comments today on the rate of future easing could soothe the markets, or add to anxiety. Importantly, the US economy operates in the larger context of the global economy, and faces ongoing external pressures from rising geopolitical tensions and trade rebalancing, China’s economic slowdown, and global indebtedness. With risks of external shocks high, the Fed will carefully calibrate steps come September based on the current situation.
Read More: Associated Press, Brookings Institution
Europe: UK Prime Minister Starmer reaches out to Chinese President Xi to reset bilateral relationship for closer economic ties.
Newly elected UK Prime Minister Starmer spoke by phone with Chinese President Xi, advising the Chinese leader that his government would approach bilateral relations objectively and rationally, through frank discussions on disagreements as the two countries pursue closer economic ties.
Our Take: Bilateral relations between the UK and China have been increasingly troubled, with some ministers in the former Sunak government pressing to designate China as a national security threat after exposure of cyber-attacks against the UK Electoral Commission and UK politicians, which the government blamed on Beijing-linked hackers. While London has been studying policies (without reaching a decision) for restricting outbound investments in China to align with the US, it has parted with the EU by deciding against tariffs on Chinese EVs, at least for now, per Trade Secretary Jonathan Reynolds. Labour has promised to launch an “audit” of London’s relationship with China within its first 100 days. It is too soon to forecast what policies Labour will adopt, particular since there is a lack of consensus in the new cabinet. The US can be expected to continue to press for harder line trade policies, regardless who wins the White House in November.
Read More: Reuters, Politico, The Economist [paywall]
Middle East: Turmoil at Libya’s central bank could trigger renewed hostilities in war-torn country
Libya’s embattled central bank, the holder of the divided country’s purse strings, resumed operations earlier this week after briefly shutting down due to the kidnapping of a bank official. Simultaneously, the governor and board refused to comply with a ruling by western authorities to replace both bodies.
Our Take: The recent turmoil at the central bank – one of Libya’s last effective political institutions and among the only that bridges the east, controlled by warlord Khalifa Hifter and the west, controlled by a UN-appointed presidential council and Prime Minister Abdul Hamid Dbeiba – signals escalating discord threatening the country’s fragile equilibrium. The cessation of operations and refusal to honor an order replacing the governor and board reflects an anxiety within the central bank that western authorities are attempting to seize power in an attempted coup and cut Hifter out of precious gas revenues. Libya has been a tinderbox for over a decade, and increased tensions could easily tip both sides back into open conflict.
Read More: BBC, New York Times [paywall], Al-Monitor [paywall], Bloomberg [paywall]
Americas: Further work stoppages threatened in Canadian rail
Workers at Canadian National Railway voted to strike next week, a fresh threat to the Canadian (and regional) economy after this week’s strike by the other major Canadian rail company, Canadian Pacific Kansas City. The latter was ordered by the Canadian government to return to work on Thursday, but the order had yet to come into effect by Friday afternoon.
Our Take: Canadian rail stoppages threaten to upend Canada’s economy and crucial trade conduits to the US and Mexico, and a weeklong shutdown could have cause about $1 billion of economic losses related to goods like fertilizer, grains, and cars. The stoppages are the most recent addition supply chain chaos ongoing throughout the globe – including the Red Sea, where Houthi attacks have deterred ships, and the Panama Canal, where low water is limiting traffic.
Read More: Reuters, Reuters, New York Times [paywall]
Asia-Pacific: Taiwan’s president plans to visit frontline islands at center of dispute with China
Taiwan’s President Lai Ching-te is set to visit the sensitive Kinmen islands near the Chinese coast on Friday, marking his first trip there since taking office in May amid escalating tensions between Taipei and Beijing.
Our Take: President Lai’s visit to the Kinmen islands, a flashpoint in cross-strait tensions, underscores the fragile geopolitical balance in the Taiwan Strait, particularly with Lai’s pro-independence Democratic Progressive Party (DPP) in power in Taiwan. By marking the anniversary of a significant military clash with China, Lai is reinforcing Taiwan’s resolve against Beijing’s claims while highlighting the islands’ symbolic importance. The move risks escalating tensions with China, which has been hostile to the DPP during previous Taiwanese President Tsai Ing-wen’s tenure, and could respond with increased military pressure or economic coercion. Additionally, it could additionally complicate Taiwan’s relations with the United States and other regional partners such as Japan, potentially drawing them deeper into the conflict.
Read More: Reuters, Global Taiwan Institute
Africa: Aid trucks enter Darfur after Sudan’s army suspends delivery ban
Food deliveries have restarted in Sudan’s famine-threatened Darfur region after Sudanese authorities reopened a crucial border crossing that had been closed for six months amid the country’s ongoing civil war.
Our Take: The reopening of the Adre border crossing in Sudan, allowing vital food deliveries to reach famine-threatened Darfur, is a significant step in addressing the humanitarian crisis and may serve as a confidence-building measure in the ongoing civil war. By facilitating aid, Sudanese authorities demonstrate responsiveness to international pressure, which could pave the way for further negotiations and a potential lasting peace agreement. However, the temporary nature of this opening amid ongoing violence suggests that lasting peace remains uncertain, with the risk that humanitarian access could be used as a bargaining tool for the Sudanese military in this conflict.
Read More: CNN, Al Jazeera, Center for Strategic and International Studies
Trade and Compliance: India overtook China as top buyer of Russian oil in July
India became the world’s largest importer of Russian oil in July, surpassing China, as Chinese refiners reduced purchases due to lower profit margins from fuel production, according to import data comparisons.
Our Take: India’s emergence as the top importer of Russian oil signals a complex balancing act of New Delhi’s political and economic priorities. While India’s deepening energy ties with Russia threaten to strain its growing partnership with the United States, it also highlights India’s growing influence as a global energy player relative to China. This development highlights the complication with US efforts to isolate Russia’s economy while balancing ties with emerging partners such as India that decline to follow suit. Nonetheless, it also positions India as a crucial player in shaping global energy markets, potentially enhancing its strategic leverage in international affairs.
Read More: Reuters, The Economist [paywall], East Asia Forum
ESG: Australia passes landmark climate reporting law
Australia’s senate passed a bill for the first time requiring standardized climate reporting by large Australian companies, both listed and unlisted. The Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 also requires companies to provide climate resilience assessments under both 1.5°C and 2.5°C warming scenarios.
Our Take: Australia is following Europe in imposing sweeping climate reporting standards, and its requirement for climate resilience assessments in two warming scenarios is an innovative standard that dovetails with requirements for climate strategies. Additionally, the rule goes further by extending reporting requirements to individual investors with large portfolios as well as corporate entities. The resulting law is a uniquely far-reaching standard that could serve as a model for future reporting throughout other countries developing sustainability requirements.
