U.S. President Donald Trump’s economic policies risk creating growth that mostly benefits the rich and aggravates income inequality in the United States, Nobel Prize-winning economist Angus Deaton said.
Trump was swept to power on promises of help for poorer Americans but Deaton said his proposals to roll back regulations on finance and industry and cut healthcare benefits would mostly help corporate groups with political influence.
Trump’s plans to cut taxes and raise trade barriers, if enacted, might give a short-term income boost to some workers but would not deliver the long-term growth that is essential for mitigating the effects of inequality, he said in an interview.
“I don’t think any of it is good” for addressing income inequality, said Deaton, a Princeton University professor, who won the Nobel Prize for economics in 2015 for his work on poverty, welfare and consumption.
He was speaking on Friday after addressing a meeting in Italy of finance ministers and central bankers from rich nations at which inequality topped the official agenda.
The political shocks in 2016 of Trump’s U.S. presidential election victory and Britain’s Brexit vote have been linked to widespread dissatisfaction with stagnant living standards for many workers, forcing policymakers in many countries to grapple with ways to narrow the gap between the rich and poor.
Income inequality has grown sharply in the United States over recent decades and the World Bank says that at a global level the gap has widened too since the 1990s, despite progress recently in some countries.
The Trump administration says it will lift U.S. economic growth to more than 3 percent a year and bring more manufacturing jobs back to U.S. shores, helping workers.
But many economists say growth like that will be hard to achieve with employment already high and the baby boom generation retiring in large numbers too.
Deaton said restoring stronger economic growth, preferably through encouraging more innovation, would help reduce the anger among many people who feel they have been left behind.
“A rising inequality that probably wouldn’t have bothered people before does become really salient and troublesome to them (during periods of low growth). It poisons politics too because when there are no spoils to hand out it becomes a very sharp conflict,” he said.
Deaton said he did not think inequality was inherently bad as long as everyone felt some benefit from growth.
“But I do care about people getting rich at public expense,” he said, referring to political lobbying by business groups.
Source: Reuters (Writing by William Schomberg; Editing by Ros Russell)
The United States said on Saturday the world’s other rich economies were getting used to the policy plans of President Donald Trump, but Europe and Japan showed they remained worried about Washington’s shift.
Officials from the Group of Seven nations met in southern Italy hoping to hear more about Trump’s plans which they fear will revive protectionism and set back the global approach to issues such as banking reform and climate change.
U.S. Treasury Secretary Steven Mnuchin said the United States reserved the right to be protectionist if it thought trade was not free or fair.
“We do not want to be protectionist but we reserve our right to be protectionist to the extent that we believe trade is not free and fair… Our approach is for more balanced trade, and people have heard that,” Mnuchin told reporters at the end of the two-day meeting.
“And as I say, people are more comfortable today, now that they’ve had the opportunity to spend time with me and listen to the president and hear our economic message.”
Other ministers from the G7 countries made it clear they did not share his view.
“All the six others … said explicitly, and sometimes very directly, to the representatives of the U.S. administration that it is absolutely necessary to continue with the same spirit of international cooperation,” French Finance Minister Michel Sapin told reporters.
Bank of France Governor Francois Villeroy de Galhau said there was a “light breeze” of optimism within the G7 about the recovering global economy after years of sluggish growth following the financial crisis that began nearly a decade ago.
But he said the continued uncertainty about the direction of U.S. policy represented a risk, echoing comments made on Friday by Japanese Finance Minister Taro Aso.
“We must not backpedal on free trade as it has contributed to economic prosperity,” Aso said.
European G7 officials complain that no-one knows what the United States understands by “fair trade” and that the only way to establish fairness was by sticking to the rules of the World Trade Organisation – a multilateral framework.
They also say the U.S. demand to balance trade bilaterally was not economically sound, because trade deficits and surpluses could only be analysed in a global context.
A senior Japanese finance ministry official said on Saturday uncertainties remained over how quickly the U.S. Federal Reserve would raise interest rates, but the biggest question mark was over possible U.S. tax cuts that could fire up an already recovering U.S. economy.
Trump has proposed slashing the U.S. corporate income tax rate and offer multinational businesses a steep tax break on overseas profits brought back home.
He dropped, however, a controversial proposal of a “border-adjustment” tax on imports as a way to offset revenue losses resulting from tax cuts.
The tax reform plans were also questioned by some European officials. “I am not so sure that with an economy already at full employment and working at full speed a fiscal stimulus would add a lot,” European Commissioner for Economic and Financial Affairs Pierre Moscovici told reporters.
“(But) we avoided some discussions which would have been more damaging, like the border adjustment tax, which is no longer on the table at this moment,” he said.
Source: Reuters (By David Lawder and William Schomberg, Writing by Jan Strupczewski)
The U.S. economy is back on track for steady growth, though not much more.
Data released Friday showed consumer retail purchases rose last month, albeit less than forecast, after a March gain that was revised from a decline, indicating the early-2017 slowdown was transitory. The consumer-price index stabilized in April following the first drop in a year, though a gauge excluding food and energy posted the smallest year-over-year increase since October 2015.
The pickup in retail sales — with gains in nine of 13 major categories — eases concern from earlier in the year about a loss of momentum in household spending, the biggest part of the economy. The CPI results are a reminder that while businesses are regaining some pricing power, inflation is hardly breaking out.
Together, the data indicate progress consistent with the Federal Reserve’s view of the economy and inflation ahead of policy makers’ mid-June meeting, where they are widely expected to continue their gradual pace of interest-rate increases with a quarter-point hike. The Fed may feel less pressure, however, to pick up the pace should core inflation remain subdued.
“It’s a pretty decent overall picture of the U.S. economy,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. “Consumer spending is rebounding, though possibly not as much as we expected. On the inflation front, there’s not a lot of pricing pressure, and it looks like inflation is gravitating toward the Fed’s goal.”
A separate report showed that the University of Michigan consumer confidence index climbed to a four-month high in May, and within that, buying conditions for large household durables rose to the highest since 2005, reinforcing signs that Americans remain optimistic about spending.
“Today’s sub-consensus U.S. data is unlikely to rock the Fed’s boat, meaning there are increasingly few reasons for not hiking in June,” James Smith, an economist at ING in London, wrote in a note.
The details of the retail-sales report included some encouraging signs that a solid labor market is underpinning consumer demand, and that tax refunds that were delayed in early 2017 are beginning to make their way to Americans’ wallets, providing additional support in the months ahead. Sales rose at auto dealers and service stations along with electronics and appliance sellers, while Internet retailers, restaurants, sporting-goods stores and building-materials outlets also posted gains.
So-called control-group sales, which are used to calculate gross domestic product and exclude the categories of food services, auto dealers, building materials and gasoline stations, rose 0.2 percent after a 0.7 percent March gain that was the biggest since April 2016. The Commerce Department data don’t reflect changes in prices.
On the inflation front, the news from the Labor Department was more mixed. While consumer prices climbed for shelter, energy, tobacco and food, costs declined for new and used vehicles, mobile-phone services, apparel and recreation. Medical care costs dropped 0.2 percent, the most since May 2013.
The CPI rose 2.2 percent from a year earlier, a tad below the forecast for a 2.3 percent gain and following a 2.4 percent increase in March. Core prices rose 0.1 percent from the prior month after falling 0.1 percent, and were up 1.9 percent from a year earlier.
One unusual factor in consumer prices: The tobacco index jumped 4.2 percent, its biggest gain in eight years, largely reflecting a $2 per-pack increase in California state taxes on cigarettes that went into effect on April 1. Without that boost, the core CPI would have been little changed, according to Omair Sharif, senior U.S. economist at Societe Generale.
Excluding the tobacco tax effect, the overall CPI index would have been up 0.1 percent in April instead of 0.2 percent, according to Steve Reed, an economist at the Labor Department.
The positive retail sales results confirm a strong rebound in second-quarter growth and the falling unemployment rate probably keeps a Fed rate hike likely for June, Ted Wieseman, an economist at Morgan Stanley, wrote in a note.
At the same time, Wieseman wrote that “core inflation is probably going to need to get back on track” in the coming months to support further tightening via interest rates or the balance sheet at Fed meetings followed by press conferences, which occur at alternating sessions.
The United States has been told by all the other Group of Seven economies that it must not turn its back on international cooperation on global economic policy, French Finance Minister Michel Sapin said on Saturday.
G7 finance ministers and central bank governors attending a two-day meeting in Italy have said they want a better sense of the plans of U.S. President Donald Trump, who has threatened to upset the international consensus of recent decades on issues such as trade and rules for the financial services industry.
“All the six others … said explicitly, and sometimes very directly, to the representatives of the U.S. administration that it is absolutely necessary to continue with the same spirit of international cooperation,” Sapin told reporters at the end of the G7 meeting in southern Italy.
Source: Reuters (Reporting by William Schomberg, editing by Silvia Aloisi)
Japanese Finance Minister Taro Aso said on Friday that the world economy was improving and the outlook was brightening, but that there was no room for complacency because of uncertainty over U.S. economic policies.
Speaking to reporters after the first day of Group of Seven financial leaders’ meeting, Aso said he told his counterparts about problems with China’s excessive credit and asked the International Monetary Fund to monitor its capital controls.
On the issue of inequality, Aso said he told G7 that countries must not backpedal on free trade, which he said has contributed to economic prosperity.
“We must not backpedal on free trade as it has contributed to economic prosperity,” Aso told reporters.
Japan’s economy is expected to expand for a fifth straight quarter in January-March led by a recovery in consumer spending and solid offshore demand, a Reuters poll found, suggesting a firm trend in the making.
Analysts project the economy will continue to expand as exports rise, while capital spending is expected to recover reflecting strong corporate earnings and growing business confidence.
But the analysts noted that U.S. trade policy will be closely watched for developments as President Donald Trump’s protectionist policies could hurt Japan’s exporters.
The economy was expected to expand at an annualized rate of 1.7 percent in the first quarter, the fastest growth rate since a 2.2 percent rise in April-June 2016, the poll of 18 analysts showed.
The forecast figure would translate into 0.4 percent growth on a quarter-on-quarter basis following a revised 0.3 percent rise in the final quarter of last year.
“The economy in fiscal 2017 is expected to continue to pick up with a tailwind of such as the global economic recovery and a weak yen,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute.
“Uncertainty over the overseas political situation has eased but risks such as the prospects for the Chinese economy remain.”
Private consumption, which accounts for roughly 60 percent of gross domestic product (GDP), was seen rising 0.4 percent in the first quarter, after it showed no growth in the October-December period.
Offshore demand – or exports minus imports – was expected to add 0.1 percentage point to growth, the third straight quarterly positive contribution to the economy, the poll showed.
Analysts say global recovery in the manufacturing sector is behind strong exports – especially in Japan’s shipments to Asia.
Capital spending likely slipped 0.4 percent in the first quarter after a robust 2.0 percent gain the previous quarter, the poll found. But analysts believe, given upbeat business sentiment, that firms’ willingness to invest has not diminished.
The Cabinet Office will announce the GDP data on May 18 at 8:50 a.m.(2350 GMT, May 17).
A separate Reuters’ survey last month showed that confidence among Japanese manufacturers had risen for an eighth straight month to a level not seen since before the 2008 global financial crisis, reflecting output and export gains led by overseas economic recovery.
Key data next week include March core machinery orders, which are expected to show a 2.1 percent rise from the previous month, up for a second straight month.
The core orders, a highly volatile data series regarded as a good indicator of capital spending in the coming six to nine months, were seen rising 0.6 percent in March from a year ago following a 5.6 percent rise in February.
“Exports and factory output have been favorable helped by overseas economic recovery and a softer yen…Uncertainty over the Trump administration’s trade policy raises worries, which makes firms cautious about capital spending,” an analyst at SMBC Nikko Securities said in the survey.
The Cabinet Office will release machinery orders on May 17.
The Bank of Japan’s corporate goods price index (CGPI) due on Monday, which measures the price companies charge each other for goods and services, was forecast to rise an annual 1.8 percent in April.
Source: Reuters (Reporting by Kaori Kaneko; Editing by Eric Meijer)
Group of Seven finance chiefs signed up to a pared-down pledge on global trade as the presence of Donald Trump’s administration of the world stage continued to redefine the established economic order.
The G-7 nations, meeting in Bari, southern Italy, said in a statement that they are “working to strengthen the contribution of trade to our economies” — a repetition of the language used at the Group-of-20 gathering in March that fell short of an explicit promise to avoid protectionism. While trade was not specifically on the agenda, its presence loomed large as U.S. Treasury Secretary Steven Mnuchin came under pressure to engage on the matter.
“People are much more comfortable today now that they’ve had the opportunity to spend time with me and listen to the president and listen to the economic message on what the economic agenda is, and that’s about creating growth in the United States,” Mnuchin told reporters after the meeting. “We don’t want to be protectionist but we reserve our right to be protectionist to the extent that we believe trade is not free and fair.”
The finance chiefs did agree that while global growth was gaining momentum, it remains moderate with risks tilted to the downside. Monetary policy should continue to support the economy, they said, while recognizing the world faces a prolonged period of modest growth and rising inequality. The group also reaffirmed a commitment to avoid competitive currency devaluations.
The U.S. Treasury Secretary’s first G-7 outing came in the wake of an announcement a deal to boost the country’s exports of gas and beef to China. The meeting saw his French and German counterparts attempt to draw him toward the previous consensus of free trade, according to France’s Michel Sapin. That follows two G-20 gatherings where Mnuchin refused to sign up to an well established explicit shunning of protectionism, and pressed for trade to be “fair” and “reciprocal.”
“It is important, protectionism is off the table, I think that there was no disagreement over the fact that trade promotes growth, and has to be inclusive,” Italian Finance Minister Pier Carlo Padoan told Bloomberg Television. “So I am very satisfied. Of course we need to make steps forward, there are different views across the G-7 and the G-20 for that, but I am confident, we can reach common views.”
The U.S.’s deal to boost exports of gas and beef to China — agreed on Friday — also gives an indication on how the world’s biggest economy may progress going forward, according to German Finance Minister Wolfgang Schaeuble told reporters.
“The U.S. has just concluded an agreement with China,” Schaeuble said. “I am quite confident that the development will continue, that the U.S. administration will engage more strongly in this process.”
German Finance Minister Wolfgang Schaeuble told a magazine he shared French president-elect Emmanuel Macron’s view that financial transfers from richer to poorer states are necessary within the euro zone.
Macron, who is due to meet with German Chancellor Angela Merkel in Berlin on Monday, has promised to press ahead with closer European integration.
Asked whether Macron was right in believing Europe and the euro zone need a “transfer union”, Schaeuble told Germany’s Der Spiegel magazine: “You can’t build a community of states of varying strengths without a certain balance.”
“That’s reflected in the European budget and bailout programmes, for example, and that’s why there are net contributors and net recipients in Europe. A union can’t exist if the stronger members don’t vouch for the weaker ones,” he added in an interview to be published Saturday.
Some conservatives around Merkel worry the euro zone could develop into a “transfer union” in which Germany is asked to pay for struggling states that resist reforms.
Schaeuble, a veteran member of Merkel’s party, said if countries wanted to make Europe stronger, it was necessary for each individual country to become stronger first – including France and Italy but also Germany.
Schaeuble also signalled he would not object if the European Commission gave its blessing to possible French budget deficits: “It’s up to the European Commission to design the budget rules.”
He added: “The German government and I have never objected to a ruling of the Commission on how the deficits of countries like France should be judged.”
The European Commission estimates France’s deficit will be 3 percent of gross domestic product (GDP) this year, from 2.9 percent previously forecast, and 3.2 percent in 2018 from the previous forecast of 3.1 percent. EU rules say countries should keep their deficits below 3 percent of GDP.
Schaeuble expressed hope that Macron would reduce the deficit, saying: “France can do it.”
The Commission expects Germany’s trade surplus, an indicator that has often caused conflicts with Brussels for being excessive, will slow to 8.0 percent of GDP this year from 8.5 percent in 2016.
Schaeuble told Der Spiegel he considered Macron’s criticism of the high German trade surplus to be justified, but said it would decline in coming years, and its size was not the result of politics
“It’s right that the German current account surplus is too high at just over 8 percent,” he said. “It’s due to the high competitiveness of the German economy but also due to the fact that we are part of a currency union.”
Risks to the euro zone economy are still not balanced and the European Central Bank needs to see evidence that wage pressures are feeding into inflation before it shifts its policy stance, governing council member Philip Lane said.
The euro zone economy has been on its best run for a decade and headline inflation has recently met the ECB’s near 2 percent target, fuelling calls from some quarters to start winding down the ECB’s 2.3 trillion euro (£1.94 trillion) bond-buying stimulus programme.
But Lane told Reuters that there was still some way to go before the central bank can feel comfortable about tweaks to its ultra-easy monetary policy stance.
“There is still downside but the tail risk… is fading and the momentum is back towards balance,” said Lane. “So still below balance but moving towards balance.”
Lane said the “key substantive debate” at the central bank is where inflation is headed over the medium-term given doubts around wage pressures in the bloc.
“We need to see evidence that wage inflation is actually on its way to a level consistent with the target,” said Lane.
“The fact we are seeing reasonably good data on output and unemployment, that is nice, it is helpful, but the core of it is how much of it is going to map into sustainable inflation.
“For underlying inflation to go towards target, a significant part of that will be: where is wage inflation going?”
The ECB has committed to buying 60 billion euros worth of bonds every month until December, despite already facing self-imposed limits in certain countries, and to keeping rates at ultra-low levels until well after that.
Sources on and close to the bank’s Governing Council told Reuters last month that the bank may send a small signal about reducing monetary stimulus at its next meeting in June, while others have said autumn may be a more appropriate time.
Asked about the timeline for future monetary policy decisions, Lane said: “Something has to happen in the rest of this year given there needs to be a plan in 2018.” The debate around limits to the bond programme was “secondary”, he added.
“Central banks have a range of instruments and I don’t think that discussion should deflect from the ability of the ECB to deliver its inflation target. We have the range of instruments that can deliver the inflation target,” said Lane, who is Ireland’s central bank governor.
Lane is spearheading a European Union proposal to create synthetic “safe” assets backed by euro zone sovereign bonds that would help break the link between banks and governments that exacerbated the financial crisis.
It is designed to provide banks with a safe asset to use as collateral so they can reduce their exposure to their own governments’ debt.
But Germany has already criticised the idea and it remains uncertain whether the European Commission will reference in its paper on the future of the euro zone at the end of the month.
“The task force is making good progress but it is purely a technical exercise. There are a wider set of issues in thinking about the potential role of these instruments in the wider European architecture,” said Lane.
“The European Commission paper and the views of various national authorities will evaluate this idea in the context about every other idea about the future of the euro zone. I hope it will be a helpful ingredient for the European system to think about how to make the euro area more robust in the future.”
Ray Dalio, founder of Bridgewater Associates, is feeling OK about markets and the economy right now, but he is getting really worried about the future.
“Big picture, the near term looks good and the longer term looks scary,” Dalio wrote in a LinkedIn blog post Friday.
“We fear that whatever the magnitude of the downturn that eventually comes, whenever it eventually comes, it will likely produce much greater social and political conflict than currently exists,” he said.
Bridgewater manages $150 billion.
Dalio listed four reasons for his pessimism:
1. Economic growth “at or near its best” with no major economic risks in the next two years.
2. “Significant long-term problems” such as high debt levels and limited central bank power “that are likely to create a squeeze.” Required payments for social programs including pensions and health care are also increasing.
3. Social and political conflicts “near their worst for the last number of decades.”
4. “Conflicts get worse when economies worsen.”
Productivity necessary for raising living standards is low, while social tensions over income inequality and politics are increasing, the hedge fund manager said.
“Since such tensions are normally correlated with overall economic conditions, it is unusual for social and political tensions to be so bad when overall economic and market conditions are so good,” he said.
U.S. stocks are at record highs, while political conflict is elevated based on a Federal Reserve Bank of Philadelphia index created by looking at newspaper articles, Dalio noted.
“The idea of conflicts getting even worse in a downturn is scary,” he said.
To be sure, Dalio said asset prices “look about right to us.” He expects low returns from investments, which is slightly better than holding cash.
“There are no debt crises on the horizon,” Dalio said. The overall global economy “is at equilibrium.”
Chinese Ambassador to Britain Liu Xiaoming has said that China and Britain enjoy a mutually beneficial and advantage complement relationship in developing the Belt and Road Initiative, which has become a new highlight in the bilateral relations.
The ambassador’s comments came ahead of the opening of the Belt and Road Forum for International Cooperation, a high-profile international meeting on the China-proposed trade and infrastructure plan connecting Asia with Europe and Africa.
Liu told Xinhua in an exclusive interview on May 12 that Britain boasts developed international finance industry, mature law and consulting businesses, world-renowned think tanks, top-notch science and technology and innovation platforms as well as its language, historical and cultural bonds with the countries along the Belt and Road initiative routes.
‘All these strengths and advantages that Britain has have well fit with the requirements of the Belt and Road construction,’ the ambassador said. ‘ They put Britain in an excellent position to secure the opportunities the initiative has to offer.’
He said that the remarkable opportunities of the Belt and Road cooperation are now up for grabs.
This year marks the 45th anniversary of the establishment of the China-UK ambassadorial diplomatic relations which have grown to a global comprehensive strategic partnership over the past four decades.
Britain will be represented by Chancellor Philip Hammond, a personal envoy of the British Prime Minister Theresa May, at the meeting, which representatives from the British enterprises and think tanks are expected to be attending.
Britain was the first major Western country to apply to join the Asian Infrastructure Investment Bank (AIIB), a multilateral financial institution founded to bring countries together to address the daunting infrastructure needs across Asia. It was also the second contributor after China to inject capital into the AIIB special fund.
Source: The Central People’s Government of the People’s Republic of China
Setting aside a few uncomfortable economic truths such as the increasing U.S. skills gap, eye-wateringly high unemployment in parts of the euro zone, and growing income inequality in China, the world economy has been doing pretty well this year.
The issue is: how well and how sustainable?
In the United States, the economy has been strong enough for the Federal Reserve to start raising interest rates, slowly. In the euro zone, growth is robust enough for the European Central Bank to think about dropping public warnings of risks.
China, meanwhile, has so far staved off last year’s dire warnings of a sharp, potentially damaging, slowdown.
But much of this comes courtesy of billions of dollars, euros, and other currencies being pumped into the global economy. In some cases, it is still being pumped in.
And the results are not exactly bracing. The International Monetary Fund expects the world economy to grow 3.5 percent this year — not bad until you remember it averaged 4.2 percent over the 10 years before the financial crisis.
The IMF sees the U.S. economy growing at 2.3 percent this year, below the 2.6 percent average for 1999-2008. Ditto the euro zone — 2017 growth at 1.7 percent versus 2.1 percent. For China, the numbers are 6.6 percent and 10.1 percent, respectively.
After their spring meeting last month, the IMF and World Bank sounded a bit passionless about it all.
“The global economy is gaining momentum, but risks remain tilted to the downside,” they said.
So a near 10-year deluge of global central bank stimulus has not brought things back to where they were and a left a large question about the sustainability of what has been achieved.
As European Central Bank President Mario Draghi said in a slightly different context in the past week: “It is too early to declare success.”
Most economists appear to believe the global economy is strong enough to keep going, if not exactly at a tear. The coming week will probably confirm this, but could also provide something of a reality check.
In what may be an example for the global economy as a whole, the United States is expected to report slower industrial output growth for April — that is, it continues to grow (at 0.3 percent), but at a lesser rate than March’s 0.5 percent.
But more attention is likely to be paid to the respective reports of the Federal Reserve banks of Philadelphia and New York — the Philly Fed and Empire State.
Last time around, they both signalled growth, but with the New York report far less robust than the Philly. Same again?
China’s economy, meanwhile, has shrugged off fears of a major slowdown. It is expected to slow from surprisingly strong first quarter growth, however, as previous stimulus measures wear off and policymakers set their eyes on controlling risks in the financial market.
In the coming week, data may further confirm a slight slowing of momentum, but nothing dramatic. Year-on-year retail sales, for example, are expected to dip to 10.6 percent from 10.9 percent.
The euro zone will offer up its second reading of first quarter GDP growth, the first coming in at 0.5 percent quarter on quarter.
Analysts polled by Reuters expect no change, but industrial production data for March did come in far softer than expected.
Another focus will be on the final April figures for inflation. Again, no change expected — 1.9 percent year-on-year — but the ECB will be watching to make sure all that money it has pumped in does not take the number too much higher.
Source: Reuters (Additional reporting by Elias Glenn in Beijing; Editing by Catherine Evans)
Europe must keep London as the continent’s global financial hub after Brexit or risk losing out to Asia and Wall Street, the City of London’s special representative to the EU told AFP.
Former British minister Jeremy Browne warned that it was in no one’s interest to punish Britain and that London would remain Europe’s only option for a world-class financial capital after the UK leaves.
“My starting point is to make sure that people across the European Union appreciate that the City of London is a European asset, not just a British asset,” Browne said between meetings with top EU officials and MEPs in Brussels.
“The alternative to Europe having a successful global financial centre in London is Europe not having a global financial centre,” said Brown, who was a British MP for the centre-left Liberal Democrats.
Browne spoke just days after the victory of centrist Emmanuel Macron in France who has promised to be a staunchly pro-EU president.
Macron, a former banker, is expected to push to have Paris replace London as a financial centre but Browne downplayed the threat.
“If Paris was the ideal hub city to put a global financial centre to cover Europe’s interest it would be there already, no one is stopping that from being the case,” Browne said.
“The talk in London is that we shouldn’t assume that jobs will go to somewhere in the European Union … The jobs that don’t rely on a single market location but don’t have to be in London, would more logically go to Asia or New York if anywhere,” he said.
– ‘Passing phase’ –
Browne also shot down talk that the attitude towards foreigners had soured in London after the Brexit referendum last June.
The UK capital remained “highly international” and the upcoming June 8 election in the UK would prove that.
“I can confidently predict that a nationalist candidate will not get more than a third of the vote in our election the way they did in France,” he said, referring to the result of far right candidate Marine Le Pen who came in second in the French election on Sunday.
“We will remain a global outward looking country,” he said.
Browne also discussed the war of words earlier this month that officials fear poisoned the atmosphere for the launch of the Brexit talks after next month’s poll.
In that row, British Prime Minister Theresa May accused Brussels of trying to influence the election with “threats against Britain”.
She fired off her broadside after a leaked account of a “disastrous” dinner with European Commission chief Jean-Claude Juncker appeared in a German newspaper.
“I hope it just is a passing phase,” Browne said, though he warned that the Commission, which is leading the negotiations for the bloc, should not break the trust of the EU member states it represents.
“It comes back to the point about whether the Commission can be trusted to seek a good deal, to have intelligent adult relationships with the United Kingdom,” he said.
G7 finance officials have raised concerns about risks to global growth from the Trump administration’s policy proposals including tax reform, a senior U.S. Treasury official said on Friday.
Finance ministers from the United States, Canada, Japan, France, Germany, Italy and Britain, the Group of Seven (G7), are holding two days of talks on the global economy, taxation and terrorist financing in the southern Italian city of Bari.
Speaking to reporters on the sidelines of the meeting, the official said the tax plan and U.S. trade policies were part of discussions about risks to the global economy.
“Some countries have flagged risks along those lines as well as risks that U.S. growth and strengthening U.S. growth will lead to more investment, which could have an impact on exchange rates and could have an impact on the Fed’s policy going forward,” the official said.
“That’s in a positive context, but it could have spillovers to the rest of the world, in terms of both positive and negative,” the official said.
Federal Reserve Bank of San Francisco President John Williams said his outlook for three or four rate increases in 2017 hasn’t shifted, as the labor market shows signs of expanding beyond its sustainable rate and the economy is operating above potential.
“I haven’t changed, again, my views on what appropriate policy is” for the remainder of the year, Williams told reporters on Friday after a speech in New York, referring to his comments last month that three or four hikes would be required.
On Saturday, at an event in California, Williams said the economy “is operating above potential.”
Fed officials left interest rates unchanged following their meeting this week, indicating that a disappointing first quarter wouldn’t stop them from raising rates twice more in 2017 following a hike in March. In their communique, policy makers described as “transitory” a slowdown in first-quarter growth, while emphasizing that inflation was running close to their 2 percent goal and the labor market continued to strengthen.
Labor Department data on Friday backed up that views, showing employers created a greater-than-expected 211,000 new jobs in April as unemployment fell to 4.4 percent, the lowest since 2007. Annual wage gains, though, slowed a touch to 2.5 percent.
“It’s nice to see further confirmation that that first quarter GDP number was an aberration,” Williams said of the report. He previously said in response to questions from the audience that the U.S. “is at full employment, or maybe even a little bit beyond.”
Williams, who took over from Janet Yellen at the San Francisco Fed in 2011 when she joined the Fed’s Board of Governors, next votes on monetary policy in 2018.
On Saturday he reiterated his view that the Fed this year should start shrinking its balance sheet, which grew to about $4.5 trillion when policy makers carried out asset purchases to protect the economy during the 2008-2009 financial crisis and the period of weak growth that followed.
“We want to move our balance sheet down to more normal levels, for a number of reasons,” Williams said at Stanford University. The Fed wants “a balance sheet that quite honestly in the future we could use if needed in a recession.”
Federal Reserve Chairwoman Janet Yellen said family-friendly policies that increase women’s participation in the workforce could boost economic growth and help the U.S. overcome longer-term challenges.
If obstacles like the gender wage gap and barriers to equal opportunities persist, “we will squander the potential of many of our citizens and incur a substantial loss to the productive capacity of our economy at a time when the aging of the population and weak productivity growth are already weighing on economic growth,” Ms. Yellen said Friday, according to remarks released ahead of delivery at Brown University in Providence, R.I.
Ms. Yellen said if the U.S. had the kinds of family policies common in Europe — like paid leave, better child-care provision and increased availability of part-time work — female labor-force participation in the U.S. could be significantly higher. She also referenced a recent study estimating that increasing the female participation rate to that of men would raise gross domestic product by 5%.
The Fed chairwoman didn’t comment on monetary policy in her prereleased comments. They came hours after the Labor Department reported that employers added a robust 211,000 jobs in April and the unemployment rate edged down to 4.4%, from 4.5% the month before.
The unemployment rate hasn’t been this low since May 2007, suggesting the Fed is likely to stay on course to raise interest rates gradually this year to prevent the economy from overheating.
The Federal Reserve has interest rates right where they should be, but should start trimming its massive balance sheet in the second half of the year, St. Louis Federal Reserve Bank President James Bullard said.
“We’ve delayed a little bit too long in reducing the size of the balance sheet,” Bullard said in an interview with Reuters near the Stanford University campus, where he is attending a conference on monetary policy.
The Fed should first communicate its approach and then begin allowing the balance sheet to shrink “maybe sometime in the second half of the year,” he said, adding that the decision on the timing would be up to Fed Chair Janet Yellen.
The Fed has raised rates three times since the Great Recession, but left them unchanged at its meeting earlier this week. Strong jobs growth in April, reported earlier on Friday, has added to investor confidence that the central bank will raise rates again at its next policy-setting meeting in June, a move that Bullard said he would not necessarily oppose.
“The current rate is reasonable, given the current situation,” Bullard said, noting that the pace of year-over-year jobs growth has actually eased in the last couple of years, and there are no signs that inflation threatens to surge above the Fed’s 2-percent target.
Most Fed officials expect the Fed would need to raise its short-term benchmark rate two more times this year, and three times next year.
Bullard, who does not have a vote on the Fed’s policy committee this year, said that he would not balk at another rate hike: “If they want to go one more time, that would be fine.”
But, he added, reiterating an argument he has been making for the past year, “what I do oppose is the idea that we are 200 basis points off… the evidence is just not there.”
Instead of focusing on raising rates, Bullard said, the central bank needs to make progress on shrinking its $4.5 trillion balance sheet, in part to give it more policy flexibility in the face of a next shock or recession.
Fed officials have signaled they may take action at the end of this year or perhaps early next year.
Bullard wants the Fed to move faster.
“We should have gotten going on this a while ago,” he said.
Source: Reuters (Reporting by Ann Saphir and Howard Schneider; Editing by Chizu Nomiyama)