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Two of the world's top central banks are about to hold much anticipated meetings, and policy makers used the last days before their quiet periods to pile into the debate over how much stimulus is needed in the euro area and the U.S.
Central bankers weren't the only thing that kept us busy this week: trade tensions continued to mount and factory gauges once again painted a dismal picture.
Here's our weekly wrap of what's going on in the world economy.
Extent of Stimulus
The European Central Bank's interest-rate decision next week -- the penultimate one headed by Mario Draghi -- is dividing the Governing Council, with the ECB president facing his biggest ever pushback. In the last few days, central bank chiefs from France and Estonia joined those questioning if a new salvo of quantitative easing is necessary at this point. Still, more than 80% of economists surveyed by Bloomberg predict Draghi will override opposition and announce more QE.
Meanwhile, Federal Reserve officials are weighing two competing forces in the U.S. economy: the resilience of the consumer versus the fallout from uncertainty around trade disputes and weaker global growth. Data Friday showed U.S. companies' hiring stumbled in August, likely cementing expectations for a second straight interest-rate cut.
Read more:
- Lagarde Says ECB Must Be Agile to Fight Economic Slowdown
- Fed and ECB Bend to Markets Ahead of Economy: Mohamed El-Erian
- Bank of Russia Cuts Rate for Third Time, Signals More Easing
Bucking the Trend
Not all central banks are jumping on the easing bandwagon despite pressure from investors to do so.
Sweden's Riksbank on Thursday said it was sticking with a plan to withdraw stimulus, although it acknowledged it would likely to do so at a slower pace than previously signaled. The previous day, the Bank of Canada surprised markets by saying its current level of stimulus was appropriate. On Tuesday, the Reserve Bank of Australia also kept its key rate unchanged and said it's waiting to see the effects of previous stimulus.
Read more:
- Carney Can't See BOE Intervening in Market to Calm Pound Swings
- Kganyago Confident on South Africa Economic Growth After Rebound
- Poland's Least Talkative Central Banker Breaks Silence on Rates
Trade War Uncertainty
Much of the outlook for the global economy hinges on trade talks between the U.S. and China, which look set to get restarted in the weeks ahead. Negotiating teams from Beijing and Washington just announced plans to meet face-to-face in early October and work again toward a deal that the U.S. wants to balance the trading relationship and that Chinese officials hope will lift tariffs on their exports.
An agreement couldn't come too soon: Global financial markets are hanging on every trade development and both economies are showing signs of weakness tied to the dispute.
Read more:
- U.S., Japan Rush to Finish Trade Deal by Trump's Tight Deadline
- Trump's Tomato Trade-War Deal Averted a Dreaded 2020 Scenario
- EU Trade Chief Says U.S. Car Tariff Threat ‘Not Based on Facts'
Weekend Reading
- Central Banks Dust Off Old Tools to Stem Risks From Easy Money
- The World's Central Banks Have Lost Credibility With Markets
- Trade-War Damage Piles Weight of Global Economy on Consumers
- Scottish Independence Is Back, and So Are the Economic Hurdles
- Why in India, 6% Economic Growth Is Cause for Alarm
- How to Make Sure Robots Help Us, Not Replace Us
Chart of the Week
America's Wealth Hinges on Its Ability to Borrow Big – or Else
--With assistance from Simon Kennedy and Brendan Murray.
To contact the reporter on this story: Zoe Schneeweiss in London at zschneeweiss@bloomberg.net
To contact the editor responsible for this story: Fergal O'Brien at fobrien@bloomberg.net
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