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Even before global finance chiefs fly into Washington over the next few days, they’ve been urged in advance by the International Monetary Fund to tighten their belts.
Two weeks ahead of a potentially era-defining US election, and with the world’s recent inflation crisis barely behind it, ministers and central bankers gathering in the nation’s capital face intensifying calls to get their fiscal houses in order while they still can.
The fund, whose annual meetings begin there on Monday, has already pointed to some of the themes it hopes to press home with a barrage of projections and studies on the global economy in coming days.
The IMF’s Fiscal Monitor on Wednesday will feature a warning that public debt levels are set to reach US$100 trillion this year, driven by China and the US.
Managing director Kristalina Georgieva, in a speech on Thursday, stressed how that mountain of borrowing is weighing on the world.
“Our forecasts point to an unforgiving combination of low growth and high debt — a difficult future. Governments must work to reduce debt and rebuild buffers for the next shock — which will surely come, and maybe sooner than we expect,” she said”
Some finance ministers may get further reminders even before the week is over.
UK Chancellor of the Exchequer Rachel Reeves has already faced an IMF warning of the risk of a market backlash if debt doesn’t stabilise.
Today marks the last release of public finance data before her October 30 budget.
The UK tax office is taking a tougher approach to clawing back debts, insolvency specialists say, a bid to squeeze £5 billion (US$6,5 billion) in extra revenue.
What Bloomberg Economics Says:
“For all the talk of black holes, the overall effect of Reeves budget will be a policy that’s looser, not tighter, relative to the previous government’s plans.”
Meanwhile, Moody’s Ratings has slated Friday for a possible report on France, which faces intense investor scrutiny at present. With its assessment one step higher than major competitors, markets will watch for any cut in the outlook.
As for the biggest borrowers of all, the glimpse of the IMF’s report already published contains a grim admonishment: your public finances are everyone’s problem.
“Elevated debt levels and uncertainty surrounding fiscal policy in systemically important countries, such as China and the United States, can generate significant spillovers in the form of higher borrowing costs and debt-related risks in other economies,” the fund said.
Elsewhere in the coming week, a rate cut in Canada and a hike in Russia are among the possible central bank moves anticipated by economists.
US and Canada
Economists see a pair of home sales reports showing that declining mortgage rates are merely helping to stabilise the US residential real estate market.
On Wednesday, the National Association of Realtors will issue data on contract closings for previously owned homes, followed a day later by government figures on sales of new homes.
Economists project modest increases in September sales of both existing and new homes. Resales remain hamstrung by limited inventory that’s keeping asking prices elevated and hurting affordability.
While purchases of previously owned properties remain near the weakest pace since 2010, builders have capitalised: New-home sales have gradually picked up over the past two years with the help of incentives.
Other US data in the coming week include September durable goods orders, plus capital goods shipments that will help economists fine-tune their estimates of third-quarter economic growth. The Federal Reserve also issues its Beige Book, an anecdotal readout of the economy.
Regional Fed officials speaking in the coming week include Jeffrey Schmid, Mary Daly and Lorie Logan. Meanwhile, the Bank of Canada is increasingly expected to cut rates by 50 basis points after inflation cooled to 1,6 percent in September and some measures of the labour market remain weak. — Bloomberg.
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