The Macro Report | August 2019

Central banks keep economy afloat

Global growth is cooling as the trade war continues to erode business investment, manufacturing activity, and investor confidence. In July, the Federal Reserve cut interest rates for the first time since 2008; the preemptive move came in response to weaker global expansion and muted inflation. In the midst of the trade battle between China and the United States, there has been market speculation that the U.S. government could intervene to weaken the dollar. The dollar has risen against a broad, trade-weighted basket of other currencies over the past year.

So, when China allowed the yuan to weaken past a key level, it didn't take long for the United States to designate China a currency manipulator, turning the duel between the two economic superpowers into a currency war. The fallout from the trade war and weakness in China has spread to the eurozone, including Germany, the region's largest economy. The European Central Bank (ECB) signaled that it will consider injecting more stimulus into the wobbling eurozone economy by cutting interest rates or restarting a bond-buying program.

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Reading the Fed's

Reading the Fed's "dot plot"

Fed Chairman Jerome Powell described the July interest-rate cut as a mid-cycle adjustment to policy, or a so-called "insurance" cut.

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ECB sets the stage for stimulus

ECB sets the stage for stimulus

The central bank has set the stage for more monetary stimulus in a bid to improve the eurozone's cooling economy.

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Game of currencies

Game of currencies

The dollar has strengthened against other currencies, raising speculation that the administration could actively intervene in the financial markets.

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About the macro report

The Macro Report is written by members of Putnam’s Fixed Income team. With backgrounds in applied economics, currency and interest-rate analysis, and sovereign and local bond market dynamics, this group conducts macroeconomic research in support of Putnam’s global fixed-income strategies.

Michael Atkin, Head of Macro & Sovereign Credit
Investing since 1988
Sovereign debt, global growth analysis

Albert Chan, CFA, Head of Portfolio Construction
Interest-rate derivatives, government debt, risk analysis

Onsel Emre, PhD, Analyst
Inflation, risk analysis, global growth dynamics

Sterling Horne, Analyst
Politics and economics

Irina Solyanik, CFA, Analyst
Quantitive analysis, growth forecasting

Izzet Yildiz, PhD, Analyst
Labor market analysis, global growth dynamics