Over the last few weeks, a storm has raged across global financial markets, triggered by rising concern about China’s prospects and policy responses and volatility in the oil market. Recent stress is likely to further accentuate the divergence between emerging market and mature economy performance. We are again marking down our EM growth forecasts and remain concerned about further waves of stress. By contrast, mature economy growth momentum looks firm, as lower oil prices benefit oil-importing countries and lower inflation provides room for continued monetary accommodation. We have pushed back our call for Fed liftoff to Q4.
The economy is trapped in a negative feedback loop. The political crisis has precluded implementation of a confidence-enhancing fiscal adjustment, which has deepened the recession. That, in turn, has undermined congressional support for fiscal tightening.
This month’s IIF Global Regulatory Update provides updates on current work streams in regulatory capital, liquidity, accounting, disclosure, insurance, systemically important financial institutions, regulatory impact as well as coherence and calibration.