Markets will get a glimpse into the future of the global economy this week as major central banks meet, key economic reports are released and European countries absorb the fallout of three Taylor Swift performances.
In today’s edition
- Night moves: More clarity is coming from major central banks
- Behind by design: From one inflation crisis to another
- Euro zone: Weekend elections change the calculus
- Swiftonomics: The Eras Tour effect
- We’re watching for developments after Canadian business mogul Frank Stronach was arrested in connection with an investigation into alleged sexual assaults. You can catch up on that story here.
Rate expectations
At one point in history, markets looked to the U.S. Federal Reserve to move first. But as Jennifer Lee, senior economist with Bank of Montreal, told The Globe, that’s no longer the case: “Different countries are dealing with their domestic issues.”
She added: “And if everyone waited for the Fed, it would probably have been a mistake at this point.”
After years of holding steady, Canada and the European Central Bank felt it was time to make a move. This week, we’ll find out whether the U.S. (unlikely) and Japan (sort of likely) will follow suit.
On Wednesday
- Fed chair Jerome Powell is expected to hold its rate steady as the U.S. economy hums above expectations.
- May inflation figures are released a couple of hours before Powell’s announcement. If they show signs of easing, investors will expect cuts to be back on the table – if not in the Fed’s July decision, by its next meeting in September.
- The markets opened the year expecting the Fed to cut its rate as many as six times. Oh, well.
On Thursday
The Bank of Japan is expected to give more guidance on its decades-long battle with deflation.
- A majority of BoJ watchers expect the bank will slow a government bond-buying program.
- The bank raised its lending rate for the first time in 17 years in March.
- It could signal another bump on the horizon.
Inflation fight over? Far from it.
Recent central bank moves and murmurings indicate an easing of the inflation crisis. But as Erica Alini and Matt Lundy write, it will leave behind a dark legacy – and not only because price levels are permanently higher.
- From “bracket creep” to the decreasing value of social assistance, Canada’s piecemeal approach to inflation indexing is hitting taxpayers in many areas of their lives.
- Depending on your province of residence or workplace benefits program, everything from tax credits to health benefits may not be adjusted to retain their dollar value.
“Generally speaking, governments use lack of indexation, or partial de-indexation, to save money,” Sherri Torjman, a social policy consultant, told The Globe. “In most cases, people don’t realize how serious the impact can be.”
The EU elections
Why they matter
Markets will have barely had time to digest last week’s historic rate cuts before being fed their next course: the results of the weekend’s EU elections.
- French President Emmanuel Macron called for snap legislative elections after he was beaten in the three-day vote by Marine Le Pen’s far-right party.
- Le Pen tapped into anger over the country’s inflation fight.
- We’ll likely see more of that now that Eurosceptic nationalists won big, while centrists were pushed out across the EU.
And as treaties have been revised, Eric Reguly writes, the EU parliament has been given greater influence over its member nations: “It approves the EU budget, (€189-billion this year), passes EU legislation based on [European Commission] proposals and helps determine policies on everything from trade and antitrust issues to sanctions and investments in member state programs. Its parliamentarians, known as MEPs, also approve or reject the EC’s presidential candidates.”
- The EU elections are the second-biggest in the world, after India’s, and will be the bloc’s first post-Brexit vote.
- Some 373 million people in the 27 member states are eligible to elect 720 parliamentarians.
Music
Sizing up Swiftonomics
"Look at all of this economic activity!"JEFF PACHOUD/Getty Images
Taylor Swift lands in the U.K. in the wake of those election results. While the economic imprint of her concerts over the next few days might not have the lasting impact of multinational trade treaties, it’s fair to say her host nations will enjoy a welcome jolt of spending from Swifties.
New figures released by Barclays last month show the Eras Tour will provide a nearly £1-billion boost to the U.K. economy. (I was going to provide a conversion rate to Canadian dollars, but felt unease at the number being too close to $2-billion.) Among its other findings:
- Tickets for the tour spurred a 15.8-per-cent year-on-year increase in U.K. spending on entertainment when they were released last July.
- Swifties are predicted to spend £848 – a much more palatable $1,484 Canadian – on tickets, travel and merch.
So, not exactly the stuff of stimulus packages. But definitely a boost to local economies.
- Nevertheless, Forbes asked: Will her concerts drive inflation? (Spoiler alert: No. But still an interesting read on the economic impact of superstars on smaller regions.)
THE LOGISTICS OF RACING
Wheely complex
Max Verstappen won the Montreal Grand Prix.Christinne Muschi/The Canadian Press
Did you catch the Canadian Grand Prix yesterday? Nicolas Van Praet has a behind-the-scenes look at how Formula 1 and its logistics aces brought it to the finish line.