Macrocast report – Changing of the guards by Gilles Moëc

Key learnings:

1. Shift in macroeconomic management: Traditional macroeconomic management principles from the 1980s/1990s, which emphasized the primacy of monetary policy and limited fiscal intervention, are being reevaluated. The current trend shows increased interest in activist fiscal policies, skepticism about the effectiveness of monetary policy alone to handle inflation shocks, and openness to price controls and state intervention.

2. Political Developments in France: The formation of a stable government in France is still uncertain. The President is waiting for political compromises before appointing a new Prime Minister. The new government will need to produce a credible medium-term fiscal plan to gain EU approval for extended deficit reduction timelines.

3. Central Banks and Inflation Control: Despite criticisms, central banks are close to achieving victory over inflation. The ECB and Fed are anticipated to continue cutting interest rates. In the US, recent inflation data supports the likelihood of a rate cut in September, while in the Eurozone, the ECB's June rate cut is expected to be followed by another cut in September.

#Macroeconomics #PoliticalStability #Inflation