News

The World In A Week – Interim Update

21st May 2020

It is happening again.  President Donald Trump has been busy with his Twitter account this week and the focus of his attention is China.  Trump’s increasingly critical comments of China could be a worry for the longer-term economic bounce back.

Whilst pent-up demand during lockdown is potentially a boost for US growth in the short term, restoring the level of growth to where it was before COVID-19 will require a stronger underlying economy, and reawakening trade tensions with China will not help.

There is more at play here than meets the eye though; casting China as the villain has been successful in the past for Trump’s approval ratings, and in a recent survey amongst Republican voters, disapproval of China is at 72%.  With the US Presidential Election not far off, seeds are already being planted for campaign strategies.  For the Trump team, it will be a difficult balancing act of building political support and ultimately keeping the trade deal alive.

In the UK we saw the official rate of inflation drop significantly from 1.5% in March to 0.8% for April, and below economists’ expectations of 0.9%.  Driven downwards by falling commodity prices, as well as reduced spending and increased savings, a result of having so many people in lockdown.  This has prompted the Bank of England to make a U-turn on the possibility of negative interest rates in the UK.

The Governor of the Bank of England, Andrew Bailey, confirmed that policy had changed slightly and that they were reviewing all tools possible to help alleviate the impact of the coronavirus.  He did stress that the Bank needed time to consider the implications of such a move and they want to see how the economy reacts to the previous rate cut to 0.1% before enacting further monetary policy.