Ostrum
  • News & Chronicles
  • France
  • Euro Area
  • United States
  • International
  • Politics & Society
  • Monetary Policy
  • Media
  • Decoding
  • About Philippe Waechter
Philippe Waechter's blog
  • Insights
  • About us
  • Expertise
  • Our people
  • Media

Philippe Waechter's blog
My french blog
  • News & Chronicles
  • France
  • Euro Area
  • United States
  • International
  • Politics & Society
  • Monetary Policy
  • Media
  • Decoding
  • About Philippe Waechter
  • News & Chronicles
  • France
  • Euro Area
  • United States
  • International
  • Politics & Society
  • Monetary Policy
  • Media
  • Decoding
Philippe Waechter's blog
Prévôté
Previous Next
  • 1 min

Political Uncertainty and Interest Rate

  • 20 December 2019
  • Philippe Waechter
  • Interest Rates
  • Political Uncertainty
Total
0
Shares
0
0
0

The increase in economic policy uncertainty is well correlated with the fall in the 10-year interest rate in Germany. An illustration

The graph is an illustration of the link between economic policy uncertainty and behavior’s adjustment via the pace of the German 10-year rate (risk-free asset). The drop in rates since 2018 has its source in the non-cooperative nature of economic policy and the uncertainty that this creates.
This is not a surprise since higher uncertainty increases the search for a risk-free investment. Over a longer period, the two indicators appear consistent but not as precise as what is observed since 2016.

The bet for 2020 will relate to the reduction of
uncertainty about global economic policy

The Brexit issue (again) and the discussions between Chinese and Americans will be essential to grasp this uncertainty.
In a year of presidential elections in the US, it’s probable that China will again be an excellent scapegoat for Donald Trump. The phase 1 agreement on trade with China is a win-win agreement in agriculture. Nevertheless almost 2/3 (64.5%*) of the Chinese products in the US will be taxed and circa 60% (56.7%) of the US products in China will have tariffs. This provides opportunities for tension as the US manufacturing sector quickly falters. China will once again become a scapegoat to convince the Republican electorate. We could then see the return of significant international tensions because the Chinese have no reason to leave the monopoly of tensions to the Americans. We could then see a drop in long rates.

Cf Chad Bown

Related Topics
  • Interest Rates
  • Political Uncertainty
On the same topic
  • 10 min

From Today to Tomorrow – December 22 – The three ruptures of the health crisis – We must rebuild the economy

  • 22 December 2020
  • News & Chronicles

Philippe Waechter

The health crisis was a life-size experience. As a result of active economic policies, economies have been resilient. But three ruptures will change the economy of tomorrow.The first is the…
  • Economic Policy
  • Labor Market
  • Polarization of the World
READ
  • 3 min

From Yesterday to Today – October 16 – Low interest rates for an extended period before inflation

  • 16 October 2020
  • Monetary Policy

Philippe Waechter

Low interest rates reflect the combination of fiscal and monetary policies. This is already translating into severe financial repression. Governments, more than central banks, will have an interest in a…
  • Financial Repression
  • Inflation expectations
  • Interest Rates
READ
  • 4 min

Europe must choose its philosophy

  • 25 May 2020
  • International

Philippe Waechter

The European Commission will have to choose between the Franco / German plan and the proposal of “frugal four”. The choice will shape the trajectory of Europe for the years…
  • "Frugal Four" Countries
  • European Commission
  • European Union
  • Franco/German Proposal
READ
Subscribe to the newsletter

All the news from Philippe Waechter’s blog in your mailbox

Loading
ABOUT PHILIPPE WAECHTER

Ostrum's expert magazine

ABOUT OSTRUM AM
  • About us
  • Media room
  • Our publications
FOLLOW ME ON
EXTERNAL LINKS
  • Economists
  • Think tank
  • Central banks
  • Blog roll
©Ostrum AM 2019
An affiliate of : Plan de travail 2

Input your search keywords and press Enter.