We have updated our Privacy Policy and Terms of Use for Eurasia Group and its affiliates, including GZERO Media, to clarify the types of data we collect, how we collect it, how we use data and with whom we share data. By using our website you consent to our Terms and Conditions and Privacy Policy, including the transfer of your personal data to the United States from your country of residence, and our use of cookies described in our Cookie Policy.
{{ subpage.title }}
A drone view shows a flooded area in the aftermath of Hurricane Beryl, in Houston, Texas.
Hard Numbers: Doctors at a distance, US inflation falls again, Beryl barrels through insurers, Virginia bans smartphones in schools
670,000: Is there a doctor in the house? Maybe, but if you’re an Ontarian, you might have to travel. At least 670,000 residents of the province live more than 50 kilometers from their family physician, according to a new report. Meanwhile, the number of Ontarians who have no family doctor at all has risen by a third since 2020 to more than 2.5 million people.
3: Annual inflation in the US fell for the third straight month in June, coming in at 3%, down from 3.3% in May. That will give the Fed room to start cutting rates again soon, but popular perceptions of inflation persist. Polling earlier this spring showed that two-thirds of Americans consider high prices a top problem, even after months of declining inflation. Why? Because things cost significantly more than they did before the pandemic-driven price surge.
2.7 billion: Damage inflicted by Hurricane Beryl will cost US insurers at least $2.7 billion, according to initial estimates. The storm, which slammed into southeastern Texas on Monday, lashing the Houston area with heavy wind and rains, destroyed property and left millions without power. For more on how climate change is cooking US insurers, see our special report by Ian Bremmer here.
1.2 million: Virginia will limit or ban cellphone use in public schools, a move that would affect 1.2 million students. Earlier this summer, the Los Angeles city school system issued a similar ban, amid heightened attention to the ways that smartphone use by adolescents can interfere with learning and threaten mental health. In Canada, Alberta will soon join Quebec, Ontario, and British Columbia with a similar measure.
The Bland Bombshell and the Big Banks
Is there anyone more bland, more powerful, and less recognizable than Federal Reserve Chair Jerome Powell? He makes money moves more than Cardi B, and yet most people wouldn’t recognize him if he were sitting on their lap in the subway.
Why do relatively obscure banker meetings matter? Fair question, and it’s precisely why our GZERO team in Washington, DC, is covering the IMF-World Bank spring meetings this week.
For Masters of Monetary Policy like Powell, being bland is a strategy, not a characteristic. They speak in a purposely arcane language that requires near Bletchley Park decoding powers because everything they say makes news that impacts markets. This, in turn, affects things like your mortgage, your investments, and your grocery bill. It also impacts global poverty, which ought to make a lot more news. So understandably, they have to be careful and neutral to avoid panics or bouts of enthusiasm and ensure their signals leave lots of room for interpretation. But don’t mistake bland for lack of consequence. In global banking, bland is the brand, but influence is the purpose.
What have you missed so far?
Powell had a major bland moment at the Wilson Center’s Washington Forum on the Canadian Economy, which coincides with the spring meetings, where he hinted he would delay dropping interest rates because US inflation is proving more stubborn than predicted. “The recent data have clearly not given us greater confidence and instead indicate that it’s likely to take longer than expected to achieve that confidence,” he said, as the finance world listened to him emphasize every SYL-la-ble.
Then, in case anyone missed it, he took out the verbal highlight pen. “We can maintain the current level of restriction for as long as needed.” Whoa. Treasury yields moved higher that very moment, and he wasn’t even done speaking. Translation for those not steeped in Bland Banker Speak: Interest rates are gonna stay higher for longer – at least until the inflation rate hits the target goal of 2%. Govern yourselves accordingly.
That news got a tiny corner of social media all ginned up, giving us the world’s first – and perhaps last – Federal Reserve Meme: Check out this AI-generated Jerome Powell hyped on rate cuts. Maybe Blands really do have more fun.
Meanwhile, Bank of Canada Gov. Tiff Macklem, who was on the same panel with Powell, hinted he might go in the other direction – and having had many conversations with him over the years, I can say that Macklem isn’t bland at all. Just last week, he held the key interest rate at 5% because inflation had centimetered up a titch, but he still suggested a rate drop was “within the realm of possibilities” as early as June.
What would that mean? For one, if Canada drops rates faster than the US Fed, the Canadian dollar would likely weaken considerably, so depending on which way you travel, things could get either a lot cheaper or more expensive.
In short, everything central bankers say makes a difference to millions of citizens, and still, most folks only pay scant attention to talk about inflation and interest rates close to home – not internalizing how much impact these decisions have on major issues like global poverty. For example, GZERO’s own Matthew Kendrick has been reporting from the spring meetings this week, covering the impact of inflation on the most vulnerable economies like Somalia and what is being done to help. You can read his surprising look at the Somali success story on debt reliefhere.
But if world bankers are all so smart, why are one in three countries worse off than in 2019? Why are so many falling back into poverty post-COVID? To find out, our Head of Content Tony Maciulis sat down with Ayhan Kose, the World Bank Group’s deputy chief economist, who told him, “When the food price goes up, the price of oil goes up. That has significant implications for these economies.” He also noted that some countries have experienced “the weakest growth rate on average since the 1990s.” What are the solutions? Watch Tony’s interview here.
News about IMF and World Bank financiers doesn’t often make the front page because it’s so complex, often depressing, and … well, kinda bland. There are other riveting events, like Donald Trump’s first criminal trial, the war in Ukraine, and Iran launching missiles at Israel to grab our attention, as they should.
But spare a moment for the folks who live in Blandlandia – those people at the IMF and World Bank spring meetings. They are participating in panels like “The Path for Taxing the Super-Rich – Towards a Progressive Global Taxation Agenda,” “Biden Pauses LNG; COP 28 Fossil Fuel Phase-Out Decision – Is World Bank Lagging on Fossil Fuels?” and even “The Polycrisis – How Unchecked Public Debt Fuels Corruption and Bad Governance.”
Beneath the bland, the story of our world unfolds. Since 1944, when both financial institutions were established, the World Bank itself has funded over 12,000 programs focused on economic development and reducing poverty. Has it worked? The record is mixed.
There have been big wins – like the reconstruction of Bosnia after the war, or working on debt relief programs, like Matt described in Somalia. But the World Bank also set a goal of eliminating extreme poverty by 2023, and its leaders admit they are not even close.
Meanwhile, the IMF, whose mission is to “firefight” big, macro-economic emergencies, like a currency collapse, comes in for much harsher criticism. Its Structural Adjustment Programs – loans to low-income countries in distress – have been subjected to extensive research, often proving that they have kept people in countries like Zimbabwe or across Latin America in poverty while enriching investors. Are these Western-designed programs just a neo-liberal form of colonialism, as some suggest, or pragmatic ways to get countries onto the path of economic development? The debates are so divisive that China has moved into the space in countries that no longer trust the IMF, using its Belt and Road Initiative to invest in infrastructure and push its own influence. So, politics are driving this as well.
The IMF and World Bank may not always make things better, and there is even paranoia right now that Donald Trump, if he wins in November, might withdraw the US from the World Bank, which would devastate developing economies. Still, these two organizations are relevant and demand our attention.
At GZERO, we are committed to covering these topics and making them accessible and interesting. So please tell us what you think. If you have suggestions for things we ought to cover, or questions about events like the IMF-World Bank spring meetings, send us a note here, and we will post answers to some of your key questions next Thursday.
Thanks for your remarkable attention to all these matters, and now, let’s get at the rest of the news.
– Evan Solomon, Publisher
Have the US and Canada managed a soft landing?
While that’s a lot of “ifs,” it’s better news than expected last year when many were predicting a rougher go of things and a decent chance of recession.
Stateside, economists are tilting more and more toward the US avoiding a recession of its own, which is also good news for Canada. Inflation is increasingly under control and the labor market is holding up. Plus the Fed is expected to cut interest rates this year, maybe even three times.
Annualized GDP growth estimates for the first quarter in the US are now up to 2.8% while estimates in Canada for growth are hovering around an unexpectedly robust 3.5%. Canadian inflation was 2.8% in February and 3.2% in the US.
Consumers and businesses are hoping for a cut in Canada, too, perhaps as soon as April 10, when the Bank releases its next rate decision. But if it doesn’t lower rates next week, it’s expected to get around to it before too long, perhaps by summer.
Could this be good news for President Joe Biden and Prime Minister Justin Trudeau? As Evan Solomon explained, reality and perception are often far apart when it comes to such matters, so it depends on whether the politicians can convince voters to give them credit for the turnarounds.Rwandan President Paul Kagame attends the lighting ceremony of the Rwandan genocide flame of hope, known as the "Kwibuka" (Remembering), to commemorate the 1994 Genocide at the Kigali Genocide Memorial Center in Kigali, Rwanda April 7, 2023
Hard Numbers: Rwanda’s Kagame will run again, the EU takes on Uber, water contamination threat in Libya, US Fed keeps cool
4: Rwanda’s President Paul Kagame, who has been in power since 2000, announced that he’ll run for a fourth term in next year’s election.
Kagame, who has been accused of cracking down on the opposition, tweaked the constitution back in 2015 to extend presidential term limits. Asked about what “the West” might think of his move, Kagame, didn’t mince words: “What these countries think is not our problem.”
40: A top Uber executive has warned that an EU proposal to classify gig workers as employees could boost ride prices by as much as 40%. Brussels says Uber should provide more job security and benefits for its employees. Uber, which has come up against similar battles in Spain, the UK and elsewhere, says the measure will hurt consumers and lead to “devastating” job losses.
4,000: Over a week after a catastrophic flood tore through two dams in eastern Libya, killing 4,000 people (while 9,000 remain missing) the UN has warned that sewage is contaminating water supplies, raising the specter of waterborne diseases like cholera, diarrhea, and hepatitis.
5.25-5.55: The US Federal Reserve held interest rates steady at 5.25-5.55, still the highest level in more than two decades after 11 rate hikes beginning in March 2022. The decision gives policy makers some breathing room to plot their next moves amid subsiding inflation. Still, with price growth well above the Fed’s 2% target, rates could stay above 5% well into 2024, analysts warn.Correction:Yesterday, we incorrectly stated that the Fed's pause was the first in 18 months. The Federal reserve also paused rate hikes in June, 2023. We regret the error.
Federal Reserve Chair Jerome Powell looks on at the Jackson Lake Lodge in Jackson Hole
What’s the Fed’s next move?
It’s a tricky moment for the global economy. Growth is slowing around the world – particularly in China. The regional US banking crisis earlier this year sowed fears that further rate hikes could destabilize the industry. And inflationary pressures around the world – especially for food – are sending prices north, thanks to climate change and the war in Ukraine.
Powell is expected to strike a more optimistic tone this year – but not a triumphant one. After a year of 11 rate hikes (interest rates are at their highest levels in 22 years), the Fed has made significant progress in easing annual inflation, reducing it from 8.5% this time last year to today’s 3.2%. But it’s still higher than the Fed’s 2% target – and there are fears that high consumer spending will keep translating into higher prices. But there is also murmuring of the Fed pulling off a “soft landing,” where it manages to tame inflation without tanking the economy.
Consumers are burning through the last of their COVID savings, so the consumer spending problem could solve itself. Monetary policy takes time to ripple through the economy, but Powell needs to decide how patient the Fed can afford to be.
Rob Kahn, director of Eurasia Group’s Geoeconomics practice, expects the Fed to pause their rate hike cycle in September. But today Powell is likely to leave the door open for additional rate hikes and signal a willingness to maintain the Fed's tight monetary policy well into 2024.
But come November, Kahn anticipates one more 25-basis-point hike and says that the first cuts are only likely to come in mid-2024 as the Fed continues aiming for the holy grail of 2%.
Trader Warren Meyers watches the Fed Rate announcement on the floor of the New York Stock Exchange
Breather for the Fed?
For background, the Fed has been bumping up rates since March 2022, when pandemic-related stimulus and supply chain kinks were driving annual price growth towards 9%, a 40-year high.
But these days things are looking rosier. The latest data show annual price growth in May was just 4%, almost a full point below April’s clip. It’s the 11th consecutive month that inflation has fallen.
Falling energy prices, down nearly 12%, played a major role. And that’s despite Saudi Arabia’s recent decision to cut oil output by 1M barrels a day. Oil prices have actually fallen since then, as other petrostates keep pumping flat out, while the post-COVID economic recovery of China — the world’s largest oil importer — remains sluggish.
All of that leaves room for the Fed to hold rates. But if so, the reprieve may be short: Core inflation, which excludes fuel and food prices, is still above 5% — a long way from the pre-pandemic average of about 2%. Even if the Fed stands pat, it may still have to hit the hiking trail again at its next meeting in July.
Fed chair Jerome Powell leaves after a news conference in Washington, DC.
The Fed's last rate hike of 2023?
On Wednesday, the US Federal Reserve will announce whether it'll further raise interest rates to tamp down inflation, which has eased in recent months yet remained at 5% in March, well above the 2% level that economists like. It's likely that the Fed will go for another 0.25 percentage point hike — taking interest rates to between 5% and 5.25%, the highest level in 16 years.
But that's not what economists and investors will most pay attention to.
They will surely obsess over every word that Fed Chair Jay Powell says in his speech after the rate decision is announced — looking for any signal that it’ll be the last hike of 2023. Yet, don't be surprised if Powell keeps his cards close to his chest amid stubbornly high inflation, fears of a looming US recession, and financial sector jitters after the collapse of First Republic Bank.
"Our base case is that the Fed will pause there and hold that rate through to at least the end of the year," says Eurasia Group analyst Robert Kahn. "But it'll be interesting to see how the Fed handles it. They're not going to want to give any kind of assurances."
Larry Summers explains the banking crisis
On GZERO World, Ian Bremmer and former US Treasury Secretary Larry Summers discuss a range of topics, including the global banking system, the impact of AI on the labor market, and a controversial solution for rebuilding Ukraine.
Summers, an expert on inflation, provides valuable insights into recent bank failures that have caused concern among investors worldwide. He discusses whether the current situation constitutes a banking crisis, explores the role that inflation is playing in contributing to the banking problems, and makes predictions about the duration of the current financial turmoil.
He and Bremmer also touch on the impact of AI on the labor market, with Summers warning of significant changes that will cause profound shifts in traditional hierarchies and ways of thinking, which may make influential groups uneasy.
Summers also offers a provocative solution for rebuilding Ukraine: seizing frozen Russian assets.