Macro Highlights August 3rd 2015

Analysis - 8/3/2015

Our Investment Research Department publishes a weekly newsletter with a round-up on the main economic developments and news flow.

The reprofiling of Greece will mean huge concessions.

The climax of the Greek debt crisis appears to be over. For the first time, the political decision-makers, i.e. the Euro Zone’s heads of state and government—and not just the European Central Bank (ECB)—deliberately chose to keep Greece in European Monetary Union. Subject to Greece’s acceptance of reforms, they reached an agreement that paves the way for a third bailout plan. However, the “Greek problem” is not about to disappear as if by magic. (...)

The US Federal Reserve looks set to raise interest rates in October.

The statement that followed last week’s US Federal Open Market Committee (FOMC) meeting matched our macroeconomic scenario of steady growth driven by strong private consumption. The terms used in the communiqué hint that the Fed will raise interest rates soon in view of good employment indicators, even though wage growth is not as strong as expected. (...)

America’s public debt is unparalleled, but so is investor confidence.

The United States government has the largest national debt in the world, $18 trillion, which moreover is set to grow 3.5% a year on average until 2025. And yet, the US Treasury is able to attract investors from the four corners of the earth. Why do they trust America while fearing the level of debt in the Euro Zone, for instance? The answer can be found by analysing the sustainability of the US public debt. (...)