Donald Trump campaign resets. Turkish and Russian presidents meet. Brazil impeachment proceedings begin. Economies react to BoE decision. All in the Week Ahead.
Donald Trump hopes to use economic speech to reset after disastrous week
On Monday, Republican presidential candidate Donald Trump will deliver a speech on economic policy at the Detroit Economic Club. He is likely to use the speech to try to move beyond the past few weeks, which have been overwhelmingly negative for his campaign and for down-ballot races. Commentary regarding the RNC convention three weeks ago largely fell around three themes: his wife Melania Trump’s plagiarism of one of Michelle Obama’s previous speeches, Senator Ted Cruz’s failure to endorse Trump during his own convention speech, and the dark and apocalyptic tone of Trump’s own acceptance speech. In the following week, Democrats delivered a largely successful convention, with praise for Michelle Obama, President Obama, and Vice President Joe Biden’s speeches.
Last week was preoccupied with unconventional comments made by Trump, including: his criticism of the mother and father of a Muslim U.S. soldier killed in action who spoke at the Democratic convention; his inability to endorse (“I’m just not there yet”) House Speaker Paul Ryan and Arizona Senator John McCain in their own primary battles; the dismissal of a slew of polls that show him lagging behind both nationally and in key swing states; and his contention that a loss by his campaign would likely be because of a rigged system. A number of prominent Republicans or Republican-leaning independents have also announced that either they will not be voting for Donald Trump or they will be actively supporting Secretary Hillary Clinton, including: Illinois Representative Adam Kinzinger and New York Representative Richard Hanna, HP CEO Meg Whitman, hedge fund manager Seth Klarman, former Jeb Bush and Chris Christie campaign officials, and former New Hampshire Senator Gordon Humphrey. The Clinton campaign has largely stepped back and allowed the Trump campaign’s comments to unfold organically, but it is highly likely they will push back if Trump attempts to move the conversation away from his politically damaging comments.
Turkish and Russian presidents meet in Russia
On Tuesday, Turkish President Recep Erdogan and Russian President Vladimir Putin will meet in St. Petersburg to discuss bilateral relations and global developments. The two countries have had at times strained relations, including in November when Turkey shot down a Russian jet over what was thought to be Turkish territory. The two are also on opposing sides in the Syria conflict.
However, with the recent attempted coup in Turkey, President Erdogan is likely looking for allies as he attempts to shore up his administration. His arrests and dismissals of thousands of government officials, teachers, professors, and journalists, among others, have led to swift condemnations from the United States and Europe. It appears that President Erdogan will use this visit as an opportunity to shore up alliances and hope that allied countries more concerned with his post-coup behavior will eventually come around to supporting his administration again. On the Syrian front, Prime Minister Binali Yildirum suggested that the door was opened a crack to eventually normalizing relations with the Syrian government, as it had normalized relations with Israel and Russia.
Should Turkey alter its relations with the Syrian government — something the Russian government would doubtless support — this could upset initiatives by the U.S. government and NATO allies to counter both the Assad regime in Syria as well as ISIS operators both in Syria and Iraq. Without Turkish support, this could complicate U.S. potential moves to counter ISIS in Mosul in the fall, and could further destabilize the Middle East and prolong the conflict in Syria. On the Russian side, Russia has tried to improve relations with Turkey, being the first major country to unequivocally condemn the coup attempt in Turkey, and with rising anti-American and anti-European sentiments in Turkey, Russia could become a natural partner for Turkey.
Brazil Senate votes to open impeachment proceedings
This week, while the Olympics are underway in Rio — schedule here — over in Brasilia members of the Brazilian Senate will vote to begin the impeachment trial of PT President Dilma Rousseff, who was forced to step down as Brazil’s head of state when the Senate voted to impeach her. Last week, a Senate committee voted 14-5 to recommend removing Rousseff from office permanently. In the event the Senate votes not to convict President Rousseff, she will be reinstated as president and current interim president and former Rousseff VP, Michel Temer, will be removed from the presidency. Otherwise, she will be removed from office and interim President Temer will be instated as permanent president for the duration of President Rousseff’s term in office which ends in 2018.
The timing is ironic, considering the Rousseff and Silva administrations worked strenuously to bring the 2016 Olympics to Brazil. The consensus among many Brazil-watchers has been that there will be sufficient votes in the Senate to remove Rousseff from office, though the trial is slated to take several weeks and the final outcome is not likely to be revealed until the end of August.
Global economies react to BoE decision to cut interest rates
This week, central banks from Japan to the United States will digest the consequences of the Bank of England’s decision to lower British interest rates from 0.50% to 0.25%, the first rate cut — or move of any kind — for 7 years. The Bank also indicated it was willing to go lower if necessary, although Bank Governor Mark Carney has repeatedly expressed skepticism at offering negative interest rates, and also said it would introduce a £100 billion program to compel British banks to move the 0.25% interest rate cut to businesses and homeowners. Speaking to reporters, Carney indicated that his goal was to “reduce uncertainty, bolster confidence, blunt the slowdown, and support the necessary adjustments in the UK economy [as a result of Brexit].” The Bank is particularly concerned about inflation, as the value of the pound has fallen since the Brexit vote and the rising cost of imports in pounds could lead to rising prices and domestic inflation.
Several economies have largely, it appears, been able to absorb the shock of a shift in 7 years of stable monetary policy from the Bank of England; by Friday, the U.S. S&P had reached one of its highest levels in history, buoyed in part by a surprisingly strong July jobs report. There are also suggestions that the Bank’s interest rate decision could make it less likely for the Federal Reserve to raise interest rates, despite strong July numbers and the headache of major interest rate decisions near elections; a significant boost in the value of the U.S. dollar while the banks of England and Australia are providing stimulus could significantly deplete U.S. exports and drag down economic growth.
The Week Ahead provides analytical foresight on the economic consequences of upcoming political developments. Covering a number of future occurrences across the globe, The Week Ahead presents a series of potential upside/downside risks, shedding light on how political decisions affect economic outcomes.
The Week Ahead is written by GRI analyst Brian Daigle.
