The Week Ahead: 5 – 11 November

The Week Ahead: 5 – 11 November

Argentine Central Bank rate change. Brexit talks restart. Trump goes to Asia. US tax changes. All in the Week Ahead.

Argentine Central Bank considers rate change as president mulls reforms

  • This Tuesday, the Argentine Central Bank will meet to consider whether to raise its interest rates above its current 26.25%, following last month’s 25-basis point increase. The Argentine Central Bank has been relatively stable over the last year, lowering interest rates .25% last December, then raising them .25% in May and again in October. Many market analysts consider December to be the likeliest point for another rate hike this year, but a central bank move this week would not be surprising.
  • The bank is likely mulling the possible monetary implications of the reform measures President Mauricio Macri intends to bring to the Congress’s attention. In what had been widely viewed as a referendum on his presidency and reform efforts, the Macri pro-market, center-right coalition Cambiemos performed well in midterm elections in October, carrying 13 of 23 provinces and emerging as the largest bloc in the Congress.
  • The markets have responded positively to the development, and there now appears to be momentum to push through a series of labor and structural market reforms to move Argentina more towards the Pacific Alliance bloc perspective of open markets and multilateral economic engagement.

GRI take: Fast growth and market encouragement have helped to lift President Macri’s popularity and voters appear to be giving his presidency a chance to move Argentina away from double-digit inflation and weak growth projections. However, should the Peronist wings detect any weakness in popularity, they are likely to push back and will now have a powerful new senator to assist them, former president (currently facing corruption charges) Cristina Fernandez de Kirchner.

Brexit negotiations begin again, following rough patch and Cabinet shakeup

  • Negotiations over Brexit between the UK and EU governments are slated to begin again this week after a disappointing meeting in October where Prime Minister Theresa May failed to move forward on trade negotiations because EU negotiators felt Brexit negotiations hadn’t moved far enough. They also come on the heels of revelations that the May government’s proposal of a Canada-esque trade deal is likely to fail because the UK would have to provide equitable access to Canada, South Korea, Israel, and other EU free trade agreement partners, severely hampering its sovereignty in trade matters.
  • Adding to these complications, the British political system, and the May cabinet, is in turmoil following a series of sexual harassment allegations from MPs and senior government officials. Although members of both the Conservatives and Labour Party have been ensnared in scandal, the biggest revelation was the inappropriate behavior of defense minister and May ally Michael Fallon, which last week led to his resignation from the cabinet. May’s appointment of chief whip Gavin Williamson, who has no military experience and has never led a government agency, has been controversial.
  • Further revelations of sexual harassment have led senior Conservative leaders like the Scottish Conservatives’ Ruth Davidson to call for a more robust response to harassment in the political sphere, suggesting that .

GRI take: This week’s meetings may not yield much, after British officials informed The Telegraph that these would be “talks about talks”, much to the astonishment and anger of the EU negotiators.  Nevertheless, the EU would do well to treat Brexit as an opportunity, not an obstacle.

President Trump heads to Asia in first trans-Pacific trip

  • This week, the president will be in South Korea, Japan, and China to meet with leaders and discuss Asia-Pacific security and economic matters. The tone and outcome of these meetings will be very important, as U.S. allies in the Pacific have become concerned (and in some cases alarmed) by the disengagement of the U.S. president from key issues in the region and a seeming ambivalence to decades’ old alliances.
  • His provocative statements on North Korea and its nuclear ambitions have led to market jitters in Asia, and his close ties to Philippine president Rodrigo Duterte has led to concerns across the region that human rights have been dropped as a pillar of U.S. foreign policy.
  • Trump is also slated to meet with Russian president Vladimir Putin, which has led to controversy domestically and is likely to further inflame discussions about the role of the Russian government and its affiliates in his presidential campaign. Reports that special prosecutor Bob Mueller has enough information to indict key advisor Michael Flynn could also engulf Washington as the president seeks to strengthen ties with the Asia-Pacific.

GRI take: Concerns have already emerged that the trip may not measure up to expectations following the announcement that the president will cut his trip short by a day and not attend the East Asia Summit (though this now appears to have been reversed).

Senate to announce tax changes bill, House pushes theirs

  • This Wednesday, Senate Republicans are slated to release their version of a long-awaited tax bill. It is uncertain the extent to which the Senate tax cut bill will differ from the House bill, but the key change will be whether it allows for an expansion of deficits by $1.5 trillion like the House bill does.
  • The House tax bill, released last week, is slated to substantially alter some of the underlying structural elements of the U.S. tax code while nibbling away at certain tax deductions. Several deductible items that were removed in the House bill, including the state and local tax (SALT) deduction, and the deductions for student loans and medical expenses, have drawn substantial early opposition from Democrats and at least a few Republicans.
  • In addition, the House tax bill collapses the income tax brackets from 7 to 4 and moves the highest bracket from those who make $400,000 or more to those who make $1 million or more, effectively creating a tax cut for the upper middle class without any major direct tax cuts for any other income bracket.
  • The Senate bill may not include the all deduction removals (moderate Republican Senator Susan Collins opposes removing the estate tax as well as cutting taxes on the wealthy), which could create problems for a final bill’s passage.

GRI take: Ultimately, whatever bill emerges from both houses is likely to be the most important bill for this Congress, following the total failure of any Congressional effort to repeal the Affordable Care Act, and the Republican Party faces enormous pressure both internally as well as from donors and constituents to present a policy win ahead of voters next November.


Stay ahead of the news cycle with GRI. Drawing on expert knowledge and local sources, The Week Ahead provides analytical foresight on the consequences of key upcoming political developments.
This edition of The Week Ahead was produced by GRI Senior Analyst Brian Daigle and Senior Editor Luke Iott.
Categories: Politics, The Week Ahead

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