The Week Ahead: 10-16 June 2018

The Week Ahead: 10-16 June 2018
ECB/Fed policy decisions. US/North Korea summit in Singapore. Colombian presidential election. All in The Week Ahead.

NORTH KOREA: Following disappointing G7 summit, US-North Korea summit to begin in Singapore

  • On Tuesday, the U.S. and North Korean governments will meet to hold an official bilateral summit in Singapore.
  • The Singaporean government has spent weeks preparing for the high-level affair, which both President Trump and Kim Jung-Un are slated to attend. The week of meetings, which should include a meeting between Kim and Trump, will follow on the heels of a largely unsuccessful U.S. performance at the G7 summit in Canada, where not only did President Trump argue for the readmission of Russia to the G7 (quickly seconded by newly minted Italian prime minister Giuseppe Conte), but cancelled meetings with French President Macron and Canadian prime minister Trudeau, likely due to public disagreements with the two leaders.
  • In addition to leaving early, President Trump largely sent the message that collaboration with major allies was a back burner issue for the government. On the North Korea front, the administration has also sent lots of mixed messages. Secretary of State Mike Pompeo, who has worked behind the scenes (even while head of the CIA) to arrange the meeting, pointed to significant potential to denuclearize the Korean peninsula.

GRI take: President Trump has indicated he doesn’t plan to prepare much for the event, indicating the bilateral meeting would be mostly about attitude. He also noted that “anything” could happen and that the negotiations could end with nothing. With such uncertain objectives, an unclear path to achieve it, and inconsistent behaviors and attitudes, there is substantial variability over what to expect this week in Singapore.

COLOMBIA: Runoff Colombia presidential election likely to lead to victory of right-wing candidate

  • On Sunday, Colombian voters will select President Santos’ successor, either right-wing Ivan Duque or left-wing candidate Gustavo Petro. In last month’s initial election, Duque emerged as the largest vote-getter, and that elevated support is likely to continue in the runoff: polling has placed him around 10-15 points ahead of Petro and most believe he is likely to prevail.
  • What this means for Colombia is somewhat uncertain at this point; Duque, with support from former hardliner President Uribe (now a senator) was able to consolidate sufficient support in both the major cities and rural areas to push ahead of more moderate candidates on either end of the spectrum. He did this, in part, by harshly criticizing the deal negotiated by the Santos government and the FARC, which ended decades of conflict by legitimized the FARC as a political force.
  • Despite initial concerns he may scrap the deal entirely (President Uribe had campaigned against the referendum to ratify the agreement), most now believe he will seek to change it.

GRI take: Just what the change will mean is up to interpretation: while comments like “FARC got a better deal than their victims, and I’m the one who will right this injustice” makes for an effective campaign mantra, without a plan to actually change the situation could open Duque to explosive and potentially political capital-draining negotiations with Congress and other key political players. Walking back these comments could also prove difficult; by ginning up support with strong statements on the FARC agreement, particularly among the Colombian right, dampened enthusiasm could create major future headaches if it provides an opening for the Colombian left.

UNITED STATES: U.S. Federal Reserve and European Central Bank interest rate decisions could point to future rate hikes

  • This Wednesday and Thursday, the U.S. Federal Reserve and European Central Bank, respectively, will vote on interest rates for the US and Eurozone economies.
  • There have been several indications that the Federal Reserve is slated to raise interest rates by 25 basis points to 1.75 to 2%, as inflation is approximately where the Federal Reserve has determined it is supposed to be (around 2%) and unemployment continues to rest at historic lows. The European Central Bank, while not likely to raise interest rates (which have not moved since early 2016 and haven’t been raise since 2011), may announce that it will not extend its stimulus efforts beyond September.

GRI take: Both developments would be interesting as they would reflect a further decoupling between the political environments of the two areas (which are, to put it mildly, chaotic and uncertain) and monetary policy. Particularly with threats of trade disruption between the EU and United States, this separation between the restrictive monetary policy and domestic/international policy does not appear to be sustainable. But for the time being, it appears likely that both the ECB and Federal Reserve will pursue a tightened monetary policy.

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.

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