Crucial referendum in Macedonia. Fed likely to raise interest rates in US. All in The Week Ahead.
MACEDONIA: Referendum could end years of diplomatic conflict with Greece
- On Sunday, Macedonian voters will head to the polls to determine by referendum whether to change the name of their country to North Macedonia. The name change, negotiated by the Macedonian and Greek governments, would end years of conflict between the two (Greece has long claimed the name Macedonia for a Greek region of the same name, as well as the historical precedent of the name Macedonia used to cover Greece).
- This conflict has stalled Macedonian access to NATO and the European Union (Greece, a member of both, has vetoed any discussion of allowing Macedonia to move forward in either). This has led to the leading wording of the referendum “Are you for EU and NATO membership by accepting the agreement between the Republic of Macedonia and the Republic of Greece?”, which has been criticized by opposition parties for being manipulative.
- Most public polling has indicated that the measure, despite the opposition of conservative parties and the opposition boycott of the vote in parliament, is likely to secure a majority of voters. However, there is uncertainty regarding whether 50% of voters will show up to make the result valid.
GRI take: It is uncertain what the Macedonian government will do in the event the majority votes against the agreement or less than 50% of voters show up. However, if it does cross the threshold necessary for support, the Macedonian constitution will be amended, and it will then fall to Greece’s parliament to ratify the agreement. Given the strong support from European nations to this change, it is likely that the EU and NATO will work to incorporate Macedonia into their respective bodies should the name change be successful.
UNITED STATES: Federal Reserve likely to raise interest rates
- This Wednesday, the Federal Reserve Bank board members will meet to discuss whether to raise the federal funds rate from 1.75%-2% to 2%-2.25%. This will mean there have been more than 6 interest rate hikes since the beginning of 2017, when rates were at their year-long 0.5% (previously rates were at 0).
- While most assume the rate will increase, potentially as important will be the Fed’s view of future rate hikes. This September rate hike had been assumed in part due to statements nearly a year ago that the Fed expected at least 3 rate hikes in 2018.
GRI take: As the year comes closer to ending, the Fed may send firmer signals of where it intends to move in 2019. Key components of this will include general growth projections for the U.S. and global economies, and possibly a discussion of the potential impact of the trade measures enacted by the Administration (though the Federal Reserve may offer more oblique references to developments of “economic uncertainty”). While the Federal Reserve is making these moves to restrict inflation, though with inflation not nearly as high as one might expect given U.S. growth, and with the labor market fairly tight, it remains an open question how far the Fed intends to go. Any comment offering a signal to the future will be watched closely, particularly as the policy environment may change substantially depending on the outcome of the November midterm elections.
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