Global investors will tune in on the nation’s capital Thursday as the new head of the IMF will talk about the challenges the world economy faces, and the Federal Reserve will hold a conference on bank systemic risk.
Over in Congress, investors may get their first clues this week on how much of President Barack Obama’s jobs plan will make it into law. The supercommittee charged with keeping the U.S. public debt under control, meanwhile, holds its first substantive meeting on Tuesday.
IMF Managing Director Christine Lagarde, a former French finance minister who was deeply involved in Europe’s debt crisis, will discuss policies she believes are needed to put the world economy back on track. Her first Washington address since becoming chief of the global lender comes at a time of deepening concerns that Europe’s fiscal crisis could tip the global economy back into recession.
Worries that a wider crisis could be triggered by the euro zone’s debt woes dominated a meeting of finance ministers and central bankers from the world’s largest advanced economies in Marseille, France, over the weekend. Moody’s Investors Service may cut the credit ratings of France’s largest publicly traded banks because of their exposure to Greek sovereign debt, according to people familiar with the matter.
The U.S. central bank conference, where Fed Chairman Ben Bernanke and his top regulatory right-hand man Governor Daniel Tarullo both speak on Thursday, will focus on the unsolved problem of banks which are so big and interconnected that they pose a threat to the economy. To help prevent another financial crisis, new international requirements call for banks to set aside capital worth 7% of their assets to guard against potential losses, up from 3% previously. Tarullo has suggested a range of between 8% and 14% of assets.
To help cut a U.S. unemployment rate still above 9.0%, most of the Obama $450 billion stimulus plan unveiled Thursday focuses on Social Security tax cuts. Remarks by senior Republican lawmakers this week will be scrutinized for signs of where they stand on the proposal. On Tuesday, the select committee on deficit reduction will hear from Congressional Budget Office Director Douglas Elmendorf.
Economic data for August out this week are expected to show the recovery continues at a slow place–retail sales should rise despite the hit to confidence from Washington’s fierce debt fight, while inflation remains subdued, giving the Fed scope to ease credit further at its Sep. 20-21 meeting.
Washington, September 12, 2011 (Dow Jones)
