Delivering Global Macro Investment Insights

DeSaque Macro Research

DeSaque Macro Research Limited was formed by Said DeSaque in April 2012 with the view to delivering global macro investment insights aimed at providing new ideas to clients.

Said DeSaque has over 26 years of experience working as a professional economist in financial services. Prior to establishing DeSaque Macro Research, Said held positions as Senior Economist at Robert W Baird and William Blair. He began his career as a graduate at PaineWebber in 1986, where he eventually became Head of the London Economics Department.

Said takes a very keen interest in international relations, along with their implications for economic development. His research interests include the economic transformation of China and its implications for global capital markets, particularly in the United States. He is a member of Chatham House in London.

The US economy and capital markets have historically been Said’s main focus of attention. He frequently presents his views to institutional investors in diverse geographic locations. In recent years, Said has also been carefully monitoring economic developments in Asia, particularly China and Japan.

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Global Economist, DeSaque Macro Research

Said Desaque

Global Economist

Macroeconomics

Weakness in US manufacturing has raised enthusiasm for the Fed to cut the federal funds rate by 50 basis points later this month, although services remain robust. Trade shocks to the economy are usually transmitted via the manufacturing sector, but hitherto there is little evidence of wider dispersion to other sectors. Meanwhile, supply-side developments in the labour market could determine the final destination of the unemployment rate and, consequently, the need for further insurance rate cuts.The People's Bank of China (PBoC) has responded to weakening in the economy with another reduction in reserve requirements to increase bank lending capacity. The lower reserve requirements come in the aftermath of the establishment of a new benchmark for bank lending rates aimed at improving the interest rate transmission mechanism, particularly for small businesses.President Trump could raise pressure on the Fed if the lower bank reserve requirements in China are followed by a reduction in the PBoC's new policy rate as well as further weakness in the yuan exchange rate. Fed Chair Powell recently appeared to push back in terms of guaranteeing more policy rate cuts after this month's promised reduction due to the respectable state of the economy.Historically, the Fed has avoided large single cuts in the federal funds rate unless economic data is unambiguously weak or there are risks of emerging dysfunctional credit markets (currently absent). A plausible Fed policy scenario involves another 25 basis points policy rate cut next month, followed by a pause to evaluate incoming economic data and, consequently, determining whether recession risks have been fully mitigated.President Trump has blamed the Fed for the strong dollar and there are rumours that the Administration is contemplating foreign exchange intervention. Any attempts at driving the yuan lower will be done in the offshore yuan market, but this could simply provoke Beijing to institute tighter capital controls as US foreign exchange intervention would be viewed as political decision undertaken by the Trump Administration.

Weakness in US manufacturing has raised enthusiasm for the Fed to cut the federal funds rate by 50 basis points later this month, although services remain robust. Trade shocks to the economy are usually transmitted via the manufacturing sector, but hitherto there is little evidence of wider dispersion to other sectors. Meanwhile, supply-side developments in the labour market could determine the final destination of the unemployment rate and, consequently, the need for further insurance rate cuts.The People's Bank of China (PBoC) has responded to weakening in the economy with another reduction in reserve requirements to increase bank lending capacity. The lower reserve requirements come in the aftermath of the establishment of a new benchmark for bank lending rates aimed at improving the interest rate transmission mechanism, particularly for small businesses.President Trump could raise pressure on the Fed if the lower bank reserve requirements in China are followed by a reduction in the PBoC's new policy rate as well as further weakness in the yuan exchange rate. Fed Chair Powell recently appeared to push back in terms of guaranteeing more policy rate cuts after this month's promised reduction due to the respectable state of the economy.Historically, the Fed has avoided large single cuts in the federal funds rate unless economic data is unambiguously weak or there are risks of emerging dysfunctional credit markets (currently absent). A plausible Fed policy scenario involves another 25 basis points policy rate cut next month, followed by a pause to evaluate incoming economic data and, consequently, determining whether recession risks have been fully mitigated.President Trump has blamed the Fed for the strong dollar and there are rumours that the Administration is contemplating foreign exchange intervention. Any attempts at driving the yuan lower will be done in the offshore yuan market, but this could simply provoke Beijing to institute tighter capital controls as US foreign exchange intervention would be viewed as political decision undertaken by the Trump Administration.

US Economic Data Suggests 75 Basis Points Cumulative Fed Easing as China Loosens Monetary Screws