The Fed changes tack, why no second Plaza Accord and why markets punished Brazil

Capital Economics Weekly Briefing

The final Weekly Briefing from Capital Economics of the year has Group Chief Economist Neil Shearing making sense of that December Federal Reserve meeting and explaining what the latest PCE data say about the inflation outlook and where rates are heading in 2025. He also addresses why hopes for a sweeping ‘Mar-a-Lago accord’ (or 'Plaza Accord 2.0') that would tackle US-China currency imbalances are likely to be disappointed.

Plus, a dramatic plunge in the value of Brazil’s real shows how far investors have fallen out with Lula’s spendthrift administration. In an exclusive clip from our client briefing on Brazil’s crisis, William Jackson, Jason Tuvey and Jonas Goltermann discuss the real’s fair value, the effectiveness of FX intervention and what the government needs to do to get investors back onside.

Events and analysis referenced in this episode:

The Fracturing of the Global Economy
https://www.capitaleconomics.com/key-issues/fracturing-global-economy

Data: Bank of England Caseometer
https://www.capitaleconomics.com/data-and-charts/bank-england-caseometer

EM Drop-In: Brazil’s currency crisis – Economic and market implications
https://www.capitaleconomics.com/events/em-drop-brazils-currency-crisis-economic-and-market-implications

Data: EM Financial Risk Indicators
https://www.capitaleconomics.com/data-and-charts/em-financial-risk-indicators