The Cost of Complacency

Summary

The financial markets enter the final stretch of the year with their eyes set firmly on the trade war and Brexit, meaning that the optimism surrounding the favorable resolution of both matters could be the stimulus that the world economy needs to regain momentum.

Key points

• Key points:
• The margin for action in monetary and fiscal policy is considerably smaller than at the end of 2016, when the world economy entered a phase of prolonged expansion following the slowdown in the previous year.
• The response by the central banks has avoided disaster in the short term but has sharpened the incentive for agents to adopt risky financial positions, compromising growth in the medium term.

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