Macro Highlights – February 2017

Macro Highlights - February 2017

Economists’ insight: China – What’s at stake with the yuan

The decline in foreign exchange reserves and the rise in capital outflows are a reminder that Beijing can only support the yuan for so long. However, rapidly switching to a floating exchange-rate regime would cause widespread instability.       

In the short term, the Chinese government holds the currency reserves it needs to continue guiding the yuan. Beijing should favour higher interest rates and tighten capital controls.

Focus on the United States: Business tax cuts could narrow corporate spreads

If Paul Ryan’s proposed corporate tax reform is implemented, the resulting tax cuts, the elimination of certain tax loopholes and additional deductions could provide a boost to the mining, manufacturing and information sectors.

The quality of corporate debt could be improved by tax cuts, and corporate bond issuance could decline if interest expenses are no longer deductible. These factors may lead corporate spreads to tighten.

Macro Highlights - February 13th 2017


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