The dollar, the currency that powers global trade, is on a tear that has few parallels in modern history. Its ascent is the result primarily of the Federal Reserve’s aggressive rate-hiking – it raised by another 75 basis points on Wednesday – and has left a trail of devastation: Driving up the cost of food imports and deepening poverty across much of the world, fueling a debt default and toppling a government in Sri Lanka, and heaping losses on stock and bond investors in financial capitals everywhere. (Bloomberg Business | The Big Take | Jul 27)
Not convinced by central banks' pledge to stamp on inflation, many investors are on the hunt for assets that will protect their portfolios from years of decline in the value of money. These funds are buying up inflation-linked bonds and real estate, while also taking long-term bets on the outperformance of stocks, including those in industries like timber and farmland. (Reuters | Jul 27)
China tried to build a network of informants inside the Federal Reserve system, at one point threatening to imprison a Fed economist during a trip to Shanghai unless he agreed to provide nonpublic economic data, a congressional investigation found. (The Wall Street Journal | Jul 27)
An SEC whistleblower program designed to prevent another Bernie Madoff-type scandal often ignores its own rules, shields much of its work from the public, and has been a financial boon for law firms that hired former agency officials, a Bloomberg Law investigation has found. (Bloomberg Politics | Jul 26)
The IMF has slashed its global growth forecasts and raised its projections for inflation, warning that the risks to the economic outlook are “overwhelmingly tilted to the downside.” The downgraded estimates, released on Tuesday, come as the world grapples with the fallout from Russia’s invasion of Ukraine, prolonged disruptions caused by the coronavirus pandemic and rapidly tightening financial conditions, with central banks seeking to contain soaring prices. (Financial Times | Jul 26)