MacroScope

The thin line between love and hate

The opinion on Turkey’s unorthodox monetary policy mix is turning as rapidly as global growth forecasts are being revised down.

Earlier this month, its central bank was the object of much finger-wagging after it defied market fears over an overheating economy by cutting its policy rate. It defended the move, arguing that weaker global demand posed a greater risk than inflationary pressures.

Investors were not persuaded. When I told one analyst about the Turkish rate move, he practically sputtered down the phone: “You’re not kidding?!”

The lira sold off, dropping to 2-1/2 year lows against the dollar.

But the central bank could yet be vindicated. With fears intensifying over weakening global demand, its decision to cut rates looks increasingly prescient. As my colleague Sujata Rao has pointed out, other emerging-market central banks have followed the Turks.

Witness Societe Generale’s head of emerging markets strategy Benoit Anne‘s mea cupla in a note issued just two weeks after Turkey’s controversial rate decision:

APEC Summit looms as US trade pacts lag

The White House could face the embarrassing possibility of President Barack Obama hosting the annual APEC leaders summit in November without managing to win approval of free trade pacts with South Korea, Colombia and Panama.

Administration officials say there is every reason to expect the long-delayed trade deals can still be passed in September, a good two months before Obama welcomes South Korean President Lee Myung-bak and 19 other APEC leaders to Honolulu.

But as yet, Obama has not even submitted the agreements to Congress, saying he first needs an iron-clad guarantee from Republicans in the Senate and House of Representatives that a worker retraining program known as Trade Adjustment Assistance will be passed along with the trade pacts.

from Davos Notebook:

Will Goldman’s new BRICwork stand up?

RTXWLHHJim O'Neill, the Goldman Sachs economist who coined the term BRICs back in 2001, is adding four new countries to the elite club of emerging market economies. But does his new edifice have the same solid foundations?

In future, the BRIC economies of Brazil, Russia, China and India will be merged with those of Mexico, Indonesia, Turkey and South Korea under the banner “growth markets,” O'Neill told the Financial Times.

Hmmm.  Doesn't quite grab you like BRICs, does it? The Guardian helpfully offers an amended branding banner of  "Bric 'n Mitsk" (geddit?). But which ever way you cut it, it's hard to see a flood of investment conferences and funds floating off under the new moniker.

from Global Investing:

PIGS, CIVETS and other creature economies…

Given the ubiquity of BRICs and PIGS, it seems everyone else in the financial and business world is attempting to conjure up catchy acronyms to group economies with similar traits. All with varying degrees of success. BRITAIN-WEATHER/

HSBC chief Michael Geogehan has been championing 'CIVETS' to describe Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa as the next tier of developing economies poised for spectacular growth.

Evoking the skunk-like animal blamed for the spread of the deadly SARS outbreak in Asia is not exactly auspicious but then it will probably be less offensive than the porcine moniker for Portugal, Italy, Greece and Spain. The collective term -- with permutations such as PIIGGS to include Ireland and Great Britain among the list of debt-ridden countries -- has been denounced by politicians in Portugal and Spain.