FICC Focus Andersen’s Natalucci on Fallout in Financial Plumbing: EM Lens
Apr 9, 2025
Fabio Natalucci, CEO of the Andersen Institute for Finance & Economics and former Deputy Director at the IMF, joins Damian Sassower to tackle the intricacies of global economic challenges. They discuss the impact of central bank policies on recession risks in the U.S. and emerging markets. Natalucci highlights the complexities of currency dynamics and the influence of structural selling on the U.S. dollar. The conversation also covers the implications of credit default swaps and the need for international cooperation in navigating frontier markets.
AI Snips
Chapters
Transcript
Episode notes
Intentional Shock
- The current trade war shock is different from previous crises because it's an intended policy objective.
- This contrasts with exogenous shocks like the financial crisis, COVID-19, or the Russian invasion of Ukraine.
Differing Impacts of Tariffs
- Tariffs create a supply shock for the US, leading to inflation and slower growth, making the Fed's job harder.
- Conversely, for the rest of the world, it's a negative demand shock, giving them more room to ease monetary policy.
Potential Cracks in the System
- While the US financial system seems resilient, potential cracks are appearing in funding markets, like the widening gap between SOFR and effective federal funds rate.
- Understanding the reasons behind these cracks, such as hedge fund deleveraging or foreign countries' actions, is crucial for an effective Fed response.