JACKSON, Wyo. — As top economists from around the globe gather for their annual conference in Jackson Hole this week, they will have a collective hope in mind: that the world’s political leaders will work to help safeguard economic growth.
Economies from the United States to the European Union to China are slowing, presenting a challenge for central bankers, whose tools are limited at a time when interest rates remain historically low in much of the world.
In the United States and Britain, central bankers are hoping that trade uncertainty and political strife will not kill long economic expansions.
And from Australia to Europe, policy makers have been urging politicians to step up their spending, hoping that a hand from the government will spur consumption and keep their economies from tipping into recession.
But there is a vast divide between technocrats trying to salvage waning global growth and politicians with an eye on their voting bases.
President Donald Trump is locked in a trade war with China, with the latest round of tariffs scheduled to take hold Sept. 1, and he shows no intention of backing down. US tariffs on European automobiles remain a possibility.
Britain is negotiating its exit from the European Union, and the likelihood of a no-deal departure, which could be economically punishing for the country and its major trading partners, has escalated with Boris Johnson’s rise to prime minister.
Complicating matters is Trump’s view that what is good economically for other countries is bad for America — a position that has led him to criticize efforts by central banks to keep their expansions on track. On Thursday, he again needled the Federal Reserve Board over Germany’s low interest rates, suggesting that negative interest rates on German bonds were putting the United States at a disadvantage.
Global political brinkmanship is adding to the uncertainty just as factories around the world slow production and businesses hold off on investment, stoking fears of a more concerted slowdown.
“Important countries are not in good shape,” said Roberto Perli, the head of global monetary policy research at Cornerstone Macro. He said there is a risk of a significant and protracted global slowdown with the potential for outright recession in some nations, such as Germany. “It started for largely cyclical reasons, but since then, other factors have intervened — trade, most importantly.”
While central bankers strive to be politically independent and avoid giving elected leaders advice, they have acknowledged that government policies are threatening growth.
The Fed cut interest rates for the first time since the Great Recession in July, a move driven in part by Trump’s trade policies and partly by the broader slowdown in global growth.
Jerome H. Powell, chair of the Federal Reserve, speaks Friday and is expected to suggest that additional rate cuts are on the table, without signaling how many or giving a specific timeline. Tariffs — and their likely escalation — are keeping the Fed and its global counterparts on edge.
Central bankers have begun warning that their ability to defend their economies is limited, especially because many never managed to sustainably lift interest rates back from rock bottom after cutting them during and after the global financial crisis.
Many are looking to their political leaders — who will gather in Biarritz, France, for the Group of 7 meeting this weekend — to help keep the world’s prosperity going.
While consumer spending is holding up in the United States and growth remains decent, manufacturing is slowing, and consumer confidence sank in August. Businesses reported holding off on investment as they waited to see how the trade war plays out.
Trump has also begun mulling more tax cuts to lift the US economy, though on Wednesday he insisted it did not need one right now. And the Fed has room to cut rates, should a recession hit. The challenge is primarily one of intense policy uncertainty.
Europe, by contrast, has negative interest rates and a fraught economic backdrop.
In Germany, where China’s slowdown is hurting the manufacturing sector and the economy contracted in the second quarter, the government has been slow to spend more aggressively.
Italy is also struggling, but it already has a heavy debt load, limiting its room to maneuver.
The European Central Bank, which runs monetary policy for 19 European countries, is expected to cut interest rates deeper into negative territory and even consider asset purchases in a bid to protect growth — but it is low on ammunition.
Like Powell, Mark Carney, governor of the Bank of England, is paying attention to politically created risks. He warned in a recent BBC interview that a no-deal Brexit would create an “instant” shock. The bank had been setting up for potential rate increases, but investors increasingly expect cuts instead as global growth wanes and trade tensions loom large.
In Australia, the central bank has cut rates to record-low levels as the economy weakens and threats to the nation’s 28-year-old expansion loom large. The threats include precarious household consumption and the broader slowdown in Asia.
Economic action might be needed sooner rather than later: Recession signals have been flashing in US bond markets, Japan and South Korea are engaging in their own trade war, and consumer and business confidence have taken a hit in many parts of the world.
While recession is far from guaranteed, it is looking increasingly likely in a number of places, including the United States.