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Council on Foreign Relations Daily News Brief
June 20, 2013

Top of the Agenda

Top of the Agenda: Fed Gives Timeline for Ending Stimulus

Jason Reed/Courtesy Reuters  

Jason Reed/Courtesy Reuters

The U.S. Federal Reserve may "taper" its bond-buying program (Bloomberg), currently at $85 billion a month, toward the end of this year and eliminate the program by mid-2014, Chairman Ben Bernanke said, anticipating improved growth and lower unemployment. The current program of quantitative easing has seen an unprecedented growth of the Fed's balance sheet. While Bernanke cautioned that the Fed will continue to provide stimulus if its expectations are not borne out, markets reacted adversely (MarketWatch): stocks fell and Treasury yields reached their highest level since March 2012 as investors sold off U.S. government bonds. Similar reverberations were felt across international markets (FT). The expectation that Bernanke will not serve (NYT) beyond his current term, which ends in January, has compounded market uncertainty.


"From the Fed's point of view, quantitative easing was always a form of insurance. Now that the likelihood of a disaster has diminished, they don't think it will be necessary for much longer. But that reasoning depends on the assumption that removing the insurance policy won't have any significant negative effects," writes John Cassidy for the New Yorker.

"The Fed's policy of forward guidance has been a useful tool in trying to damp expectations that it would choke off an emerging recovery. It should use the same tools to also raise our confidence that it won't allow inflation to fall any further," writes Justin Wolfers for Bloomberg.

"There's no question that Bernanke played a critical role in steering the global economy back from the brink in 2008 and 2009. Yet his unusual brand of policy activism did not end there--and here's where his legacy is more complicated. In five years we might look back and say that he bought just enough time for the United States to heal its economy--or that he's to blame for a new bout of disastrous financial turmoil," writes Mohamed A. El-Erian for Foreign Policy.



Japan, Brazil, to Move on Nuclear Pact

Japan and Brazil are expected to restart stalled talks on a nuclear cooperation accord (JapanTimes) at a bilateral meeting next week. Japanese prime minister Shinzo Abe considers exports of nuclear plant equipment as a cornerstone of his economic growth strategy.

This CFR Backgrounder discusses the three pillars of Abenomics.

CHINA: An annual U.S. State Department report cited China and Russia among the world's worst offenders in forced labor and sex trafficking, a ranking that could lead to U.S. sanctions (Reuters).

CFR's Mark P. Lagon's testimony to the U.S. House of Representatives discussed the rankings of individual states in the annual Trafficking in Persons Report.



Taliban Offers Hostage Trade

The Afghan Taliban said it would free a U.S. army soldier (AP) held captive since 2009 in exchange for five of their senior operatives imprisoned at Guantanamo Bay as a conciliatory gesture. The offer comes after this week's official opening of a Taliban political office in Doha, Qatar.

PAKISTAN: Pakistan said Thursday that it would fully support the reconciliation process (TheNews) in Afghanistan, adding that Islamabad supported U.S.-Taliban peace negotiations.



Lebanon Urges Hezbollah to Withdraw

Lebanese president Michel Sleiman urged Shiite group Hezbollah (AFP) to end its participation in the war in Syria and return to Lebanon, saying it was raising tensions at home. The remarks come after Hezbollah chief Hassan Nasrallah confirmed that the group would remain involved in Syria.

Andrew J. Tabler discusses Syria's collapse in this Foreign Affairs article.

TURKEY: A senior Turkish diplomat said Ankara could suspend dialogue (Hurriyet) with the EU if a section of the "regional policies" chapter is vetoed by Germany and the Netherlands.



Kenyatta Trial Postponed

The International Criminal Court has delayed the trial (BBC) of Kenyan President Uhuru Kenyatta until November 12 in order to give his defense team enough time to prepare. Kenyatta is accused of orchestrating violence after the 2007 election.

SOMALIA: Somalia's Islamist al-Shabaab rebel group threatened more attacks (Reuters), a day after a deadly assault at a UN compound in Mogadishu killed twenty-two people, including four foreigners.



Obama Dials Back Nuclear Stockpile

Barack Obama announced plans to cut U.S. nuclear weapon arsenals by a third in a speech in Berlin (Guardian) that also acknowledged unease over privacy violations and drone strikes. Obama also hinted at calls for greater German support for U.S. intervention in countries like Syria.

CFR's Charles Kupchan reflects on the president's Berlin speech in this interview.

SWITZERLAND: The Swiss parliament rejected for a second time a government bill (FT) that would have allowed Swiss banks to turn over business records to U.S. authorities.



Brazilian Cities Revoke Fare Hikes

Sao Paulo and Rio de Janeiro, Brazil's two biggest cities, revoked an increase in public transportation fares that ignited some of the country's biggest demonstrations this past week (MercoPress). The country is protesting against poor public services, corruption, and lavish spending on sporting events.



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