US potential growth has likely slowed to 2-2.5%, because of lower labour-force growth, taking the neutral rate slightly lower. Arguments for permanently weaker US investment and productivity growth are unconvincing.
• The foreign ‘savings glut’ is...
• Overview – Cross-asset volatility remains extraordinarily low due to a combination of persistent global economic slack, muted inflation and a collective G5 (US, euro area, UK, Japan and Switzerland) policy put that has all but eliminated major eco...
We see US interest rates staying low for some time but the neutral rate may not be permanently lower
• Slower potential GDP growth and the shift towards services point to a lower neutral rate
• But deleveraging, low investment and weak productivit...
• Top 3 data/events 28 April 2014
• Japan – BoJ likely to stay put; industrial production likely rebounded
• South Korea – IP backed by strong exports
• Euro area – Rise in April CPI may alleviate policy-action pressure
• Market focus
In 2010 we argued that fast growth in emerging markets (EM) and their increasing weight in world GDP was driving an economic super-cycle. We have lowered our forecasts for China, India and others, but the case broadly still holds (see Part 1).
Overview – The Fed’s surprise ‘no taper’ decision continues to dominate the market’s focus. While this should be supportive of risk appetite near-term, we see it as a temporary delay to the normalisation process and leave our UST forecasts unchanged...
Overview – We remain long-term bulls as the ‘governing dynamics’ of the FX market remain USD-positive. In this environment, we strongly recommend that corporates focus on managing translation risk. For central banks, we recommend staying defensive, ...
We expect the Fed to reduce its QE programme by USD 10bn in September, but this is still a close call
• Soft data is likely over the summer, but recent strong job gains are enough for the Fed to proceed
• QE will likely end in Q2-2014; the Fed is ...
Chairman Bernanke is set to hint that policy tightening remains distant as the economy is still fragile
• We still expect the Fed to start reducing QE in January, although risks are skewed towards an earlier date
• The underlying momentum is softe...
Our scorecard suggests the US has now largely recovered from the 2008 crisis; only a ‘lost half-decade’
• Japan and the UK are behind; Spain still has a long way to go
• We focus on progress in balance sheet adjustment and the effectiveness of mon...
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