Bank Research Consensus Weekly 08.22.11
Dangerously Close to Recession
Joachim Fels & Manoj Pradhan, Morgan Stanley
Ever more BBB: We are cutting our global GDP growth forecasts by a combined full percentage point in 2011-12, to 3.9% from 4.2% in 2011, and to 3.8% from 4.5% in 2012. We now see growth in the developed market (DM) economies averaging only 1.5% this year and next (down from 1.9% and 2.4% previously) - markedly more sluggish than the 20-year trend growth rate in DM of 2.3%, and more than a full percentage point below the 2.6% rate in 2010 when the world rebounded from the Great Recession. While we had been calling for a BBB recovery in DM all along, the path now looks even more bumpy, below-par and brittle than previously thought.
Negative Rates Now a Reality in Switzerland
Kasper Kirkegaard, Senior Analyst, Danske Bank
Negative nominal interest rates are not unheard of – short US Treasury rates have fallen below 0% several times during the financial crisis, for example – but, on the other hand, negative rates are definitely not the norm. Thus the current situation in Switzerland is indeed rather extraordinary.
Foreign Central Banks on Hold Too
John E. Silvia, Chief Economist, Wells Fargo
In this column last week, we discussed the FOMC’s proclamation that it will likely keep the fed funds rate at low levels until mid-2013. Recent data suggest that many other major central banks will probably refrain from raising rates for the foreseeable future as well. As discussed on page 4, weak economic growth in Japan likely means that the Bank of Japan (BoJ) will not be hiking rates anytime soon. Indeed, essentially all analysts, ourselves included, look for the BoJ to remain on hold through at least the end of 2012.
United States – Running Scared
Chris Jones, Economist,TD Bank Financial Group
Market volatility was in full swing on both sides of the Atlantic this week as a crisis of confidence over the health of western economies intensified. The German DAX closed down 2.2% on Friday to end the week down nearly 9%. As of writing, the S&P was off 5.3% on the week. In a bid for safety, 10-year Treasury yields briefly dipped below 2% in intraday trading Thursday, a first since at least 1954.
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Compiled by David Song, Currency Analyst
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