Dan’s Biz Bookshelf: ‘Building a Story Brand 2.0’
It’s Only Common Sense: Why Should They Take Your Call?
The US is finally trying to escape from zero-bound interest rates, after the Federal Reserve opted for a 0.25 percentage point increase in December. The key question now is whether the US economy is sufficiently robust to sustain its own recovery and lift world trade enough to reduce external deflationary pressures. Or will a strong dollar leave the US as the latest victim of the deflationary pass-the-parcel that has plagued the global economy for a decade?
We believe the US recovery will continue, but at an unspectacular pace, leaving markets guessing how far and how fast rates will rise. To keep raising rates, the Fed needs inflation to pick up. However, despite falling US unemployment, inflation remains low, largely because of tumbling global oil and other commodity costs, falling import prices and a strong dollar. The US is not a closed economy.
Global growth remains subdued, with western consumers still the only clear area of strength. We have edged up our forecasts for eurozone GDP growth to 1.5 per cent for 2016 and 2017, driven by higher consumer and public spending, much of it migrant-related.
We have also increased our 2016 growth forecast for Japan to 1.3 per cent, but for most emerging countries the revisions are downward. We have reduced China to 6.7 per cent for this year and next, and India to 7.4 per cent in 2016 and 7.8 per cent in 2017. However, the biggest cuts are in Latin America, with Brazil’s economy expected to contract by a further 2.8 per cent this year.
Continued weak global growth, particularly in emerging economies, will exert disinflationary pressures in the US. The Fed is still projecting rate rises totalling one percentage point in 2016 but we think it will move more cautiously – with only two quarter-point increases – rather than risk following the other developed markets’ central banks that soon had to reverse rate rises.
Page 1 of 2
