Bank Research Consensus Weekly 08-31-09

Published August 31st, 2009 - 03:15 GMT

This week's Congressional Budget Office (CBO) mid-year budget outlook highlights the problems inherent in conducting an “independent” monetary policy and an effective exit strategy in a subpar economic recovery. The CBO expects relatively weak real economic growth of 1.7 percent in 2010 and sees the unemployment rate reaching 10.2 percent. Their 10-year Treasury rate forecast is 4.10 percent compared to today's rate of 3.48 percent.

E. Silvia, Ph.D. Chief Economist, Wachovia



Weekly Bank Research Center 08-31-09



 

The Message from Jackson Hole

Stephen Roach, Head Economist, Morgan Stanley

The Grand Tetons' timeless beauty once again provided a relaxed backdrop in which to debate and reflect on the state of the global economy and financial markets at the Kansas City Federal Reserve's annual Monetary Policy Symposium this weekend in Jackson Hole, Wyoming. Gone were last year's gloomy acceptance by policymakers and market participants that continued downside risks for the global economy and financial markets would persist, along with the huddled meetings to deal with the gathering storm. In their place was relief that the worst of the crisis was now past and that economies were stabilizing or showing early signs of recovery, and hope that the outlook for recovery was good.

 

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FX: Central Banks and FX

Niels-Henrik Bjørn Sørensen, Senior Analyst, Danske Bank

The all-dominating theme in the FX market over the past six months has been the stabilisation and prospect of renewed growth in the global economy. Improvements came first in the forward-looking indicators such as the ISM and PMI, and over the past six months the situation has improved for orders and actual production too. Major industrial nations like Germany, France and Japan have all reported economic growth in Q2.

 

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Fiscal Policy is Monetary Policy

E. Silvia, Ph.D. Chief Economist, Wachovia

This week's Congressional Budget Office (CBO) mid-year budget outlook highlights the problems inherent in conducting an “independent” monetary policy and an effective exit strategy in a subpar economic recovery. The CBO expects relatively weak real economic growth of 1.7 percent in 2010 and sees the unemployment rate reaching 10.2 percent. Their 10-year Treasury rate forecast is 4.10 percent compared to today's rate of 3.48 percent. The CBO estimates the federal deficit at $1.38 trillion for 2010. In this context, decision-makers will need to be vigilant in assessing how independent and how effective any exit strategy will be in the year ahead.

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United States - This Time It's Different?

Steve Chan, Economist, TD Bank Financial Group

With the release of the Bureau of Economic Analysis’ preliminary estimate of the second quarter GDP growth and an increasing number of signs that growth will return to positive territory in the third quarter, it is an appropriate time for a “preliminary” post-mortem look at the U.S. Great Recession. The discussion can only be preliminary because the history books are still being written on the medium and long-run ramifications of the financial crises of 2007 and 2008 and subsequent global recession. At this point at least, we can say that the 2008-09 recession in the United States lasted 18 months – from January of 2008 to June 2009 and resulted in a 3.9% reduction in real GDP. While a number of elements of the recession were unique from previous recessions, in terms of its duration and depth this recession was only slightly worse than the 1973-75 recession, which lasted 16 months and saw a peak-to-trough decline in real GDP of 3.2%, and the recession of 1981-82, which also went 16 months and saw real GDP decline by 2.9% peak-to-trough.

 

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Prospects for the UK Hang in the (Im)balance

Trevor Williams, Chief Economist at Lloyds TSB Financial Markets

One of the positive by-products of the UK economic downturn over the past two years - and there have not been many - has been the improvement in the UK’s economic imbalances. It is hoped that these improvements, if sustained, will eventually leave the UK economy better placed to benefit from the next cyclical upturn. So what is meant by the UK’s imbalances; why have they improved; and what are the implications for the UK economy over the coming years?

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Compiled By: David Song, Currency Analyst

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