Slowing economic activity indicates the US has passed peak growth in its return to more normal output. A more stable medium-term inflation outlook, coupled with expectations of more muted long-run economic growth, are causing long-term interest rates to decline from a spike in the second quarter.
The key takeaways are as follows:
We maintain our 2021 and 2022 US real GDP forecasts at 6.0% and 4.0%.
Expected US COVID-19 booster shots will slow the global vaccine rollout, potentially extending supply chain disruptions.
A roll-off of price rises in reopening sectors and used autos will soften inflation, but shipping costs and rents will add upward pressure.
We lower our 2021 and 2022 10-year sovereign yield forecasts to 1.4% and 1.6% to reflect lower current yields and stable inflation expectations.