Our view of sluggish global growth and subdued inflation remains fully intact. Given the progress on US-China trade talks and Brexit in the UK, we have revised down the risk probability of US recession to 30%. As a result, we expect no further rate cuts by the Fed and revised up our forecast of the US 10y yield to 1.7% for end-2020 and 1.9% for 2021. Overall, central banks are expected to remain very accommodative.
Our baseline scenario of a continued growth slowdown in key markets remains intact.
Despite the US-China trade détente, the trade war remains a key risk into 2020.
The UK is on course for orderly Brexit on 31 January. This will boost sentiment in the near term, but protracted negotiations with the EU will keep economic uncertainty high.
At this stage, higher oil prices on the back of the US-Iran tensions will have a limited impact on the global economy.
We revised down the probability of US recession to 30%, from 35% last month.
We expect monetary policy to remain very accommodative in most key markets but enough green shoots to expect no further rate cuts by the US Fed.