Economic and financial risk insights - Global growth and yields will remain subdued
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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.