Subdued Growth, No Double Dip

- "We continue to expect a sustained but uneven global recovery, although the near-term outlook could be quite choppy. We do not regard a double-dip recession — that takes major economies back into a period of sustained negative growth — as likely. Nevertheless, growth momentum has slowed in China, Japan and the US, and is unlikely to regain the vigour of late 2009 and early 2010 in the next few quarters."
- "As with the last couple of months, revisions to our growth forecasts are quite balanced but with a slight tilt to the downside. We are raising our 2010 growth forecasts for the UK, euro area, Sweden and Hong Kong after strong Q2 data. However, we also have cut our forecasts for the US and Japan, following softer Q2 readings and the lack of support from financial conditions."
- "With low inflation, plus signs of slowing growth and weaker financial conditions, the Fed has signaled a reenergized commitment to low interest rates, and we now expect the Fed to keep rates on hold all the way to the end of 2011. The BoE and ECB are probably on hold until well into 2011, but on balance we now believe that 3Q-11 is more likely for the first hike rather than our prior forecast of 2Q-11. With China on hold near term, our base case is that none of the main five central banks (Fed, ECB, PBOC, BoJ, BoE) will hike before mid-2011."
- "Citi's market strategists are cautiously optimistic on credit and equities and believe that current fears of a global double-dip recession are overdone, while corporate profits will probably continue to outpace market expectations. Citi's FX strategists believe that further upside for the trade-weighted USD may be likely over 0-3 months as short USD exposures are unwound. Thereafter, however, we expect that many G10 currency pairs effectively will continue to range trade. G10 fx is likely to remain a funding tool more generally for forays into higher-yielding EM currencies and asset markets."

Citigroup Global Economic Outlook Strategy 20100818

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