Global Growth Remains Solid, Fed Edges Towards More Stimulus

- "We continue to look for sustained but uneven global growth, led in general by strong emerging market growth and with more modest recoveries in the US and Europe. But, after a slight bias to GDP forecast downgrades in the last two months, this month we make more GDP forecast upgrades than downgrades. We regard a "double-dip" as unlikely. Rather than negative growth, the greater likelihood is that recoveries in some key industrial countries will not be strong enough to quickly eliminate slack created by the recession."
- "As last month, we expect the Fed, ECB, BoJ, BoE and PBOC all to keep their key policy rates on hold to the middle of 2011 and indeed we expect the US Fed to keep rates on hold to end-2011 as well. The Fed is edging towards further stimulus. Barring material improvements in the outlook, we would anticipate action as early as the November meeting."
- "Chief Economist Essay (by Willem Buiter, see page 14). There is no such thing as completely safe sovereign debt. The cost-benefit analysis of sovereign default may favour default for the most highly indebted sovereigns, especially if they also have surpluses in their primary budgets. Default looks most likely for Greece, and Ireland may not be able to make whole both its sovereign debt holders and all unsecured creditors of its banks."
- "Citi rate strategists have become a little more bearish over the past two weeks. Citi strategists believe that corporate credit in core countries looks attractive in risk/reward terms, while Citi equity strategists argue that global equities can make healthy gains in 4Q10. For securitized products, Citi strategists remain positive, and recommend overweighting CMBS and Agency MBS while marketweighting consumer ABS. Citi FX strategists believe that SEK offers best fundamental value among G10 markets, while GBP looks stretched. For EM, our medium-term FX forecasts remain generally bullish versus forwards."


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