PERSPECTIVE3-5 min to read

Economic and Strategy Viewpoint - July 2019

In this month's Viewpoint we discuss the outlook for US interest rates as well as the policy options available to central banks in the event of a global slowdown.

28/06/2019
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Read full reportEconomic and Strategy Viewpoint - July 2019
18 pages748 KB

Authors

Keith Wade
Chief Economist & Strategist
Piya Sachdeva
Economist
Craig Botham
Senior Emerging Markets Economist

A gentle touch on the tiller from the Fed? (page 3)

  • Slower growth and ongoing trade tensions have caused interest rate expectations to move significantly and bonds have rallied hard.
  • There is talk of the US Federal Reserve (Fed) cutting rates as an "insurance" measure to keep the economy on track, an outcome it successfully achieved in 1995 and 1998.
  • However, a turn in the capital expenditure cycle, low inflation and concerns about the efficacy of monetary policy are likely to keep the central bank easing into 2020.

What is left in the central bank toolbox? (page 7)

  • Conventional monetary policy space is limited in developed markets, and alternative tools come with limitations. Quantitative easing is broadly speaking an option but will likely need to be supplemented with fiscal policy.
  • There is some fiscal space available in most advanced economies, though debt sustainability remains a problem for some eurozone economies. Once you factor in political constraints, the eurozone may find the next downturn more challenging than the rest of the developed markets.

EM: Cushioning the blow (page 12)

  • Emerging markets (EM) have some advantages over their slower growing, low interest rate cousins in the developed world. Should a global slowdown arrive, they still have an arsenal of familiar weaponry to deploy.
  • Monetary space is far greater than in developed markets, and fiscal policy – though constrained – seems more politically viable.

Please find the full PDF below.

Read full reportEconomic and Strategy Viewpoint - July 2019
18 pages748 KB

This article is issued by Cazenove Capital which is part of the Schroders Group and a trading name of Schroder & Co. Limited, 1 London Wall Place, London EC2Y 5AU. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. 

Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested.

This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements.

All data contained within this document is sourced from Cazenove Capital unless otherwise stated.

Authors

Keith Wade
Chief Economist & Strategist
Piya Sachdeva
Economist
Craig Botham
Senior Emerging Markets Economist

Topics

The value of your investments and the income received from them can fall as well as rise. You may not get back the amount you invested.