Powered by MOMENTUM MEDIA
Powered by MOMENTUM MEDIA
subscribe to our newsletter

Global economy ‘on a knife edge’

The global economy is currently poised at a tipping point between inflation on the one hand and deflation on the other, says BondAdviser.

In its First Half Outlook for 2017, fixed income research house BondAdviser said fiscal policy promises by US President Donald Trump have shifted deflationary market expectations back into "normal" territory.

Investors have regained confidence that inflation could finally be returning to global markets that appeared to be mired in deflation, said the report.

But the execution of fiscal stimulus policies by the new US president will be crucial to maintaining market confidence, said BondAdviser.

"Our analysis suggests the biggest issue for these policies will be choices the [US] Federal Reserve makes in regard to raising interest rates in the face of an arguably larger debt obligation," said the report.

Advertisement
Advertisement

PROMOTED CONTENT


"As a general rule, central banks do not anticipate inflation (albeit market expectations are observed) but will wait until it actually emerges. Actual core inflation
(monthly) is only now in line with the Fed’s target average inflation rate of 2.00 per cent."

However, inflationary pressures will only persist if wage growth continues – something that is not guaranteed given the "structural headwinds" that technological advancements pose for the labour market.

"The global economy is poised on a knife-edge between inflation and deflation. The inflationary path could take hold, based on a combination of government spending (i.e. deficits) and low interest rates," said BondAdviser.

"Conversely, the deflationary pressures could prevail, based on fundamental factors such as a strong US dollar, deleveraging, technology and Fed tightening."

[Related: 'Trump effect' overblown amid sluggish growth]

Global economy ‘on a knife edge’
mortgagebusiness

Latest News

More than a third of investors would consider refinancing to a new lender to secure a slightly better rate, while the majority of investors ...

Moody’s has predicted a substantial rise in non-performing loans after the measure that allowed banks to treat loans subject to repayment ...

The non-bank lender has announced its largest commercial mortgage-backed securitisation to date. ...

FROM THE WEB

Join a group of highly informed brokers.

Broker Pulse, a community-driven knowledge base of lender performance Reveal exactly which lenders are making life easiest for brokers and their clients by taking this monthly survey and joining a group of highly informed brokers who leverage these insights every month.

JOIN NOW
podcast

LATEST PODCAST: Victoria’s surprising appetite for new homes

Do you expect to see strong uptake of the HomeBuilder scheme?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.