Powered by MOMENTUM MEDIA
subscribe to our newsletter

US recession ‘likely’ in a few years: Pimco

An economic recession in the US in the next three to five years is “more likely than not”, says Pimco.

Speaking at a media briefing around its June 2017 Secular Outlook, Pimco managing director and global economic adviser Joachim Fels said that while recession risks in the next six to 12 months are “very low”, the risk is much higher when viewed over the next three to five years.

“On the secular horizon, it’s more likely than not that we hit the next recession,” Mr Fels said. “If you look at the past five-year periods in the US since World War II, we have at least one recession in 70 per cent of the five-year periods.”

“Based on that, you would think there would be something like a 70 per cent chance of a recession within the next five years.”

As for what events could cause the next US recession, Mr Fels said sharply rising debt levels in China over a number of years “raises longer term risk of a default cycle”.

Advertisement
Advertisement

PROMOTED CONTENT


He also said the Italian general election that must be held before May next year could create a risk of political instability within Europe, given current opinion polls show more than 50 per cent of the vote going to anti-European parties on the left and right of the political spectrum.

Lastly, Mr Fels said there could be risk if the US Federal Reserve continues with hikes in interest rates, and that low inflation plays a major part in that risk.

“The inflation of the last three months has turned down again after rising for quite some time. We think the downturn in core inflation is quite broad based,” he said.

“It's not confined to only one or two components of the consumer price index, so there's more to it than just a temporary slowdown, and the risk really is that the Fed really cements the low inflation expectations.”

[Related: Trump inauguration marks 'whole new world']

US recession ‘likely’ in a few years: Pimco
mortgagebusiness

Latest News

The Federal Court has ordered Westpac to pay an agreed $1.3 billion penalty for breaching anti-money laundering and counter-terrorism financ...

The major bank has hired internally to fill the position of head of corporate finance, international, a newly created role overseeing the c...

The ASX-listed bank has reported strong third-party-driven loan book growth over the first few months of the new financial year. ...

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.