In addition to our regular monthly surveys of projections for over 90 currencies we also undertake a special survey of real interest rate trends in Foreign Exchange Consensus Forecasts (in May and November) for the countries listed below. We present consensus estimates of both short- and long-term interest rates.
G7 & Western Europe: United States, Japan, Germany, France, United Kingdom, Italy, Canada, Euro zone, Netherlands, Norway, Spain, Sweden and Switzerland.
Asia Pacific: Australia, India, Indonesia, Malaysia, New Zealand, Philippines, Singapore, South Korea, Taiwan and Thailand.
Eastern Europe: Czech Republic, Hungary, Poland, Slovakia and Turkey.
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The table and text commentary below represent a small portion of this special survey taken from our November 2019 issue of Foreign Exchange Consensus Forecasts.
Insurance Against Global Risks
Previous discussions about global policy normalisation have all but been abandoned in recent months, as the US Fed and the European Central Bank slashed rates in the face of deeper-than-anticipated momentum loss. The former, which raised rates four times in 2018, has had to reverse gear in quick succession on July 21, September 18 and October 30. In addition, the latter, though not as active, pushed its deposit rate deeper into negative territory. Their return to policy accommodation has reduced anxieties about liquidity and capital outflows and allowed countries in Asia and Latin America to cut interest rates. What is unusual, though, has been the concurrent lack of movement in OECD bond yields, which remain depressed, suggesting a lack of optimism in short-term rate reductions as a means of kick-starting a global recovery. In fact, the slide in both short rates and long yields has often been a precursor to a recession, which some warn might put some countries in danger of ‘secular stagnation’ – that is an extended period of extremely low rates, weak demand, and negligible growth and inflation. Few panellists see Japan and Europe emerging from their slow growth – low rates pattern over the next 3-12 months, due to fragile macro fundamentals. However, the US Fed will most probably avoid slipping into a negative rate trap, as employment is buoyant and US fiscal spending may increase ahead of the 2020 Presidential elections.
A portion of the analysis from Foreign Exchange Consensus Forecasts, November 11, 2019.