US: Shrinking Universe – BNPP
Alexandra ESTIOT, Research Analyst at BNP Paribas, notes that the Fed is
worried about the negative risks the global slowdown pose to US growth.
Key Quotes
“Yet the United States has a
very closed economy, and in the past, it is generally internal or
exogenous factors that have triggered economic downturns. Naturally, the
next recession is getting closer the further we move away from the
previous one, but what will largely determine the scope and duration of
the next contraction is the excesses that need to be corrected, and
currently they appear limited.
Yet when interest rates are close
to their effective lower bound, the risks become asymmetric, which
explains why the Fed is being so cautious. Our own concerns are more
about the deterioration in the medium-term growth prospects, which are
strained by demographics and underinvestment.”
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