US Fed officials scale back their hawkish rhetoric – Deutsche Bank

FXStreet (Delhi) – Research Team at Deutsche Bank, suggests that they are increasingly seeing late cycle characteristics in the US economy.

Key Quotes

“Our US economist flags that real GDP growth was probably was no more than 0.5% in Q4 of last year, and so far it seems like growth will recover to only about 1.5% in Q1 of 2016. Indeed, leading indicators, including slope of the yield curve, credit spreads, earnings projections, inventory trend, and business outlook surveys, suggest that downside risk to our forecast might be accumulating.

As the Fed recognizes the incipient downside to the economy, it may well be compelled to scale back its expectation of sustained rate hikes in the coming years. While a slowing US economy is not ultimately good for the global demand environment, a more dovish Fed is arguably good for EM sentiments in the short term. As the specter of wide policy divergence fades, the EM to DM movement of capital would slow, helping EM economies and markets.”