Global Economic Weekly Putting a face on risk

BofA Merrill Lynch Global Research  - Viernes, 18 de Julio

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Global: putting a face on risk  Our quantitative risk assessment confirms that risks to global GDP growth are biased to the downside for now. United States: Yellen's separation principle The Fed sees uncertain benefits but clear risks to hiking rates in order to fight bubbles. Macroprudential supervision is the preferred tool. 

Euro area: downgrading GDP 

We are downgrading our Euro Area GDP growth forecasts for 2014 and 2015 by 0.1pp each to 1.0% and 1.5%. This reflects slightly worse than expected hard data in 2Q, and not a change of view on the trend. 

Japan: BoJ - keeps easing at current scale 

Any further BoJ easing and the timing of such action are increasingly dependent on economic and inflation data. We identify three key variables: wage growth, export recovery and asset prices. 

Emerging Asia: Europe re-leverages 

China's GDP ticked up to 7.5% in 2Q on government spending on infrastructure and social housing. We cut Singapore's GDP forecast to 3% in 2014 and now see a small chance of MAS easing to neutral. European banks have re-leveraged in Asia over the last two years, contrary to conventional wisdom. 

Emerging EMEA: Turkey - deflation is not Turkish 

CBT has cut the policy rate by 175bp since May and we expect another 50bp in August. While CBT has been quick to ease on the back of an EM-friendly global backdrop, inflation remains well above the 5% target. Our leading core-inflation indicator suggests the long-awaited fall in inflation may prove much more limited than expected. 

Latin America: Brazil - downgrading growth to 0.7% this year 

We cut our 2014 growth forecast to 0.7% from 1.6% and 2015's to 1.5% from 2%. Industry's outlook for 2014 continues to deteriorate. Investments came to a halt in 1H14. Lower carry, subdued confidence and the macro policy adjustment will weigh on 2015 results as well. 

UK: the labor market paradox continues 

With unemployment declining rapidly but wage growth remaining soft, views within the BoE may soon start to diverge on how much weight to give to leading versus lagging indicators. 

Australia: inflation to decelerate sharply in second half 

The RBA was justifiably concerned at the start of this year that inflationary pressures were building. But since then the RBA has become much more comfortable with the outlook now appearing to be much more benign, allowing it to lower its inflation forecasts recently. 

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