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2016: A reflationary year – Goldman Sachs

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Dec 29, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Delhi) – Research Team at Goldman Sachs, suggests that despite the recent sell-off, the bonds of major advanced economies remain ‘expensive’ relative to levels consistent with their economists’ views on growth, inflation and the policy stance.

    Key Quotes

    “Our economists’ baseline macroeconomic projections for the major developed market economies (DM) for 2016 feature: (1) growth above trend and limited spill-overs to DM from weaker growth in emerging markets; (2) an acceleration of inflation driven by base effects and a firming of core inflation as slack in the labour market diminishes; (3) a greater divergence between the monetary policy stance in the US and UK (where we expect their respective central banks to hike at a faster pace than the market expects) vs. the Euro area and Japan (where we expect an increase in the pace of accommodation); and (4) a somewhat more supportive fiscal stance in the US, Euro area and Japan.”

    “Relative to what the bond market is currently pricing, in our view the major surprise to bond investors will come from higher than expected inflation. To be clear, our economists do not expect inflation to overshoot central banks’ 2% inflation target, but the degree of acceleration they forecast is not sufficiently discounted in bond prices.”
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