US Economy - Recession Right Nowf

Thursday, 1 February 2001, 6:54 pm
Forecast: HSBC Bank

GDP slashed from 2% to 0%. We look for three consecutive quarters of negative growth, to be followed by two quarters of sub-trend growth.

Market expectations of a V-shaped recovery in 2001-H2, therefore, appear too optimistic. We do not see a return to trend growth until 2002-Q2.

Fed to keep cutting another 75bp in 2001-H1, followed by another 75bp in 2001-H2, taking the Fed funds rate to 4% by year-end.

Looser monetary and fiscal policies will initially appear impotent as the focus for businesses and consumers is now balance sheet repair, not expanding consumption and investment.

Ian Morris, US Economist, HSBC

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