Anticipating a slowing of the US economy, Pacific Investment Management Co (PIMCO) yesterday downgraded its expectations for US interest rates hikes this year from one-to-two times to just once, and said it expected Asian central banks to be cautious about raising their rates.
The US Federal Reserve is likely to become very data dependent, PIMCO chief investment officer Dan Ivascyn told a news conference in Taipei.
“It would not surprise us at all if the Fed does not raise rates, and that would be the case if we continue to see a general weakening not only in US growth, but also in global growth,” Ivascyn said.
Like the US central bank, central banks in Asia and Europe are likely to be much more cautious in tightening monetary policies as their economies are also facing challenges and potential slowdowns, he said.
Fed Chairman Jerome Powell has said several times that the US central bank would be “patient” in deciding whether to continue raising rates.
It is forecasting a slight growth rate of 2.75 to 3.25 percent for the global economy this year, with inflation likely to stand below 2.25 percent, PIMCO said.
The odds that the US economy would enter a recession are low, less than 20 percent, it said.
However, there is likely to be more volatility in Asia, especially China, but China’s GDP growth is forecast to remain above 6 percent, relatively higher than other economies, Ivascyn said.
Hong Kong and Taiwan might grow at decelerating paces from last year, to below 3 percent, but would remain healthy, he added.
PIMCO said it does not foresee an imminent resolution to the US-China trade dispute in the next few months, but the two nations are likely to reach partial agreements to curb the tensions, which would made markets more comfortable, he said.
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