"The global economy has momentum. Global growth is at 5 percent over the last 12 months but real global interest rates remain negative. Fears of a double-dip recession are overdone and the risks are now to the upside.
We believe that these fears are overdone. We continue to say 'no' to the double dip, we continue to worry more about the longer-term inflationary risks associated with extreme monetary accommodation, and we doubt that governments in the US and in the large euro-area member states have the resolve to tighten fiscal policy drastically. Monetary policy will face an awkward choice between allowing inflation to run its course and raising interest rates aggressively despite high debt levels.
Our suspicion is, as we have explained in the past, that they would opt for the former – allow higher inflation for some time in order to help reduce the debt burden."
Joachim Fels, the co-head of economics at Morgan Stanley
Related stock: Morgan Stanley (NYSE:MS)
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