UK asset manager Schroders has reduced its growth forecast for 2016 from 2.6% to 2.4% due to “modest” downgrades in the US, Japan and emerging markets.
According to the firm’s chief economist Keith Wade, the inflation forecast for 2016 has also been reduced for the advanced economies to reflect the lower oil price.
Wade adds that the longer outlook remains difficult as underlying growth is weak, making the world more susceptible to shocks at a time when monetary policy has become “impotent”.
“The decision by the [Bank of Japan] at the end of January to take interest rates into negative territory seems to have crystallised these fears with the fall in bank stocks indicating that such a move could well be counterproductive. Central banks can and will do more, but they are firing blanks,” says Wade.
Schroders says that problems could be solved using fiscal policy but it does not believe that politicians are ready “to join the battle”.
However, Schroders forecasts for 2017 remain unchanged as the firm is confident of an emerging markets recovery.
©2016 funds europe
