【英文】麦格理报告：全球宏观经济年中展望 Global Economic and Markets Outlook: Mid-Year Update The Tariffs （47P）

As the outlook for global growth improves beyond this on a more significant stimulus from China, a  moderation in trade tensions, and firming inflationary pressures, the 10-year treasury yield should  move higher – we project it will rise to 2.2% in 1H20. As we highlighted in US ten year yield and the trade war, beyond this time horizon, it is unlikely  that yields will move materially higher as they remain "even lower for even longer". Our view is  underpinned by three observations that suggest the average fed funds rate will prove to be very  low over the next ten years. These should mean the 10-year remains well anchored and is likely to  eventually fall below 1.5% again when the next downturn occurs. 1) "Later cycle environment". 

There has become an increased likelihood of a significant downturn  or recession in the next few years, suggesting that there is a high likelihood of an eventual  significant rate cut cycle, where the fed funds rate returns to zero for a period of time. 2) Fed unlikely to hike rates again. While, under our base case, growth improves in 2020, we do  not believe it will be enough for the Fed reverse any of the 75 bps in insurance cuts that we  anticipate through year-end.  3) Lack of policy space. Without any further hikes, this suggests the Fed may have just ~150 bps in  conventional policy ammunition when the next recession or downturn occurs. This is less than onethird of the typical 500-650 bps that has been utilized in recent recessions. Even in the modest  2001 recession, the fed funds rate fell by 550 bps. This suggests a period of several years with a  fed funds rate at zero while unconventional measures are utilized once again. What’s more, any  subsequent hiking cycle is likely to prove very gradual with the result of a very low average fed  funds rate over the next ten years.

As noted above, with global headwinds building, and most measures of wage and consumer price  growth having slowed a little, we suspect the ECB will soon cut the deposit rate to -50bps and possibly restart quantitative easing. This is in line with recent comments from outgoing ECB  President Draghi that policy rates could be cut further if needed, and consistent with the ECB’s  own research that negative interest rates can indeed stimulate growth.