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EUROPEAN BANKS: NEITHER A BORROWER NOR LENDER BE

Banks everywhere are under pressure from the low interest rate environment. Corporate financing in Europe goes through banks, not the capital markets, making banks more important to the system. Monetary policy in Europe has just begun to increase bank lending, which historically has resulted in higher stock prices for banks, though the full impact of negative interest rates is difficult to determine.

SEE YOU IN SEPTEMBER?

We continue to expect that the Fed won’t raise rates until the December 2016 meeting, but a potential path to a September hike also exists. Key items to watch for a possible September hike include U.S. manufacturing, financial conditions, the labor market, wage inflation, foreign central banks, and comments from key Fed officials.

FOLLOW THE LEADERS

The LEI provides a valuable monthly guidepost regarding the state of the current economic expansion. Looking at past and present readings of the LEI provides added context for the potential direction of the U.S. economy. Despite a recent weak reading, we do not think the LEI is signaling a recession in the near term, although global and policy risks remain.

MIDYEAR OUTLOOK 2016: BELIEVING IN THE POTENTIAL OF THE U.S. ECONOMY

Looking out into the second half of the year, we expect the U.S. economy may grow between 2.0% and 2.5%. Given both the direct and indirect impacts of Brexit on the U.S. economy and financial system, we are now expecting the Fed to raise rates just once this year.

WHAT’S AHEAD FOR THE U.K. & EUROPE?

Following its vote to the leave, the U.K. will need to enter negotiations with the EU regarding the terms of the exit. The terms regarding movement of people across borders and the trade relationship will be the focus of the negotiations. In addition to political uncertainty in the U.K., there are several other political events across Europe in 2016–2017 that we’ll be watching.

 
Results: 12 Articles found.
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