UK Budget: No Fiscal Consolidation, but Looser Money Ahead

We expect little change in UK fiscal policy in Wednesday’s budget. Instead the Chancellor George Osborne may try to nudge the Bank of England towards more aggressive monetary easing, putting further pressure on the pound.

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Shadow Banking Darkens China Policy Outlook

Chinese government measures to cool the property market last week could be the start of a broader tightening campaign. The “shadow banking” industry might be next in line for action.

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US Manufacturing Restores Competitive Vigor

The US manufacturing sector has repeatedly figured out how to reinvent itself when faced with competitive threats. In recent years, American companies have become much leaner, regaining an edge in global markets that should lead to a bigger role in economic growth.

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Fed Must Tune in to Changing US Economy

With each passing month, more questions are being asked about the sluggish US economic recovery. Why has growth been subdued since the recession ended in mid-2009? What’s changed in the economy? How long can loose monetary policies persist before promoting more inflation or creating a new bubble?

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Cracks Appear in the French Economic Model

Today’s PMI data point to a deepening recession in France at a time when Germany is showing tentative signs of life. Is the euro crisis exposing the weaknesses of the French economic model?

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Chastened ECB Wary of Premature Monetary Tightening

Cyclical indicators have improved, but the economic and financial backdrop in the euro area remains fragile. The ECB has clearly learned from past mistakes and is keen to avoid a premature tightening of monetary conditions.

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UK Threat to Exit EU: Much Ado About Nothing

In a speech last week, British Prime Minister David Cameron raised the possibility that the UK might push the “nuclear button” and leave the European Union. We think both the threat and consequences of such a move have been exaggerated.

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Equities Set to Break Out of the Bear Trap

In the face of significant uncertainties, US and global equities rallied in 2012 and at the start of the New Year. We think there might be more to come as stocks break out of the bear trap.

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Is the Euro “Dangerously High”?

Jean-Claude Juncker’s view that the euro is “dangerously high” isn’t shared by the European Central Bank (ECB). As long as this is the case, the single currency may continue to defy fundamentals and act as an unwelcome headwind for an economy still struggling to break out of recession.

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UK Economic Quagmire Adds Pressure for Monetary Policy Change

Bank of England governor-elect, Mark Carney, has raised hopes that the central bank may soon switch to a nominal GDP target. In our view, the costs outweigh the benefits, but the attractions of a radical new approach will grow if the economy remains stuck in the doldrums.

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