Former Federal Reserve Chairman Ben Bernanke spoke with PIMCO’s finance pros about what 2015 might look like.
“One key question on our minds for 2015 is whether the decline in oil prices today, which will lead to negative headline inflation prints early next year, is sufficient to change the baseline outlook for monetary and fiscal policies we have already embedded in our growth forecasts,” wrote PIMCO’s Saumil Parikh and Dan Ivascyn in a new note published on PIMCO.com.
Parikh and Ivascyn summarized Bernanke’s response to that question:
Dr. Bernanke affirmed PIMCO’s view that the outlook for the U.S. economy in 2015 is incrementally positive, reflecting improving household finances and confidence as well as increasing evidence that the economic recovery is becoming self-sustaining and broad-based. Even as the output gap closes, the economic expansion looks to have room to run, reflecting remaining slack in the labour market and a housing recovery still in its early stages. Further, Dr. Bernanke suggested that monetary policymakers are likely to remain deliberate. They will look past the drop in headline inflation in the U.S. next year, and will remain focused on the level and momentum of real growth as well as the progress of core inflation toward target in determining the proper future course of monetary policy.
There’s not a lot of specificity there. However, they do note that the chairman is on board with PIMCO’s forecasts.
PIMCO’s house view is that global GDP will rise 2.75% in 2015. They also see low oil prices holding back inflation, but they also see inflation bouncing back in late 2015 and early 2016. Among other things, they are bullish on the dollar, but bearish on interest rates.
Read the whole note at PIMCO.com.