Itaú BBA - Macro Scenario – Global: Vaccines to support global growth; Fed to act sooner than markets expect

Global Scenario Review

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Macro Scenario – Global: Vaccines to support global growth; Fed to act sooner than markets expect

February 12, 2021

We now expect U.S. GDP to grow 6.7% (from 5.5%) in 2021 due to a higher fiscal boost. The Fed is set to hike rates in 1Q23.

For the version with all charts and tables, please open the attached pdf file

 
Global supply of vaccines will increase significantly in 2Q-3Q. Europe and EMs are lagging but will catch up in time. Risks to vaccine effectiveness against new strains are higher for EMs than DMs.

 We now expect U.S. GDP to grow 6.7% (from 5.5%) in 2021 and 4.2% (from 3.0%) in 2022 due to a higher fiscal boost; inflation to increase and lead the Fed to taper in 2022 and hike rates in 1Q23, possibly sooner.

 Europe lockdowns still restrict activity in 1Q21, but improving pace of vaccination in 2Q should allow reopening.

 China set for a soft landing, with gradual withdrawal of stimulus. We forecast GDP growth at 8.5% this year (from 2.3% in 2020) and 5.0% in 2022.

 U.S. 10Y yields to increase to 1.70% (previously 1.55%) in Dec/21 and 2.30% (previously 1.80%) in Dec/22. USD to remain contained in 2021, as synchronized global growth picks up and Fed remains on hold. However, we see a stronger USD (about 4% gain against a broad basket, Euro at 1.15, CNY 6.75) in 2022 as the Fed prepares markets for rate hikes in early 2023.

 LatAm: interest rate divergence. Inflationary pressures in Brazil are stronger than in the rest of the region and will likely trigger the start of a hiking cycle in March, while Banxico has resumed an easing cycle and the central bank of Colombia is considering to do the same.

For the version with all charts and tables, please open the attached pdf file



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