MFS fund manager Pilar Gomez-Bravo believes central banks may not be able to increase interest rates as much as originally thought because of recession.
Central banks have no hope of raising interest rates as far as they think they have to, says one of the world’s top fixed income managers, meaning the tightening cycle will end sooner than bond markets predict.
The London-based fund manager said Europe was facing many challenges such as collapsing lending standards, falling loan demand and reduced money supply, against a backdrop of higher borrowing costs. MFS, which has $US580 billion under management, anticipates the ECB to lift its deposit rate to 3.25 per cent to 3.5 per cent this year, from 2.5 per cent currently. On Sunday, the bank’s president, Christine Lagarde, said a 0.5 percentage point increase at the March 16 policy meeting was likely.“Once you’ve crossed the 3.
As the world gets excited about the prospects for global growth, she said the reopening of China would initially boost the services sector worldwide, particularly Thailand and Australia’s hospitality sector.She noted that a new Chinese premier, replacing Li Keqiang, might push the country’s growth target of around 5 per cent towards 6 per cent. “But I wouldn’t be surprised if they tried to come out with a more constructive view of China growth.
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