US: Outlook for a shaper growth slowdown to bring US yields and the USD back down – MUFG

Economists at MUFG Bank expect a sharper growth slowdown to drag down US yields and the greenback.

Mild recession to start later this year, followed by a moderately paced recovery

“The economic forecast prepared by the Fed staff for the May FOMC meeting continued to assume that ‘the effects of the expected further tightening in bank credit conditions, amid already tight financial conditions, would lead to a mild recession starting later this year, followed by a moderately paced recovery. Real GDP was projected to decelerate over the next two quarters before declining modestly in both the fourth quarter of this year and the first quarter of next year’.”

“We share the Fed staff’s outlook for a shaper growth slowdown which we believe will bring US yields and the US Dollar back down.”