by HVB Group Global Markets Research ● The winds of recession we portended last month have transformed in a full-blown storm spreading across the continent. No banking system and no economy appears safe, and it is now common belief that a recessionary scenario is in the cards also for the euro area. ● Over the last few weeks, we have witnessed a massive and broadbased downward revision of growth and inflation forecasts. Our (already) gloomy scenario makes no exception. Next year, eurozone growth will be miserable and inflation will decline quickly toward 2%. We now see 2009 GDP averaging 0.3%, with inflation slowing to 2.3% - implying HICP hovering around 2% in H2 2009. Risks to both the growth and inflation forecasts are to the downside. ● It’s time for rate cuts. After the coordinated emergency move, the ECB will enter its...
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