By Shrutee Sarkar
BENGALURU (Reuters) - The U.S.-China trade war is unlikely to see a permanent truce over the coming year, and while concerns have eased over a U.S. recession, an economic rebound is also not expected any time soon, according to a Reuters poll of economists.
The Nov. 8-13 Reuters poll of over 100 economists showed a quarter-point Federal Reserve interest-rate cut would come in the third quarter next year; a poll three weeks ago had predicted a cut early next year.
That shift in expectations came after Fed Chairman Jerome Powell indicated that while the central bank was cautious about the trade conflict and slowing growth, it would now pause after cutting rates three times https://www.reuters.com/article/us-usa-fed/u-s-fed-cuts-interest-rates-signals-it-is-on-hold-idUSKBN1X90D7 this year to 1.50-1.75%.
While most major central banks are concerned about the ongoing trade dispute, stocks on Wall Street have touched record highs over the past few months on hopes for a resolution between Washington and Beijing.
But economists do not share the same view. While the median probability of a recession for the coming year fell to 25% from 35% last month, the economic growth outlook remained modest.
Over three-quarters of 53 economists who answered an additional question said a permanent truce in the U.S.-China trade war was unlikely over the coming year.
"The global economic backdrop is going to remain tough, the U.S. dollar is going to remain relatively firm and we are less positive on the trade story than perhaps the market is currently pricing. The talk of (tariff) rollbacks and stuff like that – we are not as certain that will actually come through," said James Knightley, chief international economist at ING.
"So, we think there is still scope for a weaker growth environment – with inflation being pretty benign - to give the Fed the opportunity to come in with a little bit more stimulus."
President Donald Trump said on Friday he had not agreed https://www.reuters.com/article/us-usa-trade-china/trump-says-has-not-agreed-to-roll-back-tariffs-on-chinese-goods-idUSKBN1XI1TQ to rollbacks of U.S. tariffs sought by China. Officials from both countries on Thursday said China and the United States had agreed to roll back tariffs on each others’ goods in a “phase one” trade deal.
The U.S. economy is forecast to have expanded at an annualized pace of 1.9% in the July-Sept period, slightly down from 2.0% in the second quarter. Growth is expected to hover around that rate in each quarter through to the second half of 2021, according to economists.