Members of the Securities Industry and Financial Markets Association’s Economic Advisory Roundtable believe U.S. economic growth will turn positive in the third quarter, although remain at a subpar pace until next spring. Stresses resulting from the current U.S. recession dominate all responses in the economic survey. The perfect storm of financial market meltdown, credit market freeze and economic contraction seems to be passing, but the U.S. economy remains afloat, albeit battered. The continuing housing sector weakness, tight credit markets, and widespread economic contraction have been countered with aggressive and unconventional central bank actions and fiscal stimulus; these provide the backdrop for the cautious optimism reflected in this economic outlook.

MONETARY POLICY The Roundtable was unanimous in its opinion that the Federal Open Market Committee (FOMC) would not change its current 0.0 to 0.25 percent target federal funds rate at the upcoming June 23-24 meeting.

THE ECONOMY The median forecast calls for gross domestic product (GDP) to fall 2.7 percent in 2009 on ayear-over-year basis (-1.4% on a fourth quarter-to-fourth quarter basis). By individual quarter, respondents expect GDP to fall 2.0 percent in the second quarter on an annualized basis before recovering and growing at 0.8 and 1.9 percent annualized, respectively, in the third and fourth quarters.

INTEREST RATES The median forecast for the June 2009 average 10-year Treasury note yield was 3.7 percent, rising to 3.9 percent in December and to 4.0 percent at midyear 2010. The easing of the “flight to quality” phenomenon that drove rates down sharply at the end of 2008 and growing optimism about the economic outlook were cited as two of the most important drivers of the recent rise in long-term Treasury yields, while inflation, inflationary expectations, and budget deficit trends were also identified as important
influences.

Other Questions

• Monetary Policy Easing; Unconventional Policies; What Next?
• Housing and Employment Dominant Risks to U.S. Economic Growth
• Fiscal Policy: A Bright Spot Among Dark Clouds
• Although Sunsetting Tax Cuts Will Not Help
• Increase in Savings: Cyclical or Structural
• When Will We Reach Bottom?
• Oil Prices: Little Near-Term Chance of Dramatic Change
• EESA Impact: Generally Effective
• Asset Purchases: Still Waiting

About the Report

A quarterly survey of SIFMA’s Economic Advisory Roundtable concerning the U.S. economic outlook and rates forecasts.

Credits

SIFMA

• Staff Advisor: Kyle Brandon

SIFMA Economic Advisory Roundtable 2009

• Chair: Jim Glassman, J.P. Morgan Chase & Co.