The Economy:

Members of SIFMA’s Economic Advisory Roundtable forecast that the U.S. economy will grow at 2.1 percent rate in full-year 2012 and will grow at a rate of 2.1 percent in 2013. This outlook is slightly weaker than at end-year 2011, when the Roundtable predicted a growth rate of 2.2 percent in 2012. Concerns over European sovereign debt and U.S. fiscal policy dominate the 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 through 2013. Of those respondents that put a date to a rate hike, approximately half expected a rate hike mid- or late-2014.

Interest Rates:

As noted earlier, the Roundtable expected the FOMC to maintain its 0.0 to 0.25 percent federal funds target rate throughout 2013. As of June 12, the end of the survey period, the 10-year U.S. Treasury yield was 1.6 percent; the median forecasts for 10-year Treasury rates were 1.65 percent for June 2012, 1.85 percent in September 2012, 2.00 percent in December 2012, 2.19 percent in March 2013, and 2.30 percent in June 2013. Survey respondents expected the European debt crisis to have the greatest impact on long-term Treasury yields in 2012, followed by credit market risk aversion/flight to quality, economic growth prospects, and inflationary expectations.

European Fallout:

The European debt crisis, normalization of private credit markets and self-correcting adjustments by business and real estate markets continued to remain the three most important factors impacting U.S. economic growth.

In particular, approximately three fourths of respondents expected the exit of Greece from the euro would lower the value of the euro vs. U.S. dollar, U.S. interest rates, and U.S. GDP growth, with the balance of respondents remaining neutral on the impact to the U.S. A respondent noted that the situation in Europe would likely continue to “fester” for some time, and a Greece Greek default and exit would be “messy, but . . . need not be inherently destabilizing for the global financial system.”

The report also includes forecasts concerning economic growth, employment outlook, and oil prices, among other issues.

About the Report

A semiannual 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 2012

• Chair: John Silvia, Wells Fargo