SocGen analyst: We're banking on a US recession

11 April 2008

A US recession would go some way to reduce volatility on the markets, the head of strategy at Societe Generale has suggested.

According to Alain Bokobza, equity markets have already priced in the long-predicted negative growth - and ending the uncertainty as to when the downturn would become official will have a calming effect.

"We have been waiting for a US recession for a number of quarters despite a relatively resilient global economy," he said.

Further uncertainty has been added by the apparent stimulatory effects of the drastic cuts in interest rates from the Federal Reserve, which have emerged recently.

"Those who were 'short', thinking that the credit crisis would worsen, have lost a lot of money over the past two weeks," he added.

Overall, Mr Bokobza predicts a long - though shallow - recession for the US economy, Reuters reports.

He also expects the Federal Reserve to cut rates to one per cent by this summer - an astonishing 4.25 per cent drop since the beginning of the credit crunch last year.

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