An international triumvirate of female leaders is likely to hold sway in 2016, according to the OMFIF advisory board New Year predictions. Hillary Clinton is likely to win the US election by a small margin. Chancellor Angela Merkel will remain as German chancellor despite opposition within her own Christian Democrat party over the refugee influx, because there is no alternative to her leadership. Christine Lagarde will stay at the International Monetary Fund because she is backed by major shareholders over issues such as Ukraine and China.
The full list of predictions, contained in OMFIF’s upcoming January Bulletin, is now available online at www.omfif.org/news. Among the global forecasts of advisory board members is that the oil price will recover slightly to $45-$50 a barrel by the end of the year, partly reflecting pressure on Saudi Arabia to cut production – though the ceiling for price rises remains limited.
Other forecasts include that the euro area faces a fresh crisis because of fundamental differences between debtors and creditors; US-Russian rapprochement on Syria is unlikely in view of pressure on both sides in an American election year; India will outpace China; junk bonds will be hit by credit tightening in the US, though the Federal Reserve will face pressure not to increase the federal funds rate above 1%; the renminbi will decline further amid significant scope for China’s structural slowdown to create macroeconomic instability; and the markets are not pricing in risks for the yen if Japanese inflation rises.
Typical of the downbeat nature of the forecasts is the statement by Meghnad Desai, emeritus professor of economics at the London School of Economics and Political Science and chairman of the OMFIF advisory board: ‘During the prolonged period of near zero interest rates I had frequent premonitions that, while the Federal Reserve and other central banks were concerned about the trade-off between employment and inflation, another portfolio crisis was the real danger. Market fragility since the start of 2016 has shown that many equity prices were unsustainably high…Financial volatility is very likely this year.’
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