Moody’s rating agency cuts US growth forecast

Moody’s rating agency has reduced this year’s growth forecast of United States from 2.3% to 2%, however it recognized underlying strength in some parts of the economy. It forecasted 2.3% growth next year and expects Federal Reserve to hike rates twice this year of 25 basis points each.

“The strong recent pick-up in consumer confidence and spending, and the continued strength in services industry underlines the resilience of the US economy”.

The main reason behind the reduction has been weaker global demand that has proved persistent and sluggish first quarter.

It cited Chinese slowdown as biggest risk to global economy and expects growth to drop from 6.9% in 2015, to 6.3% this year.

FED in its latest minutes have signaled strong US economy that may prompt it to hike rates at June meeting, scheduled middle of the month.

We, at FxWirePro, also considers China as biggest risk and continue to remain one, however growth may not slowdown that much due to the effect of fresh fiscal stimulus from Beijing this year But it is also important to note, marginal productivity of capital in China is diminishing fast.