Citigroup Cuts Global Forecasts

Citigroup has again cut their global gross domestic product forecasts for 2011 and 2012 as growth prospects continue to deteriorate. Citigroup downgraded its outlook for the United States, Europe, Japan, Canada and the UK individually. It cut its view on China’s 2012 growth rate, to 8.7 percent from 9 percent. The financial services firm expects interest rates to remain at their current, low levels as a result.

Citigroup’s Chief Economist Willem Buiter said, “Interest rates are likely to stay low and negative in real terms, for a long period in the main advanced economies,” According to Buiter, this means the European Central Bank is likely to cut rates, while the U.S. Federal Reserve will probably need to see significant downside risks before doing anything more with interest rates.

“Renewed expansion of the Fed’s balance sheet is unlikely unless deflation becomes a clear danger,” said Buiter, who said he expects a more aggressive response from the Bank of England, which he predicts will unleash a second round of quantitative easing in the next month or two. Monetary easing is also being talked about in emerging markets.

“We expect more sovereign ratings downgrades among Euro Area countries in the next 3-6 months, including Italy, Spain, Greece, Portugal and Cyprus,” Buiter said.

Buiter also remarked that Citigroup’s equity strategy team is being cautious on risk assets and bullish on core fixed income. Buiter said the Citi foreign exchange teams like the dollar and the yen.

Citigroup Inc. (NYSE:C) was trading at 26.52 or +2.31% this afternoon. Citigroup Inc. (Citigroup) is a global diversified financial services holding company.