Paul Kasriel, Chief Economist of Northern Trust, has just produced his annual economic forecast. Here are some of the key takeaways:

  • The pace of economic activity is expected to accelerate in 2011 on a Q4/Q4 basis largely because of increased growth in credit created by monetary financial institutions.
  • Housing and state/local governments are sectors that will remain a drag on economic growth.
  • Exports are and likely will remain a star performer of the U.S. economy.
  • Inflation, while remaining low in absolute terms, is expected to increase modestly.
  • Money market interest rates are anticipated to remain near current levels because the Fed is not expected to raise its policy interest rates in 2011.
  • Bond yields are expected to drift higher as real bond interest rates continue to “normalize”.
  • The principal upside risk to economic growth and interest rates is that private monetary financial institutions sharply increase their credit creation.
  • The principal downside risk to economic growth and interest rates is that Chinese economic growth decelerates sharply.
  • Federal budgetary issues are not a near-term threat to economic growth, but are a long-term threat.

Click here for the full PowerPoint presentation.

Source: Paul Kasriel, Northern Trust, January 2011.

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