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U.S. recession “more likely than not”, same for Europe – PIMCO

A U.S. recession over the next 12 months is “probably more likely than not”, PIMCO’s global chief investment officer for fixed income Andrew Balls said on Thursday.

Balls, speaking at a media webinar, put the probability at close to 50% or slightly higher.

“A recession is not the only important thing. You’re clearly going to see a significant growth slowdown,” Balls said.

“The inflation profile in the short term is very important. Central banks are focused on inflation credibility”.

The probability of a recession is similar in Europe, possibly a bit higher, he added.

Balls also said that he sees market pricing of U.S. Federal Reserve rate hikes as “reasonable”.

“In the European case I think they will hike as they’ve laid out this year and get to positive rates, but it’s really not clear that they get as far as the market is pricing in.”

He expects a European Central Bank terminal rate of around 0.75%-1%, “which will be a lot given the negative starting point”.