Quarterly Economic Outlook (Q1 2008), 15 pages

Summary:

* United States - We have revised down our US GDP forecast, reflecting the additional pressure on growth from tighter lending standards and higher energy prices, which is compounding the pain from the ongoing adjustment in the housing market. While we do not expect a recession, we do see the Fed cutting rates by a further 75bps in the first half of 2008.
 
* Euro area - The outlook for the euro area is the brightest of the major industrial economies, although we have revised down moderately our growth forecast for 2008. Lingering upside risks to inflation will ensure that the ECB maintains its tightening bias, but no imminent rate rise is in prospect.
 
* Japan - Growing concerns about the weakness of domestic demand and softer global growth have resulted in a fairly sizeable downward revision to our GDP forecast. With the focus having shifted back to worries about the outlook for activity, and little evidence of building inflationary pressure, we do not see rates rising again until H208 at the earliest.
 
* UK - Tighter money market conditions, a rapidly slowing housing market and weaker global growth are combining to put downward pressure on the UK economy. With the downside risks to growth dominating the upside risks to inflation, we expect the MPC to cut rates three more times by the middle of 2008.
 
* Emerging markets - In most emerging market countries, domestic demand is sufficiently strong to avoid a sharp slowdown in GDP growth. In many countries, inflation is the bigger concern, and several EM central banks will need to tighten monetary conditions in 2008. China's rapid GDP growth is set to moderate, but it will remain near 10% in 2008, providing an important impetus to global demand.