U.S. Likely to Fix Fiscal Cliff in January 2013 Says BNY Mellon's Hoey "Bungee Jump Scenario" Likely to Avoid Recession

NEW YORK and LONDON, Nov. 15, 2012 /PRNewswire/ -- BNY Mellon Chief Economist Richard Hoey expects the fiscal cliff will be fixed in the first few days of 2013 if it is not fixed in the last few days of 2012, according to Hoey's most recent Economic Update. 

"We believe that if the tax hikes and spending cuts of the fiscal cliff do go into effect, the odds that they will be ameliorated within a few days are quite high," said Hoey.  "This is sometimes called the 'bungee jump scenario.'"  Hoey states that it may prove easier to finalize a fiscal cliff deal in the first few days of January 2013 than in the last few days of 2012, since members of the House of Representatives would then be voting for tax cuts rather than for tax increases on the top two brackets.

Hoey further states that if the U.S. goes over the fiscal cliff and does nothing about it for the 365 days of 2013, the calendar 2013 fiscal tightening of 5% of GDP would be very likely to generate a recession.

"Given that Washington politicians would be blamed for an avoidable recession if the fiscal cliff is not dealt with by early 2013," Hoey continued, "we expect the eventual success of negotiation to reduce the size of fiscal tightening in 2013." 

Other report findings include:

U.S FISCAL TIGHTENING IN 2013 -- Fiscal consolidation of 1% to 1.5% of GDP for 2013 will prove more likely than the fiscal tightening of 5% of GDP for 2013 which would occur if the entire fiscal cliff took place and was not modified for the entire year.

GLOBAL GROWTH RECESSION WILL PERSIST – Global growth recession is expected to persist in 2013, especially in the early part of the year.

LESS WORSE ECONOMY IN EUROPE – A "less worse" economy in Europe is expected in Europe in 2013, with a modest improvement from a full-scale recession in 2012 to flat economic activity in 2013.

See http://www.bnymellon.com/foresight/update-video.html for Hoey's complete November 2012 Economic Update. 

Notes to Editors:

BNY Mellon Investment Management is one of the world's leading investment management organizations and one of the top U.S. wealth managers, with $1.4 trillion in assets under management. It encompasses BNY Mellon's affiliated investment management firms, wealth management services and global distribution companies. More information can be found at www.bnymellon.com.

BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 36 countries and serving more than 100 markets. BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, offering superior investment management and investment services through a worldwide client-focused team. It has $27.9 trillion in assets under custody and administration and $1.4 trillion in assets under management, services $11.6 trillion in outstanding debt and processes global payments averaging $1.4 trillion per day. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available on www.bnymellon.com or follow us on Twitter@BNYMellon.

All information source BNY Mellon at September 30, 2012.  This press release is qualified for issuance in the UK and US and is for information purposes only. It does not constitute an offer or solicitation of securities or investment services or an endorsement thereof in any jurisdiction or in any circumstance in which such offer or solicitation is unlawful or not authorized. This press release is issued by BNY Mellon Investment Management (US) and BNY Mellon Asset Management International Limited (ex-US) to members of the financial press and media and the information contained herein should not be construed as investment advice. Past performance is not a guide to future performance.  The value of investments and the income from them is not guaranteed and can fall as well as rise due to stock market and currency movements.  When you sell your investment you may get back less than you originally invested. Registered office of BNY Mellon Asset Management International Limited: BNY Mellon Centre, 160 Queen Victoria Street, London, EC4V 4LA. Registered in England no. 1118580. Authorized and regulated by the Financial Services Authority. A BNY Mellon Company

 

SOURCE BNY Mellon



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