...Economic Recovery Taking Hold: Fitch Ratings forecasts economic growth in developed markets (DMs) will increase to 1.8% in 2014 and 2.2% next year. The US should see a strong recovery in 2H14 with annual growth of 2.3% and a declining output gap. The eurozone crisis has passed its acute phase and both Germany and Spain should see better growth. Controlling the Flow: Now that recovery in the US and the UK is gathering pace, the Fed and the Bank of England are faced with the challenging task of reducing the flow of easy money, although the ECB and Bank of Japan are more concerned with deflation. Fitch regards eurozone deflation as a serious risk, but not its base case. Reducing the flow of support money also risks bouts of market volatility which could damage emerging-market (EM) access to finance at a time when growth is slowing in many countries. Easy Money Underbelly: Several years of QE have stoked inflation in select financial asset classes, notably high yield and certain prime housing...
