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ECONOMIC & January 19, 2005
MARKET
ANALYSIS
Economics/Strategy
Global
Kermit L. Schoenholtz
1-212-816-9898
@ Global Economic

Europe
Michael Saunders Outlook and Strategy
44-20-7986-3299
Japan
Kiichi Murashima ➤ Favorable financial conditions should help sustain a
81-3-5574-4730
United States pace of global expansion moderately above past
Robert V. DiClemente norms. . growth prospects continue to exceed
1-212-816-9893
Australia/New Zealand notably the outlook in the euro area and Japan.
Paul Brennan
Stephen Halmarick
61-2-8225-6043 ➤ The Fed likely will continue to tighten at a steady
Canada pace, boosting rates to the 31/2%-4% range this year.
Gabriel de Kock
1-212-816-3954 However, the ECB probably will tighten only modestly
Emerging Markets from midyear, while mild deflation in Japan favors
Lewis Alexander
Donald Hanna continued “quantitative easing” through 2005.
Thomas J. Trebat
Ann Wyman
1-212-816-9891 ➤ Above-trend growth should put upward pressure on
. yields, while euro-area issues still appear more
reasonably valued. With the . external deficit
weighing on the dollar, the odds are that China will
allow a modest widening of its exchange rate band in
the first half of 2005.
Figure 1. Currency and Interest Rate Forecasts (End of Period, Unless Specified)
Jan 19, 2005 1Q 05 2Q 05 3Q05 4Q 05
.: Federal Funds % % % % %
10-Yr Treasuries (Period Average)
Euro Area: US$/€
Euro Repo Rate % % % % %
10-Yr Bunds (Period Average)
Japan: ¥/US$ 103 98 102 97 95
Call Money % % % % %
10-Yr JGB (Period Average)
Source: Citigroup forecasts.
January 19, 2005 Global Economic Outlook and Strate