Mini-Deal to be Struck this Year for U.S. Budget Deficit says BNY Mellon's Hoey; "Subcycle Inflation Peak" Expected in Many Countries

LONDON and NEW YORK, June 30, 2011 /PRNewswire/ -- "Our most likely case is that in order to resolve the debt ceiling struggle, there will be a mini-deal this year targeting future deficit actions," says BNY Mellon Chief Economist Richard B. Hoey in his June 2011 Economic Update.  "We continue to believe that the budget deficit will be easy to finance in the near term, because monetary policy is easy and private sector credit demand is weak.  While we doubt that any deal agreed to this year would fundamentally fix the structural deficit problem, the issue has risen higher on the public agenda."  

"The U.S. budget deficit is a problem for today from a political perspective," Hoey continued. "From a financial perspective, however, we believe that it is a problem, not for today, but for some future year."  

Hoey continues to expect a sustained global economic expansion along with two subcycle patterns: a subcycle slowdown in economic activity and a subcycle peak in reported inflation (including food and energy.)  Hoey believes global growth should be sustained due to:

• The lagged impact of two years of stimulative macroeconomic policy;
• Balance sheets have strengthened as profits have rebounded strongly;
• Food and energy prices are already elevated and we now expect a subcycle peak in most countries in the reported rate of inflation as the pace of food and energy inflation slows.

"Overall, we believe that, in the current midcycle context, the global expansion is likely to prove sustainable,"  Hoey concluded.  

See http://www.bnymellon.com/foresight/pdf/update.pdf for Hoey's complete June 2011 Economic Update.

Notes to Editors:

BNY Mellon Asset Management is the umbrella organization for BNY Mellon's affiliated investment management firms and global distribution companies.

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 $25.5 trillion in assets under custody and administration and $1.2 trillion in assets under management, services $11.9 trillion in outstanding debt and processes global payments averaging $1.7 trillion per day. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation. Additional information is available at www.bnymellon.com.

All information source BNY Mellon Asset Management as at 31/03/11. 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 authorised. The statements and opinions expressed herein are those of the author and are subject to change as economic and market conditions dictate, and do not necessarily represent the views of BNY Mellon, BNY Mellon Asset Management, The Dreyfus Corporation or any of their respective affiliates. This press release is issued by BNY Mellon Asset 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. Registered office of BNY Mellon Asset Management International: BNY Mellon Centre, 160 Queen Victoria Street, London, EC4V 4LA. Registered in England no. 1118580. Authorised and regulated by the Financial Services Authority. A BNY Mellon Company(SM).

SOURCE BNY Mellon; BNY Mellon Asset Management

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