"The New Normal"

"A New Normal" - PIMCO believes that following the severe shocks to the global economy in the second half of 2008, the world embarked upon a journey of change not likely to be reversed over the next few years. This journey, likely characterized by starts, stops and volatility, will end at a destination or "New Normal". Some of the features of this New Normal will be a bifurcated global recovery, with relatively robust growth in China and emerging markets, but more tepid growth in developed economies. The growth of the public sector relative to the private sector could dampen productivity and lead to greater protectionism. Deflationary impulses will persist in developed economies, but US-style monetary policies will exert inflationary pressures in emerging markets.