Schroders has reduced its global growth forecast by 0.2 per cent as a result of the downgrades witnessed across developed and emerging markets.
The group has taken its global growth prediction from 2.6 per cent to 2.4 per cent as it rejects the prospects of a hard landing in China and a US recession, believing such fears to be overblown.
Emerging market concerns relate to Brazil and Russia, as its growth forecast for China remains at 6.3 per cent.
Chief economist Keith Wade says he is not forecasting a US recession but believes the next rate rise will come in June, with weaker global growth and tighter financial conditions causing the Federal Reserve to delay this month.
The more tempered view of developed market growth reflects the lower oil price profile.
He says: “The rate profile has been flattened: we now expect Fed funds to rise to 1 per cent by end 2016 and 1.5 per cent by end 2017.”
Wade is concerned over the medium-term outlook and has concerns over the continued lack of growth, hovering at around 2.5 per cent over the past five years.
Elsewhere, he expects the European Central Bank to cut rates this month with the deposit rate falling to -0.5 per cent and remaining there throughout 2017.
He adds the Bank of Japan is also expected to cut rates to -0.25 per cent by the end of this year and to -0.5 per cent by the end of next year.
Wade says: “Followers of our scenario analysis will be well aware that the risks to our forecasts have been skewed to the downside for some time, led by a cluster of deflationary scenarios, such as ‘China hard landing’, ‘US recession’ and ‘EM defaults’.
“So, whilst none of these have been fully realised, we have incorporated some of their consequences such as a weaker US growth profile into the baseline.”