60 seconds on the global economic outlook for 2018
We’ve just updated our global economic outlook for the next two years, and we’ve revised up growth for 2018 to 3.3% from 3% previously. This marks a small acceleration from 2017, but more importantly, it would be the strongest growth on record since 2011.
This upgrade has been driven by expectations of looser fiscal policy in the US but also, on a global basis, stronger trade.
Unfortunately, stronger growth means faster inflation, with 2018 likely to surprise to the upside after 2017 came in weaker than expected. Price pressures are going to rise as spare capacity is eroded by growth, and stronger oil prices mean higher energy costs.
Consequently, we’re expecting central bank policy will be a bit tighter next year than it has been this year.
We think we’ll have three hikes coming from the Federal Reserve in the US; we think the European Central Bank will end its quantitative easing (QE) programme in September 2018; and the Bank of Japan will have to reduce its own QE purchases throughout the year compared to what we had expected previously.
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