Global Economic Scenarios Q1 2019
- In the wake of a large tightening in financial conditions and a crystallisation of political risks during 2018 global economic activity has slowed sharply, especially outside of the US. We expect this to push global growth down to 3.3% in 2019, from 3.7% last year.
- Wage growth has been picking up in response to tightening labour markets in many developed economies. However, with firms absorbing higher labour costs into margins, there is still no sign of a re-steepening of the Phillips Curve that would make us worried about meaningful upside risks to core inflation.
- Central banks have recently demonstrated increased sensitivity to financial market and economic weakness. As such, we now expect only one interest rate hike from the Fed this year and another next year, and little or no policy adjustment from the ECB. This allows the global economy to reaccelerate somewhat in the second half of 2019 and into 2020. "