With the US and China poised to impose tariffs on each other in the coming days trade tensions look set to ratchet up further. But the world economy is still doing well. We estimate that global economic growth picked up a bit in the second quarter and that it rebounded in all of the four major advanced economies. Against this backdrop, central bankers will probably continue with policy normalisation. The ECB is now committed to ending its asset purchases by December, provided there are no major downside surprises. We expect the Bank of England to raise interest rates in August and once more before year-end. Meanwhile, we think the Fed will hike interest rates four more times by mid-2019 but will then bring its tightening cycle to an end as the US economy slows.
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