Business and consumer surveys suggest that the strong start to the year continued in February. The global composite PMI remained close to a three-year high and is consistent with world GDP growth of around 3½%. Headline inflation has rebounded sharply over the past couple of months, reaching the central bank’s target in the euro-zone and exceeding it in the US. However, underlying inflation remains very low almost everywhere, suggesting that policymakers will persist with exceptionally accommodative monetary policy for a long time yet. The one exception is, of course, the US. The Fed has now prepared the market for another rate hike next week and we think a further three 25bp rate hikes are likely before year-end.
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