Global economic growth has held up quite well in recent months despite the sell-off in equity markets, but we expect it to slow over the next two years. The US economy is likely to cool as monetary tightening starts to bite and the boost from the fiscal stimulus fades, while activity in China will probably weaken further as a result of the ongoing slowdown in credit growth. Meanwhile, core inflation is likely to continue rising steadily in advanced economies, which should allow the Fed to raise interest rates a further three times by the middle of 2019. As for the ECB, we doubt that renewed concerns about Italy will deter it from normalising policy gradually.
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