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Central Bank monetary policy in 2018 - Where to expect changes
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Loading...FED - United States
Given the robust economic performance of the US in 2017, analysts expect at least three interest rates to increase next year by 0.25 bps. Andy Cates, of Nomura, believes that the Fed may move to fourth if companies increase their investment after a successful US tax reform. Nick Gartside, international chief information officer of fixed income at JP Morgan Asset Management, told that: "Fundamental factors in the U.S. continue to look robust — upward revisions to previous months' durable goods numbers; PMI remain at high levels; consumer confidence continues to rise strongly; labour market conditions continue to show improvement to new cycle highs."
We expect rumors of a fourth interest rate to positively affect the dollar, and improving US economic performance to keep stock growth in 2018.
ECB - Eurozone
The eurozone has enjoyed one of its best moments since the financial crisis, with growth rates exceeding that of the United States. In the third quarter of 2017, The GDP of the 19 countries increased by 0.6% compared to the previous quarter and by 2.5% on an annual basis; In the US, growth is +2.3% yoy. Currently, markets do not expect rising interest rates in 2018, and the ECB has left the opportunity to increase incentives if economic conditions are still changing. Cates of Nomura believes that core inflation will be higher in 2018. compared to the central bank's projections. If this materializes, it would have prompted the bank to cut more with the current QE program. Cates warned that political instability could turn out to be negative for the economy. Upcoming elections in Italy in the first half of 2018 are considered a potential risk due to the growing presence of populist parties.
Bank Of England - United Kingdom
The Central Bank of England announced its first interest rate increase for more than a decade in November, under strong inflationary pressures and a low level of unemployment. At that time, it also signaled its intention to gradually tighten monetary policy in the coming years. Given that market participants are predicting a further rise for the next year, but both Cates and Gartside believe that in 2018, there may be two increases in interest rates. One of the key factors for the central bank is Brexit. The UK's decision to leave the EU now leads mainly to a depreciation of the pound. However, given that the negotiations will continue in 2018, Cates believes that in the short term "Brexit" will not cause economic uncertainty and thus BoE will be able to focus on the economy that performs well in compared to the gloomy expectations of economists after the decision to leave the EU.
Bank Of Japan - Japan
The autopilot remains on ... Given the low inflationary pressure, BOJ will not hurry to tighten its monetary policy. Most market participants believe that while the current inflationary environment will not change, BOJ will not take either interest rate cuts or change the current QE program.
Source: Bloomberg Pro Terminal
Jr Trader Petar Milanov
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