Global growth is likely to ease over the next two years, led by slowdowns in the US and China. Although headline inflation should drop back in many advanced economies next year, core inflation will continue to rise. Against this backdrop we expect the Fed to raise rates only three more times in this cycle but to then cut interest rates in 2020 as the US economy slows, and the ECB will leave rates on hold until September 2019. While we are forecasting only a gradual deceleration of global growth, two key downside risks include an Italy-led re-run of the euro-zone debt crisis and a marked escalation of trade protection.
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