World economy entering 2018 on a firm footing

Global activity indicators suggest that the world economy ended 2017 on a very strong note. We expect this strength to continue in the near term, helped by a steady rise in employment and supportive policies. The soon-to-be-finalised fiscal stimulus in the US should boost GDP growth there, which along with a tightening labour market should put upward pressure on inflation, prompting the Fed to hike rates four times during 2018. The euro-zone economy should also continue to grow strongly, even as the ECB scales back its asset purchases. In contrast, the slowdown in China is likely to continue, which may prompt the People’s Bank to loosen policy.