The world economy seems to have lost some momentum in the past few months and we expect it to slow further in the coming year. World trade growth has fallen sharply, though this is due to weakening global demand rather than new protectionist measures, which still affect only a small fraction of global trade. Following a long period of tightening labour markets, there are growing signs that wage pressures are building in some economies. In the US, we think this will prompt the Fed to raise rates three more times by mid-2019, before ending its tightening cycle. Meanwhile, worries about Italy’s public finances are likely to build in the coming months as the government in Rome implements its fiscal plans.
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