Analysts at Wells Fargo, continue to expect some rate hikes from major central bank (ECB, Fed, and Boc) despite signs of slower growth across the globe. 

Key Quotes: 

“While the U.S. economy held up reasonably well in Q4, signs of slower growth were widespread across the globe. Other major economies in Europe, North America and Asia registered only marginally positive growth late last year, while China’s economy extended its ongoing gradual and orderly economic slowdown.”

“Against this backdrop of slower international growth, many foreign central banks have adopted a more dovish stance. Most notably the European Central Bank (ECB) has signaled that policy rates may now be on hold through all of 2019, and also announced a new round of targeted long-term loans. The Bank of Canada (BoC) said that the timing of future rate hikes had become more uncertain, while central banks in Australia and New Zealand have explicitly acknowledged in recent months that the next move in policy interest rates could be up or down.”

“Even with slower growth, our forecast for calendar 2019 anticipates that many major economies will grow close to (or above) their potential or trend growth rates. In our opinion that argues against extended easing, and indeed on a growth pick-up global, tightening could resume.” 

“While our forecast timing has been pushed back, we still expect rate hikes from the ECB and BoC for example. The Bank of Japan’s policy could stay on hold, however, given the approaching consumption tax increase. With many countries growing close to trend our global GDP growth forecasts have fallen only slightly, to 3.4% in 2019 and 3.3% in 2020.”

“We still expect the FOMC’s next move will be to raise rates, and we still expect that rate hike to be in Q3.”
 

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