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Global Economics Monthly Review

January 14, 2019


Global outlook: 


  • Financial conditions have tightened since the beginning of October, although they receded a bit in the past two weeks. Further heightened volatility in the financial markets may hurt economic sentiment and weigh on global demand in the short-run.
  • Trade talks between the US and China continue. It is in the best interest of both sides – probably the US more than China – to reach an agreement. That said, until the parties reach an agreement, uncertainty will continue to weigh on business confidence and trade growth.
  • Economic growth moderated in the fourth quarter last year, after slowing in the preceding quarter.
  • Economic growth is expected to moderate gradually further in 2019.
  • Risks to our 2019 growth outlook are tilted to the downside.
  • Base effects and the recent decline in oil and other commodity prices may weigh on headline inflation in the short-run. Further tightening in the global labor market and wage growth may limit downward pressures on core inflation.
  • Due to an increase in the risk environment and economic uncertainty, the extent of monetary policy normalization may be more limited, and some major central banks may even pause their normalization processes. 
  • The recent decrease in US interest rate expectations may limit the widening trend in yield differentials between the US and other advanced economies in the short-run, before they start narrowing probably sometime in 2019-2020.


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